U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999.
|_| 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)
978-536-2777
(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 __
Applicable only to corporate issuers
Number of shares outstanding of each class of common equity, as of April 30,
1999:
Class A Common Stock 5,530,206
Class B Common Stock 727,210
Transitional Small Business Disclosure Format
(Check one):
Yes______ No X
<PAGE>
PHC, Inc.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - March 31, 1999 and June 30,
1998.
Condensed Consolidated Statements of Operations - Three months ended
March 31, 1999 and March 31, 1998; Nine months ended March 31, 1999
and March 31, 1998.
Condensed Consolidated Statements of Cash Flows - Nine months
ended March 31, 1999 and March 31, 1998.
Notes to Condensed Consolidated Financial Statements - March 31, 1999.
Item 2. Management's Discussion and Analysis of Plan of Operation
PART II. OTHER INFORMATION
Item 6. Exhibits
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
PHC INC. AND SUBSIDIARIES (UNAUDITED)
CONSOLIDATED BALANCE SHEETS
Mar. 31 June 30
ASSETS 1999 1998
Current assets:
Cash & Cash Equivalents $ 137,949 $ 227,077
Accounts receivable, net of allowance
for bad debts of $3,079,521 at
Mar. 31, 1999, $3,488,029 at
June 30, 1998 6,697,074 7,441,972
Prepaid expenses 322,207 156,695
Other receivables and advances 367,604 127,064
Deferred Income Tax Asset 459,280 515,300
Other Receivables, related party 75,531 64,065
_________ _________
Total current assets 8,059,654 8,532,173
Accounts Receivable, noncurrent 640,000 685,000
Other receivables, noncurrent, related
party, net of allowance for doubtful
accounts of $407,000 Mar 31, 1999 and
$382,000 June 30, 1998 3,464,745 2,941,402
Other Receivable 115,520 426,195
Property and equipment, net 1,512,119 2,128,273
Deferred income taxes 154,700 154,700
Deferred financing costs, net of
amortization of $50,181 at Mar. 31,
1999 and $18,065 at June 30, 1998 56,927 53,608
Goodwill, net of accumulated
amortization of $79,347 at Mar. 31, 1999
and $307,707 at June 30, 1998 1,881,611 2,011,613
Other assets 181,512 167,004
___________ ___________
Total assets $16,066,779 $17,099,968
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,540,949 $2,346,213
Notes payable--related parties 267,356 159,496
Current maturities of long term debt 1,292,666 1,107,167
Revolving credit note 1,400,277 1,683,458
Current portion of obligations
under capital leases 62,349 67,492
Accrued Payroll, Payroll Taxes
and Benefits 325,923 729,194
Accrued expenses and other liabilities 1,377,006 1,004,763
Net current liabilities of
discontinued operations 1,232,394 1,232,394
___________ ___________
Total Current liabilities 8,498,920 8,330,177
___________ ___________
Long-term debt 1,865,665 2,850,089
Obligations under capital lease 67,787 93,747
Net long term liabilities of
discontinued operations 88,374 1,409,143
Convertible Debentures 500,000 --
____________ ___________
Total noncurrent liabilities 2,521,826 4,352,979
____________ ___________
Total liabilities 11,020,746 12,683,156
____________ ___________
Stockholders' Equity:
Preferred stock, $.01 par value;
1,000,000 shares authorized, 864 and
950 shares issued and outstanding Mar.
31, 1999 and June 30, 1998
liquidation preference ($864,000
and $950,000 respectively) 9 10
Class A common stock, $.01 value;
20,000,000 shares authorized, 5,530,206
and 4,935,267 shares issued Mar. 99
and June 98 respectively 55,302 49,353
Class B common stock, $.01 par value;
2,000,000 shares authorized,
727,210 and 727,328 issued Mar. 99
and June 98 respectively, convertible
into one share of Class A common stock 7,272 7,273
Additional paid-in capital. 15,580,621 15,295,895
Treasury stock, 2,776 shares at cost (12,122) (12,122)
Accumulated Deficit (10,585,049) (10,923,597)
____________ ____________
Total Stockholders' Equity 5,046,033 4,416,812
____________ ____________
Total Liabilities and Stockholders'
Equity $16,066,779 $17,099,968
____________ ____________
See Notes to Consolidated Financial Statements
<PAGE>
PHC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended
March 31 March 31
1999 1998 1999 1998
____ ____ ____ ____
Revenues:
Patient Care, net $4,587,743 $5,362,955 $13,852,546 $15,503,447
Management Fees 122,141 182,290 518,983 644,983
__________ __________ ___________ ___________
Total revenue 4,709,884 5,545,245 14,371,529 16,148,430
__________ __________ ___________ ___________
Operating expenses:
Patient care expenses 2,296,160 2,822,708 7,218,008 8,509,056
Provision for doubtful
accounts 275,263 537,128 1,419,583 1,536,377
Administrative expenses 1,776,668 2,075,115 5,551,240 6,702,613
__________ _________ __________ __________
Total operating expenses 4,348,091 5,434,951 14,188,831 16,748,046
__________ _________ __________ ___________
Income (loss) from 361,793 110,294 182,698 (599,616)
operations __________ _________ __________ ___________
Interest income 118,149 87,725 356,897 288,323
Other income 19,286 58,960 58,206 180,709
Interest expense (240,503) (336,943) (869,199) (935,145)
Facility Closing Costs -- -- (304,994) --
HRH Relocation Expense -- -- (36,935) --
__________ _________ __________ ___________
Total other income
(expense) (103,068) (190,258) (796,025) (466,113)
__________ _________ __________ ___________
Income (Loss) before
Provision for Taxes 258,725 (79,964) (613,327) (1,065,729)
Provision for Income Taxes 43,724 98,309 44,635 105,509
__________ _________ __________ ___________
Income (loss) from
Continuing Operations $ 215,001 $(178,273) $(657,962) $(1,171,238)
__________ _________ __________ ___________
Loss from Discontinued
Operations -- $(807,802) -- $(1,829,508)
__________ _________ __________ ___________
Income (Loss) before
Extraordinary Item $ 215,001 $(986,075) $(657,962) $(3,000,746)
Extraordinary Gain (net of
estimated taxes) $ -- -- $1,089,076 --
___________ __________ __________ ____________
Net Income (Loss) $ 215,001 $ (986,075) $ 431,114 $(3,000,746)
___________ __________ __________ ____________
Basic Earnings (loss) per
common share:
Income (loss) from
continuing operations .03 (.03) (.11) (.23)
Loss from discontinued
operations -- (.15) -- (.36)
Extraordinary Gain -- -- .18 --
Total .03 (.18) .08 (.58)
Basic Weighted average
number of shares
outstanding 6,182,204 5,431,196 5,910,928 5,090,919
Diluted Earnings (loss)
per common share:
Income (loss) from
continuing operations .03 (.03) (.11) (.23)
Loss from discontinued
operations -- (.15) -- (.36)
Extraordinary Gain -- -- .18 --
Total .03 (.18) .08 (.58)
Diluted Weighted average
number of shares
outstanding 6,194,456 5,431,196 5,921,910 5,090,919
See Notes to Consolidated Financial Statements
<PAGE>
PHC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine
Months Ended
March 31
1999 1998
Cash flows from operating activities:
Net income (loss) $ 431,114 $(3,000,746)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Non-Cash charge (credit) related to
discontinued operations (1,320,769) 999,121
Depreciation and amortization 248,987 334,066
Changes in:
Accounts Receivable 325,224 (710,969)
Prepaid expenses and other
current assets (165,512) 90,597
Other assets 41,512 (6,932)
Accounts payable 194,736 (452,565)
Accrued expenses and other
liabilities (31,028) 291,201
____________ _____________
Net cash used in operating activities (275,736) (2,456,227)
____________ _____________
Cash flows from investing activities:
Acquisition of property and
equipment (150,420) (112,911)
Disposition of property, equipment
and intangibles 363,104 (13,275)
Costs related to business
acquisition -- (626,267)
____________ _____________
Net cash provided by (used in)
investing activities 212,684 (752,453)
____________ _____________
Cash flows from financing activities,
Revolving debt, net (283,181) --
Other debt activity (165,339) 407,320
Preferred stock dividends paid (92,567) --
Issuance of Common Stock 15,011 2,049,480
Convertible debt 500,000 --
____________ _____________
Net cash provided by (used in)
financing activities (26,076) 2,456,800
____________ _____________
NET INCREASE (DECREASE) IN CASH (89,128) (751,880)
Beginning cash balance 227,077 844,471
____________ _____________
ENDING CASH BALANCE $ 137,949 $ 92,591
____________ _____________
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 802,549 $ 619,523
Income taxes 94,919 82,703
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Conversion of Debt to Common Stock -- 2,710,106
Conversion of Preferred Stock
to Common Stock 185,571 500,000
Stock issued for Acquisitions
and Earnout Agreement 219,165 614,280
Issuance of Preferred Stock in lieu
of cash for Dividends due 44,000 --
See Notes to Consolidated Financial Statements
<PAGE>
PHC, INC. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
March 31, 1999
Note A - The Company
PHC, Inc. (the "Company") is a national health care company specializing
in the treatment of substance abuse, which includes alcohol and drug
dependency and related disorders, and in the provision of psychiatric
services. The Company currently operates two substance abuse treatment
facilities: Highland Ridge Hospital, located in Salt Lake City, Utah,
("Highland Ridge"); and Mount Regis Center, located in Salem, Virginia, near
Roanoke ("Mount Regis") and eight psychiatric facilities: Harbor Oaks
Hospital ("Harbor Oaks"), a 64-bed psychiatric hospital located in New
Baltimore, Michigan; Harmony Healthcare ("Harmony Healthcare"), a provider of
outpatient behavioral health services in Las Vegas, Nevada; Total Concept EAP
("Total Concept"), a provider of outpatient behavioral health services in
Shawnee Mission, Kansas;" and North Point-Pioneer, Inc. ("NP") which
operates four outpatient behavioral health centers under the name Pioneer
Counseling Center in the greater Detroit metropolitan area. The Company also
operates BSC-NY, Inc. ("BSC") which provides management and administrative
services to psychotherapy and psychological practices in the greater New York
City metropolitan area.
In June, 1998 the Company's sub acute long-term care facility, Franvale
Nursing and Rehabilitation Center ("Franvale"), in Braintree, Massachusetts was
closed in a State Receivership action which was precipitated when the Franvale
facility instituted a proceeding under Chapter 11 of the Federal Bankruptcy
Code. The net assets and liabilities of this facility are shown as discontinued
operations on the accompanying financial statements. In January 1999 the company
closed its Virginia out patient operations, Pioneer Counseling of Virginia
("PCV"), and sold the PCV real estate in a transaction consummated in March
1999. In a separate agreement the Company also acquired the minority interest
shares in PCV. The elimination of the losses incurred by the PCV operations
should have a positive impact on the Company. The sale of the PCV real estate
and the acquisition of the minority interest did not materially impact the
Company's Financial Statements.
Note B - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-QSB and
Item 310 of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the nine months ended March 31, 1999 are not necessarily indicative of the
results that may be expected for the year ending June 30, 1999. The
accompanying financial statements should be read in conjunction with the June
30, 1998 consolidated financial statements and footnotes thereto included in
the Company's 10-KSB filed on October 13, 1998.
Note C - Subsequent Events
In May, 1999 the Company launched its Web page operated by
Behavioralhealthonline.com ("BHO"). Through its Web site the Company offers
articles related to current events and advances in behavioral health and
books written by well known authors and practitioners in the field.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
PHC, INC. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Net patient care revenue decreased 14.5% to $4,587,743 for the three
months ended March 31, 1999 from $5,362,955 for the three months ended March
31, 1998 and 10.6% to $13,852,546 for the nine months ended March 31, 1999
from $15,503,447 for the nine months ended March, 31, 1998. This decrease in
revenue is due primarily to the close of the Rhode Island facility in May,
1998 and the phase out and close of the Pioneer Counseling of Virginia
operations in January 1999.
Patient care expenses decreased 18.6% to $2,296,160 for the three months
ended March 31, 1999 from $2,822,708 for the three months ended March 31,
1998 and 15.2% to $7,218,008 for the nine months ended March 31, 1999 from
$8,509,056 for the nine months ended March 31, 1998. This decrease in
expenses is a result of the continued reengineering of all subsidiaries and
the closing of the facilities noted above. Administrative expenses have also
decreased 14.3% to $1,776,668 for the three months ended March 31, 1999 from
$2,075,115 for the three months ended March 31, 1998 and 17.2% to $5,551,240
for the nine months ended March 31, 1999 from $6,702,613 for the nine months
ended March 31, 1998. This decrease in expenses is also a result of the
reengineering and streamlining of all operations.
Liquidity and Capital Resources
A significant factor in the liquidity and cash flow of the Company is
the timely collection of its accounts receivable. Net accounts receivable
from patient care increased during the quarter ended March 31, 1999 by 2.0%,
approximately $146,759. The Company continues to closely monitor its
accounts receivable balances and is working to reduce amounts due consistent
with growth in revenues.
During the quarter ended March 31, 1999 the Company issued 113,199
shares of Class A Common Stock in exchange for 90 shares of Series B
Convertible Preferred Stock and $1,125 in dividends. The Company has 864
additional shares of Series B Convertible Preferred Stock still outstanding.
Also during the quarter ended March 31, 1999 the Company issued 53,374
shares of Class A Common Stock to the former owners of Behavioral Stress
Centers, now BSC-NY, Inc. in connection with the earnout as stipulated in the
original purchase and sale agreement.
In conjunction with the 12% convertible debentures issued by the Company
in December 1998, the Company has issued warrants to purchase 145,000 shares
of Class A Common Stock and will issue warrants to purchase an additional
30,000 shares of Class A Common Stock over the next three months.
The Company believes that it has the necessary liquidity and capital
resources and contingent funding commitments to sustain existing operations
for the foreseeable future. The Company also intends to expand its
operations through the acquisition or establishment of additional treatment
facilities. The Company's expansion plans will be dependent upon obtaining
adequate financing as such opportunities arise.
<PAGE>
Year 2000 Compliance
The Company has been unable to reach an agreement with its Information
Systems Vendor to upgrade its current accounts receivable software to
accommodate a four digit year and bill, track and age receivables
accordingly. The Company is currently pursuing other software packages which
are already year 2000 compliant and in the interim has contacted each
facilities' fiscal intermediaries requesting an extension of time beyond the
HCFA April 5, 1999 deadline for year 2000 compliance. The Company has also
contracted with another company to provide case management software which is
year 2000 compliant. This software has already been installed at Pioneer
Development and Support Services in Utah and is currently being modified to
meet the needs of Harmony Healthcare in Nevada. The Company has already
upgraded network software at some locations and is currently upgrading
hardware to accommodate the software upgrade at all other locations.
The Company is currently in the process of contacting each third party
payor of accounts receivable, landlords, financial institutions, major
suppliers of essential products and utilities to request the status of their
year 2000 compliance.
To date the Company has expended approximately $52,000 on items relating
to the year 2000 issues and anticipates approximately $165,000 in additional
expenses relating to the upgrade of Company's computer and telephone systems.
<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits
Exhibit No. Description
4.27 Warrant Agreements by and between PHC, Inc., and George
H. Gordon for 10,000 shares of Class A Common Stock dated
May 1, 1999.
10.62 Agreement for Purchase and Sale of Pioneer Counseling of
Virginia, Inc. to Dr. Mukesh Patel and Dr. Himanshu Patel
dated February 15, 1999.
10.63 Letter Agreement by and between PHC, Inc. and Dr. Mukesh
Patel and Dr. Himanshu Patel dated March 3, 1999
regarding the transfer of minority ownership in Pioneer
Counseling of Virginia, Inc. to PHC, Inc.
10.64 Seller's Settlement Statement related to the sale of the
real estate owned by Pioneer Counseling of Virginia, Inc.
dated March 15, 1999.
27 Financial Data Schedule
<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: May 14, 1999 /s/ Bruce A. Shear
President
Chief Executive Officer
Date: May 14, 1999 /s/ Paula C. Wurts
Controller
Assistant Treasurer
<PAGE>
Exhibit No. Description
4.27 Warrant Agreements by and between PHC, Inc., and George
H. Gordon for 10,000 shares of Class A Common Stock dated
May 1, 1999.
10.62 Agreement for Purchase and Sale of Pioneer Counseling of
Virginia, Inc. to Dr. Mukesh Patel and Dr. Himanshu Patel
dated February 15, 1999.
10.63 Letter Agreement by and between PHC, Inc. and Dr. Mukesh
Patel and Dr. Himanshu Patel dated March 3, 1999
regarding the transfer of minority ownership in Pioneer
Counseling of Virginia, Inc. to PHC, Inc.
10.64 Seller's Settlement Statement related to the sale of the
real estate owned by Pioneer Counseling of Virginia, Inc.
dated March 15, 1999.
27 Financial Data Schedule
<PAGE>
Exhibit 10.62
PURCHASE & SALE AGREEMENT
Under the terms of this Agreement, dated the 15th day of February, 1999, by
and between Pioneer Counseling of Virginia, Inc. (hereinafter "Seller") and
Dr. Mukesh Patel and Dr. Himanshu Patel or their assign (together hereinafter
referred to as "Purchaser"), the parties hereto agree as follows:
1. SALE. The Seller agrees to sell and convey, and the Purchaser
agrees to purchase, all that certain plot, piece or parcel of land, with
all buildings and improvements thereon, lying and being in the City of
Salem, Virginia, described as 400 East Burwell Street (the "Premises").
2. STREET RIGHTS. This sale includes all the right title and
interest, if any, of the Seller in and to any land lying in the bed of
any street, road, or avenue opened in front of or adjoining the Premises.
3. PURCHASE PRICE. The Purchase price is Five Hundred Forty Five
Thousand Dollars ($545,000.00), payable as follows:
a. Non-refundable cash deposit of Five Thousand Dollars
($5,000.00), paid to Michael Ferguson, Esq. of Osterhoudt,
Ferguson, Natt, Aheron & Agee, 1919 Electric Road SW, Roanoke, VA
24018 as escrow agent, upon execution of this Agreement;
b. The balance of Five Hundred Forty Thousand Dollars
($540,000.00) to be paid, in cash, to the Seller at the closing.
4. DEED. The Deed shall be a General Warranty Deed with Modern
English Covenants of Title, and shall be duly executed, acknowledged,
and prepared at the Seller's expense. The Deed shall convey to the
Purchaser the fee simple of the Premises, free of all encumbrances, save
and except easements which do not materially adversely affect the
Premises,
5. CANCELLATION WHERE TITLE DEFECTIVE. If, at closing, the Seller is
unable to convey a good and marketable title as to the Premises and the
Purchaser rejects title for that reason, this Agreement:
a. May be deemed canceled as to the Premises at Purchaser's option;
b. The Purchaser may waive said objections as to the Premises on
such terms and conditions as shall be appropriate; or
c. May be extended for such period as the Purchaser may
designate, during which time Seller may cause the same to be
corrected.
6. SELLER TO KEEP PREMISES IN REPAIR. The Seller agrees to keep the
Premises in their present state of repair, ordinary wear and tear
excluded, up to the date of Closing and shall not commit waste upon the
said Premises while thereon. However, notwithstanding the foregoing,
the Purchaser is currently in possession of a substantial portion of
the Premises and, therefore, the Seller is absolved from any
obligation, liability or risk of loss for damage and/or waste resulting
from or created by, either the Purchaser, their agents, employees
and/or invited guests.
7. REPRESENTATIONS AND WARRANTIES.
a. Purchaser's Representations and Warranties. Purchaser
represents, warrants and agrees that on the date of execution of this
Agreement and on and as of the date of Closing, Purchaser will have all
right, power and authorization to execute and perform Purchaser's
obligations under this Agreement. Purchaser further warrants,
represents and agrees that this Agreement has been duly executed by
Purchaser and is enforceable against Purchaser in accordance with its
terms.
b. Seller's Representations and Warranties. Seller represents,
warrants and agrees that on the date of execution of this Agreement and
on and as of the date of Closing, Seller will have all right, power and
authorization to execute and perform its obligations under this
Agreement. Seller further represents, warrants and agrees that this
Agreement has been duly executed by Seller and is enforceable against
Seller in accordance with its terms. Seller additionally warrants that
Seller is not a foreign person for purposes of Internal Revenue Code
Section 1445 and agrees to deliver at Closing an affidavit to that
effect and stating Seller's federal tax identification number.
8. CLOSING AND POSSESSION.
a. Closing shall take place at the offices of Seller's attorney
in Roanoke, Virginia, or at such other location as may be mutually
agreed upon by Seller and Purchaser, on or before March 15, 1999. At
closing, possession will be delivered to Purchaser.
b. At Closing, real property taxes, utilities, rental payments
from current tenants and insurance premiums applicable to the Premises
will be pro-rated to the date of Closing.
C. Seller shall be responsible for the costs of the preparation
of the deed, certificate of non-foreign status, Seller's settlement
statement, Form 1099 and the fees and expenses of its attorneys.
Purchaser shall be responsible for all other fees and expenses of
Closing including, but not limited to, the fees and expenses of its
attorneys.
9. COMPLETENESS OF CONTRACT. The Seller and Purchaser acknowledge
that this Agreement represents the entire understanding of the parties,
that neither oral nor written representations have been made other than
those contained herein, and that this Agreement may not be modified
except in writing by the parties hereto.
10. TIME. Time is of the essence in this Agreement. The terms
evidenced by this Agreement remain open until Friday, February 19, 1999
at 5:00 pm Eastern Time. Notwithstanding the foregoing, deadlines
defined and imposed under this Agreement may be extended at the sole
discretion and option of Seller.
11. DEFAULT. If either party shall default in its obligations
hereunder, the other party shall have all remedies available to it under
law and equity, including the right to the recovery of its reasonable
attorney's fees and all costs of litigation.
12. NOTICES. All notices and other communications or permitted under
this Agreement shall be in writing and shall be sent either:
a. Through the, U.S. Postal Service, registered or certified mail,
return receipt requested and bearing adequate postage; or
b. By means of a nationally recognized overnight delivery service
if it obtains a written receipt to verify delivery.
Each such notice shall be effective three (3) days after deposit for
delivery or upon receipt, whichever is earlier. By giving the other
party hereto at least seven (7) days notice thereof, any party shall
have the right while this Agreement is in effect to change its address
for purposes of this Paragraph. Each notice or other communication
shall be addressed, until receipt of notice of change of address as
aforesaid, as follows:
If to Seller: Pioneer Counseling of Virginia, Inc.
Attn: Bruce A. Shear, President
200 Lake Street; Suite 102
Peabody, MA 01960
Phone: (978) 536-2777
Fax: (978) 536-2677
If to Purchaser: W. William Gust, Esq.
10 Franklin Road, S.E.
P.O. Box 40013
Roanoke, VA 24018
Phone (540) 983-9305
Fax: (540) 983-9400
13. PARAGRAPH HEADINGS. Paragraph headings are provided for
convenience only and shall not serve as a basis for interpretation or
construction of this Agreement, nor as evidence of the intention of the
parties hereto.
14. WAIVER REMEDIES. No waver by Seller or Purchaser of any default or
breach under this Agreement shall operate as a wavier of any future
default, whether of like or different character. All remedies, rights,
undertakings, obligations and agreements contained in this Agreement,
unless otherwise specified, shall be cumulative and not mutually
exclusive.
15. SEVERABILITY. If any provision of this Agreement, as applied to
either party or to any circumstance, shall be adjudged by a court of
competent jurisdiction to be void or unenforceable, the same shall in no
way effect any other provision of this Agreement, the application of any
such provision in any other circumstance, or the availability or
enforceability of the Agreement as a whole.
16. APPLICABLE LAW. This Agreement shall be governed by the laws of
the Commonwealth of Virginia excluding its law as to conflicts.
17. SUCCESSORS AND ASSIGNS. The parties agree that all of the
provisions hereof shall be binding upon, and inure to the benefit of,
the parties hereto, their respective heirs, legal representatives,
successors and assigns.
18. AGREEMENT. This Agreement, together with any attachments or
exhibits hereto, contains the entire agreement between the parties and
no addition to, modification, or cancellation of any term or provision
of this Agreement shall be effective unless set forth in writing and
signed by the parties hereto.
19. BROKER. Seller and Purchaser hereby represent and warrant that
they have not dealt with any broker or real estate agent and the parties
will hold each other harmless from and against any and all claims, loss,
liability, cost and expenses resulting from any claim that may be made
by any broker or person claiming a commission, fee or other compensation
by reason of this transaction.
20. TENANTS. Purchaser acknowledges that approximately One Thousand
Five Hundred Square Feet (1,500 sq. ft) of the Premises are currently
occupied by an Optician whose tenancy is "at will". Rent is paid by
this tenant at the rate of One Thousand Dollars ($1,000.00) per month
due on or before the tenth (10th) day of each month. Purchaser further
acknowledges that Seller has no obligation with respect to removal of
this tenant or termination of the tenancy and the arrangements by which
the tenant occupies the Premises will remain, at the option of the
tenant, intact at the time of Closing.
21. EXTENSION OF TIME TO CLOSE. In the event Purchaser is not prepared
or otherwise able to close on or prior to the deadline established in
Paragraph 8 above, an extension may be granted at the sole option and
discretion of Seller. If an extension is granted, for the entire term
of the same, Purchaser will be obligated to remit directly to Seller,
monthly and in advance, a per diem rate equating the pro-rated cost of
Seller's present monthly mortgage payment ($5,557.64/month) plus
pro-rated estimated property taxes (approximately $4,600.00 annually)
less the pro-rated value of any rental payments received from tenants
occupying the Premises. Pro-ration will be based on the actual number
of days within a given month. In the event such an extension is granted
and accepted by Purchaser, the first such payment owing under this
Paragraph will due March 16, 1999. Subsequent payments, if applicable
will be owing on the first day of each month in which any extension is
provided, regardless of the length of the extension. In the event an
extension is not granted, or Purchaser elects to not accept the same,
then Purchaser will forfeit all amounts remitted to date and will vacate
the Premises on or before March 31, 1999.
22. SURVIVAL. All representation and warranties by both Seller and
Purchaser shall survive the Closing.
23. ASSIGNABILITY. This Agreement may be assigned by the Purchaser to
an entity owned or controlled by the Purchaser without the consent,
whether written or otherwise, of the Seller.
[signatures on the following page]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto.
SELLER: PURCHASER:
Pioneer Counseling of Virginia, Inc. Dr. Mukesh Patel &
Dr. Himanshu Patel
By: /s/ Bruce A. Shear /s/ Mukesh Patel
Its: President Date: _____________________
Date: _______________________
/s/ Himanshu Patel
Date: _____________________
<PAGE>
Exhibit 10.63
March 3, 1999
Dr. Mukesh Patel
5271 Roselawn Road, S.W.
Roanoke, VA 24018
Dr. Himanshu Patel
5432 Snow Owl Drive, S.W.
Roanoke, VA 24018
LETTER AGREEMENT
Dear Drs. Patel:
In accordance with our many recent conversations and in consideration of our
entering into a binding agreement for the sale of that certain real estate
located at 400 East Burwell Street in Salem, Virginia, this Letter Agreement
serves to affirm your agreement to cancel all outstanding issues, debts,
obligations and rights presently existing between each of you and PHC, Inc.
and/or its affiliated organizations. It is expressly understood by all parties
that the release of your rights, as provided for herein, is contingent upon your
entering into a written agreement for the purchase of the Salem real estate and
consummation of the purchase of said property. In the absence of such binding
agreement and consummation of said purchase, the provisions of this Letter
Agreement shall be void as without consideration and shall in no way limit or
otherwise prevent you from pursuing your lawful claims against PHC, Inc. or any
of its affiliates.
This Letter Agreement does not address, in any manner, Dr. Mukesh Patel's
re-engagement as the Medical Director of the Mount Regis Center beginning
January 1, 1999, or the completion of the related Administrative Services
Agreement evidencing said relationship.
By the terms of our accord, each of you, your successors and/or assigns hereby
forgive, waive and cancel any and all outstanding obligations, duties or debts
of PHC, Inc., Pioneer Counseling of Virginia, Inc. ("PCV"), or any of their
affiliated, subsidiary or sister companies, and their officers, directors and
employees, existing as of the date of this Letter Agreement, including, but not
limited to, those items described within letters written by Attorney William
Gust on or around December 16, 1998, January 6, 1999 and February 9, 1999.
Furthermore, in exchange for the tendering, to PHC, Inc., PCV stock certificates
representing Ten (10) shares held by Dr. Mukesh Patel (PCV Certificate Number 2)
and Ten (10) shares held by Dr. Himanshu Patel (PCV Certificate Number 3) as
well as the affirmative representation that each of you will either provide for
the continuation of the APA Sponsored Professional Liability Insurance Policies
currently held, obtain comparable "tail coverage", or obtain a policy with
another carrier which provides the identical coverage and retroactive date as
the APA Policy for a minimum period of four (4) years after the date of this
Letter Agreement, PCV will issue a letter indemnifying each of you from any
liability derived from your association with PCV. However, this indemnification
will exclude any liability of PCV, PHC, Inc. or their affiliates resulting from
the intentional or negligent acts, errors or omissions of Dr. Mukesh Patel
and/or Dr. Himanshu Patel.
I believe the above accurately memorializes our understanding. If you are in
Agreement, please acknowledge the same by your signatures below.
Sincerely,
/s/ Bruce A. Shear
President
AGREED: AGREED:
/s/ Mukesh Patel /s/ Himanshu Patel
By: Dr. Mukesh Patel By: Dr. Himanshu Patel
Date: ____________________ Date: ______________________
<PAGE>
Exhibit 10.64
SELLER'S SETTLEMENT STATEMENT
HARIOM, LLC
400 EAST BURWELL STREET, SALEM, VA
PURCHASE PRICE:
Payoff 508,616.39
Deposit 5,000.00
Additional 30,000.00
___________
Total $543,616.39
Less:
Payoff to Dillon & Dillon Associates $508,616.39
Attorney's Fees (Osterhoudt, Ferguson, Natt, 315.00
Aheron & Agee)
1997/98 & 1st Half 1998/99 Real Estate Taxes 7,915.82
Pro Rata Real Estate Taxes (1/l/99-3/15/99) 923.80
Recordation Costs:
Deed:
Grantor's Tax 544.00
Certificates of Satisfaction ( 2 @ $16.00)
32.00
SUBTOTAL $523,347.01
Payoff to Beneficiary of
Cross-Collateralization and Cross-Default 25,269.38
Agreement
TOTAL $543,616.39
AMOUNT DUE TO SELLER $-0-
PIONEER COUNSELING OF VIRGINIA, INC.
Date: March 15, 1999 By: /s/ Paula C. Wurts
Its: Chief Financial Officer
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
Exhibit Number Document
27 Financial Data Schedule
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the consolidated
balance sheet and the consolidated statement of income filed as part of the
report on Form 10-QSB and is qualified in its entirety by reference to such
report on Form 10-QSB.
</LEGEND>
<CIK> 0000915127
<NAME> PHC, Inc.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-1-1998
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1.000
<CASH> 137,949
<SECURITIES> 0
<RECEIVABLES> 9,776,595
<ALLOWANCES> 3,079,521
<INVENTORY> 0
<CURRENT-ASSETS> 8,059,645
<PP&E> 2,458,788
<DEPRECIATION> 946,669
<TOTAL-ASSETS> 16,066,779
<CURRENT-LIABILITIES> 8,498,920
<BONDS> 500,000
0
9
<COMMON> 62,574
<OTHER-SE> 4,983,450
<TOTAL-LIABILITY-AND-EQUITY> 16,066,779
<SALES> 0
<TOTAL-REVENUES> 14,371,529
<CGS> 0
<TOTAL-COSTS> 14,530,760
<OTHER-EXPENSES> 882,640
<LOSS-PROVISION> 1,419,583
<INTEREST-EXPENSE> 869,199
<INCOME-PRETAX> (613,327)
<INCOME-TAX> 44,635
<INCOME-CONTINUING> (657,962)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,089,076
<CHANGES> 0
<NET-INCOME> 431,114
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
