U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998.
| | TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 0-22916
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 January 31,
1999:
Class A Common Stock 5,348,158
Class B Common Stock 727,210
TRANSITIONAL SMALL BUSINESS DISCLOSURE
FORMAT
(Check one):
Yes______ No X
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<PAGE>
PHC, INC.
Part I, Item 1 financial statements filed in the Company's 10-QSB for the
period ended December 31, 1998, filed with the Securities and Exchange
Commission on February 16, 1999, are being amended to reflect the following:
1. The effect of the changes to the financial statements for the period ended
June 30, 1998, as amended.
a. Increase in general and administrative expenses amounting to
approximately $148,000 related to the issuance of warrants to a
financial advisor to the Company.
b. Increase in dividends related to the beneficial conversion feature of
series B convertible preferred stock of approximately $190,000.
2. The effect of changes to the financial statements for the period ended
September 30, 1998 as amended.
a. Increase in interest expense related to the issuance of warrants with
debt, approximately $26,000 for the three months ended September 30,
1998.
3. Increase in Interest expense related to the issuance of warrants with debt,
approximately $26,000 for the three months ended December 31, 1998.
4. Increase in Professional fees related to the issuance of warrants with
convertible debentures as a finders fee, approximately $43,357 for the
three months ended December 31, 1998.
5. Correct the accounting for price guarantee shares issued to the former
owners of BSC. Previously recorded as a part of the acquisition price and
capitalized, the value of these price guarantee shares should have been
charged to expense as interest. Net effect of these changes is
approximately $92,000 increase in expense and reduction in intangible
assets.
6. Reverse the recognition of part of the gain related to the liquidation of
assets of Quality Care Centers of Massachusetts, Inc. The Company
subsequently determined that it was more appropriate to defer recognition
of any gain until final resolution of all potential liabilities.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
PHC INC. AND SUBSIDIARIES (UNAUDITED)
CONSOLIDATED BALANCE SHEETS
DEC. 31 JUNE 30
1998 1998
ASSETS (as restated) (as restated)
__________________________
Current assets:
Cash & Cash Equivalents $ 512,801 $ 227,077
Accounts receivable, net of allowance for bad debts
of $3,505,310 at Dec. 31, 1998, $ 3,488,029 at
June 30, 1998 6,580,315 7,441,972
Prepaid expenses 336,292 156,695
Other receivables and advances 186,314 127,064
Deferred Income Tax Asset 515,300 515,300
Other Receivables, related party 70,213 64,065
_________ _________
Total current assets 8,201,235 8,532,173
Accounts Receivable, noncurrent 610,000 685,000
Other receivables, noncurrent, related party, net
of allowance for doubtful accounts of $382,000
Dec. 31, 1998 and June 30, 1998 3,453,836 2,941,402
Other Receivable 117,680 426,195
Property and equipment, net 2,096,815 2,128,273
Deferred income taxes 154,700 154,700
Deferred financing costs, net of amortization of
$25,195 at Dec. 31, 1998, 18,065 at June 30, 1998 83,912 53,608
Goodwill, net of accumulated amortization of $53,124
at Dec. 31, 1998 $307,707 at June 30, 1998 1,703,689 2,011,613
Other assets 217,047 19,386
_________ _________
Total $16,638,914 $16,952,350
_________ _________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,793,571 $ 2,346,213
Notes payable--related parties 220,000 159,496
Current maturities of long term debt 1,407,020 1,107,167
Revolving credit note 1,626,587 1,683,458
Current portion of obligations under capital
leases 67,408 67,492
Accrued Payroll, Payroll Taxes and Benefits 484,573 729,194
Accrued expenses and other liabilities 927,820 1,004,763
Net current liabilities of discontinued operations 2,641,537 2,641,537
_________ _________
Total Current liabilities 10,168,516 9,739,320
Long-term debt 2,468,276 2,850,089
Obligations under capital lease 79,778 93,747
Convertible Debentures 500,000 --
_________ _________
Total noncurrent liabilities 3,048,054 2,943,836
_________ _________
Total liabilities 13,216,570 12,683,156
_________ _________
Stockholders' Equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized, 943 and 950 shares issued and
outstanding Dec. 31, 1998 and June 30, 1998
liquidation preference ($943,000 and 950,000
respectively) 9 10
Class A common stock, $.01 par value; 20,000,000
shares authorized, 5,348,158 and 4,935,267
shares issued Dec. 98 and June 98, respectively 53,482 49,353
Class B common stock, $.01 par value; 2,000,000
shares authorized, 727,210 and 727,328 issued
Dec. 98 and June 98 respectively, convertible
into one share of Class A common stock 7,272 7,273
Additional paid-in capital 15,724,630 15,485,895
Treasury stock, 2,776 shares at cost (12,122) (12,122)
Accumulated Deficit (12,350,927) (11,261,215)
_________ _________
Total Stockholders' Equity 3,422,344 4,269,194
_________ _________
Total Liabilities and Stockholders' Equity $ 16,638,914 $ 16,952,350
_________ _________
See Notes to Consolidated Financial Statements
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<PAGE>
PHC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
1998 1997 1998 1997
(as restated) (as restated)
______________________________________________________
Revenues:
Patient Care, net $4,552,961 $5,196,280 $9,264,803 $10,140,492
Management Fees 197,389 229,410 396,842 462,693
__________ __________ __________ ____________
Total revenue 4,750,350 5,425,690 9,661,645 10,603,185
__________ __________ __________ ____________
Operating expenses:
Patient care expenses 2,485,632 2,912,131 4,921,848 5,686,348
Provision for doubtful
accounts 788,130 515,471 1,144,320 999,249
Administrative expenses 1,911,648 2,392,919 3,817,565 4,627,498
__________ __________ __________ ____________
Total operating expenses 5,185,410 5,820,521 9,883,733 11,313,095
__________ __________ __________ ____________
Income (loss) from
operations (435,060) (394,831) (222,088) (709,910)
Interest income 129,366 102,951 238,748 200,598
Other income 34,578 52,499 38,920 121,749
Interest expense (460,122) (271,614) (772,434) (598,202)
Facility Closing Costs (304,994) -- (304,994) --
HRH Relocation Expense (36,935) -- (36,935) --
__________ __________ __________ ____________
Total other income
(expense) (638,107) (116,164) (836,695) (275,855)
Loss before Provision for
Taxes (1,073,167) (510,995) (1,058,783) (985,765)
Provision for Income Taxes
(Benefit) -- -- 911 7,200
__________ __________ __________ ____________
Loss from Continuing
Operations $(1,073,167)$ (510,995) $(1,059,694) $ (992,965)
__________ __________ __________ ____________
Discontinued Operations:
Income (Loss) from
Operations -- $ (585,038) -- $(1,021,706)
__________ __________ __________ ____________
Net Income (Loss) $(1,073,167) $(1,096,033) $(1,059,694) $(2,014,671)
Dividends (15,265) -- (29,809) --
__________ __________ __________ ____________
Loss applicable to common
shareholders $(1,088,432) $(1,096,033) $(1,089,503) $(2,014,671)
__________ __________ __________ ____________
Basic and diluted (loss)
per common share:
Loss from continuing
operations (.19) (.09) (.19) (.20)
Loss from discontinued
operations -- (.11) -- (.21)
Total (.19) (.20) (.19) (.41)
Basic Weighted average number
of shares outstanding 5,896,659 5,404,251 5,778,239 4,924,479
See Notes to Consolidated Financial Statements
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<PAGE>
PHC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED
DECEMBER 31
1998 1997
(as restated)
_________________________________
Cash flows from operating activities:
Net income (loss) $(1,059,694) $(2,014,671)
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities
Non-Cash charge of net cash provided
by discontinued operations -- 372,498
Depreciation and amortization 161,421 225,932
Compensatory stock options and stock and
warrants issued for obligations 143,738 46,131
Changes in:
Accounts Receivable 519,722 (311,684)
Prepaid expenses and other current assets (179,597) 53,690
Other assets (14,760) 38,245
Accounts payable 447,358 993,483
Accrued expenses and other liabilities (321,564) 250,385
____________ ___________
Net cash used in operating activities (303,376) (345,991)
Cash flows from investing activities:
Acquisition of property and equipment (123,227) (41,045)
Disposition of property, equipment and
intangibles 341,929 --
Costs related to business acquisition -- (616,276)
____________ ___________
Net cash provided by (used in) investing
activities 218,702 (657,321)
____________ ___________
Cash flows from financing activities:
Revolving debt, net (56,871) (196,823)
Net debt activity (35,509) (181,373)
Deferred financing costs (7,202) --
Preferred stock dividends paid (30,020) --
Issuance of Common Stock -- 3,328,915
Convertible debt 500,000 (2,734,375)
____________ ___________
Net cash provided by financing activities 370,398 216,344
____________ ___________
NET INCREASE (DECREASE) IN CASH 285,724 (786,968)
Beginning cash balance 227,077 844,471
____________ ___________
ENDING CASH BALANCE 512,801 57,503
____________ ___________
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 562,046 $ 282,580
Income taxes 51,195 37,956
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Conversion of Debt to Common Stock $ -- $2,734,375
Conversion of Preferred Stock to Common
Stock 40,000 584,587
Stock issued for North Point Acquisition -- 31,383
Stock issued for Harmony Acquisition
agreement 39,000 39,000
Issuance of Preferred Stock in lieu of cash
for Dividends due $ 33,000 --
See Notes to Consolidated Financial Statements
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<PAGE>
Signatures
In accordance with the requirements of the Exchange Act, the registratn
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
PHC, Inc. Registrant
Date: December 7, 1999 /s/ Bruce A. Shear
President
Chief Executive Office
Date: December 7, 1999 /s/ Paula C. Wurts
Controller
Assistant Treasurer
<TABLE> <S> <C>
<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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-1-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1.000
<CASH> 512,801
<SECURITIES> 0
<RECEIVABLES> 10,085,625
<ALLOWANCES> 3,505,310
<INVENTORY> 0
<CURRENT-ASSETS> 8,201,235
<PP&E> 3,022,479
<DEPRECIATION> 925,664
<TOTAL-ASSETS> 16,638,914
<CURRENT-LIABILITIES> 10,168,516
<BONDS> 0
0
9
<COMMON> 60,754
<OTHER-SE> 3,361,581
<TOTAL-LIABILITY-AND-EQUITY> 16,638,914
<SALES> 0
<TOTAL-REVENUES> 9,661,645
<CGS> 0
<TOTAL-COSTS> 10,225,662
<OTHER-EXPENSES> 772,434
<LOSS-PROVISION> 1,144,320
<INTEREST-EXPENSE> 772,434
<INCOME-PRETAX> (1,058,783)
<INCOME-TAX> 911
<INCOME-CONTINUING> (1,059,694)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,059,694)
<EPS-BASIC> (.19)
<EPS-DILUTED> (.19)
</TABLE>
