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, 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 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)
- -------------------------------------------------------------------------------
Indicate by check mark 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___
Number of shares outstanding of each class of common equity, as of April 30,
2000:
Class A Common Stock 7,009,779
Class B Common Stock 727,170
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT
(Check one):
Yes______ No __X__
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PHC, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - March 31, 2000 and June 30,
1999.
Condensed Consolidated Statements of Operations - Three months ended
March 31, 2000 and March 31, 1999; Nine months ended March 31, 2000
and March 31, 1999.
Condensed Consolidated Statements of Cash Flows - Nine months ended
March 31, 2000 and March 31, 1999.
Notes to Condensed Consolidated Financial Statements - March 31, 2000.
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II. OTHER INFORMATION
Item 6. Exhibits
Signatures
3
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, JUNE 30,
2000 1999
-------- --------
ASSETS (unaudited)
Current assets:
Cash & cash equivalents $ 172,852 $ 381,170
Accounts receivable, net of allowance for bad
debts of $3,374,100 at March 31, 2000,
$3,647,848 at June 30, 1999 6,634,608 6,343,227
Prepaid expenses 162,284 101,865
Other receivables and advances 232,462 334,155
Deferred income tax asset 459,280 459,280
Other receivables, related party 77,245 53,517
_________ _________
Total current assets 7,738,731 7,673,214
Accounts receivable, noncurrent 639,000 595,000
Other receivables, noncurrent, related party, net
of allowance for doubtful accounts of $1,162,287
at March 31, 2000 and $782,000 at June 30, 1999 3,211,891 2,908,113
Other receivable 128,721 109,165
Property and equipment, net 1,377,816 1,483,319
Deferred income taxes 154,700 154,700
Deferred financing costs, net of amortization of
$77,072 at March 31, 2000 and $64,041 at June 30,
1999 32,036 45,067
Goodwill, net of accumulated amortization of
$195,642 at March 31, 2000 and $116,900 at June
30, 1999 1,682,334 1,761,075
Deferred costs related to discontinued operations 546,778 219,443
Other assets 100,849 78,338
___________ ___________
Total assets $15,612,856 $15,027,434
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,684,353 $ 1,832,750
Notes payable--related parties 200,000 200,000
Current maturities of long term debt 1,827,246 1,286,318
Revolving credit note 1,914,641 1,669,830
Current portion of obligations under capital
leases 79,543 60,815
Accrued payroll, payroll taxes and benefits 360,315 333,955
Accrued expenses and other liabilities 1,584,578 1,459,290
Net current liabilities of discontinued
operations 2,641,537 2,641,537
___________ __________
Total current liabilities 10,292,213 9,484,495
___________ __________
Long-term debt 1,371,679 1,730,230
Obligations under capital leases 168,800 51,657
Convertible debentures 500,000 500,000
___________ __________
Total noncurrent liabilities 2,040,479 2,281,887
___________ __________
Total liabilities 12,332,692 11,766,382
___________ __________
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000
shares authorized, 813 shares issued and
outstanding June 1999 -- 8
Class A common stock, $.01 par value; 20,000,000
shares authorized, 7,005,404 and 5,612,930
shares issued March 2000 and June 1999,
respectively 70,054 56,129
Class B common stock, $.01 par value; 2,000,000
shares authorized, 727,170 and 727,210 issued
March 2000 and June 1999 respectively, convertible
into one share of Class A common Stock 7,272 7,272
Additional paid-in capital 16,631,381 15,967,176
Treasury stock, 2,776 shares at cost (12,122) (12,122)
Accumulated deficit (13,416,421) (12,757,411)
___________ ____________
Total stockholders' equity 3,280,164 3,261,052
___________ _____________
Total liabilities and stockholders' equity $15,612,856 $15,027,434
=========== ============
See Notes to Condensed Consolidated Financial Statements
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PHC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31 MARCH 31
2000 1999 2000 1999
(as restated) (as restated)
___________________________________________________
Revenues:
Patient Care, net $5,541,406 $4,333,651 $13,599,089 $13,125,581
Management Fees 290,192 122,141 783,427 518,983
Other 148,434 254,092 469,076 726,965
__________ __________ __________ __________
Total revenue 5,980,032 4,709,884 14,851,592 14,371,529
__________ __________ __________ __________
Operating expenses:
Patient care expenses 2,485,483 2,165,868 6,822,757 6,828,704
Cost of management
contracts 147,133 130,292 364,899 389,304
Provision for doubtful
accounts 560,641 275,263 1,629,029 1,419,583
Website expenses 200,817 -- 548,657 --
Administrative expenses 1,895,836 1,808,024 5,373,104 5,967,518
__________ __________ __________ __________
Total operating
expenses 5,289,910 4,379,447 14,738,446 14,605,109
__________ __________ __________ __________
Income (loss)from operations 690,122 330,437 113,146 (233,580)
__________ __________ __________ __________
Interest income 111,604 118,258 309,780 357,006
Other income 35,874 19,286 161,935 58,206
Interest expense (215,793) (240,612) (601,071) (1,013,046)
__________ __________ __________ __________
Total other expenses (68,315) (103,068) (129,356) (597,834)
__________ __________ __________ __________
Income (loss) before
Provision for Taxes 621,807 227,369 (16,210) (831,414)
Provision for Income Taxes 53,189 43,724 53,289 44,635
__________ __________ __________ __________
Net income (loss) $ 568,618 $ 183,645 $ (69,499) $ (876,049)
========= ========= =========== ===========
BASIC AND DILUTED EARNINGS PER SHARE
Net income (loss) $ 568,618 $ 183,645 $ (69,499) $ (876,049)
Preferred stock dividends (533,318) (62,547) (589,514) (92,356)
__________ __________ __________ __________
Income (loss)applicable to
common shareholders $ 35,300 $ 121,098 $ (659,013) $ (968,405)
========= ========= =========== ===========
Basic income (loss) per
common share $ 0.00 $ 0.02 $ (0.10) $ (0.16)
Basic weighted average number
shares outstanding 7,225,013 6,182,204 6,645,742 5,910,928
Diluted income (loss) per
common share $ 0.00 $ 0.02 $ (0.10) $ (0.16)
Diluted weighted average number
of shares outstanding 7,651,468 6,194,456 6,645,742 5,910,928
See Notes to Condensed Consolidated Financial Statements
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PHC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED
MARCH 31
2000 1999
(as restated)
_____________________________
Cash flows from operating activities:
Net loss $(69,499) $(876,049)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 249,474 249,483
Compensatory stock options, stock and warrants
issued for obligations 104,490 174,234
Changes in:
Accounts Receivable (580,750) 325,224
Prepaid expenses (60,419) (165,512)
Other assets (349,846) 69,859
Accounts payable (148,397) 194,736
Accrued expenses and other liabilities 151,648 (152,036)
__________ ___________
Net cash used in operating activities (703,299) (180,061)
__________ ___________
Cash flows from investing activities:
Acquisition of property and equipment (64,231) (150,420)
Disposition of property, equipment and
intangibles -- 363,104
__________ ___________
Net cash provided by (used in)investing activities (64,231) 212,684
__________ ___________
Cash flows from financing activities:
Revolving debt, net 244,811 (283,181)
Net debt activity 318,248 (344,550)
Deferred financing costs (5,288) (3,319)
Preferred stock dividends paid (4,809) (5,712)
Issuance of common stock 6,250 15,011
Convertible debt -- 500,000
__________ ___________
Net cash provided by (used in)financing activities 559,212 (121,751)
__________ ___________
NET DECREASE IN CASH (208,318) (89,128)
Beginning cash balance 381,170 227,077
__________ ___________
ENDING CASH BALANCE $172,852 $137,949
========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $616,071 $802,549
Income taxes 88,689 94,919
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Conversion of preferred stock to common stock 756,346 185,571
Issuance of preferred stock in lieu of cash
dividends 33,386 44,000
Issuance of common stock in lieu of cash
dividends 551,319 54,447
See Notes to Condensed Consolidated Financial Statements
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PHC, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE A - THE COMPANY
PHC, Inc. and its wholly owned subsidiaries (the "Company") is a national
health care company specializing in behavioral health services including the
treatment of substance abuse, which includes alcohol and drug dependency and
related disorders and the provision of psychiatric services. The Company also
provides management, administrative and online behavioral health services. The
Company primarily operates under three business segments:
(1) BEHAVIORAL HEALTH TREATMENT SERVICES, including two substance abuse
treatment facilities: Highland Ridge Hospital, located in Salt Lake City, Utah;
and Mount Regis Center, located in Salem, Virginia, and eight psychiatric
treatment locations which include Harbor Oaks Hospital, a 64-bed psychiatric
hospital located in New Baltimore, Michigan and seven outpatient behavioral
health locations (two in Las Vegas, Nevada operating as Harmony Healthcare, one
in Shawnee Mission, Kansas operating as Total Concept and four locations
operating as Pioneer Counseling Center in the Detroit, Michigan metropolitan
area);
(2) BEHAVIORAL HEALTH ADMINISTRATIVE SERVICES, including delivery of
management, administrative and help line services. PHC, Inc. provides management
and administrative services for its behavioral health treatment subsidiaries and
BSC-NY, Inc., a subsidiary of PHC, Inc., provides management services on behalf
of physician owned behavioral health practices in the greater New York City
metropolitan area. Pioneer Development and Support Services ("PDSS") provides
help line services primarily through contracts with major railroads; and
(3) BEHAVIORAL HEALTH ONLINE SERVICES, which includes behavioral health
education, training and products for the behavioral health professional, through
its website behavioralhealthonline.com.
In June, 1998 the Company's sub acute long-term care facility, Franvale
Nursing and Rehabilitation Center, in Braintree, Massachusetts was closed in a
state receivership action which was precipitated when the Company caused the
owner of the Franvale facility, Quality Care Centers of Massachusetts, Inc., to
institute a proceeding under Chapter 11 of the Federal Bankruptcy Code. The net
assets and liabilities of this facility are shown as discontinued operations in
the accompanying financial statements. The liquidation of the assets and
liabilities of Franvale may result in a non-cash financial statement gain. The
recognition of any gain has been deferred until final resolution of all
contingent liabilities.
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, 2000
are not necessarily indicative of the results that may be expected for the year
ending June 30, 2000. The accompanying financial statements should be read in
conjunction with the June 30, 1999 consolidated financial statements and
footnotes thereto included in the Company's 10-KSB filed on October 13, 1999 as
amended on October 20, 1999 and November 29, 1999.
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NOTE C - RESTATEMENT OF MARCH 31, 1999 FINANCIAL INFORMATION
In December 1998 the Company issued $500,000 in convertible debentures
together with 25,000 warrants and 105,000 warrants in lieu of cash for
professional fees. In error the value of these warrants was not charged as an
expense during the December 31, 1998 and March 31, 1999 quarters as required.
The Company has amended the December 31, 1998 and March 31, 1999 financial
information to reflect the Black-Scholes value of these warrants as additional
expense of $69,357 and $31,400 respectively.
The Company also amended the December 31, 1998 financial information to
reverse the recognition of part of the gain related to the liquidation of assets
of Quality Care Centers of Massachusetts, Inc. having determined that it was
more appropriate to defer recognition of any gain until final resolution of all
contingent liabilities. The accompanying balance sheet includes approximately
$2,600,000 in current liabilities and $545,000 in deferred expenses related to
the closing of the Quality Care Centers of Massachusetts facility, Franvale. The
deferred expenses are from various litigations brought against the subsidiary,
which except for the Massachusetts litigation, have been settled and related
legal costs. The Company anticipates that the final case pending, which was
filed by the State of Massachusetts, will result in additional costs of less
than the reserves available when all cases are settled. Based on existing facts
and conditions we anticipate that the elimination of this liability may result
in a non-cash gain and an increase in net worth. (See our 10-QSB for December
31, 1999 filed with the commission on February 14, 2000, "Part II, Item 1, Legal
Proceedings" for details regarding the case filed by the State of Massachusetts)
NOTE D - RECEIVABLE DUE FROM UNRELATED PROFESSIONAL CORPORATION
On November 1, 1996, BSC-NY, Inc. ("BSC"), merged with Behavioral Stress
Centers, Inc., a provider of management and administrative services to
psychotherapy and psychological practices in the greater New York City
Metropolitan Area. In connection with the merger, the Company issued 150,000
shares of PHC, Inc. Class A common stock to the former owners of Behavioral
Stress Centers, Inc. Also, in connection with the merger, another entity was
formed, Shliselberg Physician Services, P.C. formerly Perlow Physicians, P.C.
("Shliselberg"), to acquire the assets of the medical practices theretofore
serviced by Behavioral Stress Centers, Inc. The Company advanced Shliselberg the
funds to acquire those assets and at March 31, 2000 Shliselberg owed the Company
$4,374,178 which includes in addition to acquisition costs, management fees of
approximately $2,350,927 and interest on the advances of approximately $868,770.
During fiscal 1998 the Company established a reserve against this receivable in
the amount of $382,000. The Company increased the reserve to $782,000 in the
fiscal year ended June 30, 1999 and to $1,162,287 through March 31, 2000. It is
expected that collections will be received over the next several years and
accordingly, these amounts have been classified as noncurrent. The Company has
no ownership interest in Shliselberg.
8
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NOTE E - BUSINESS SEGMENT INFORMATION
The Company's behavioral health treatment services have similar economic
characteristics, services, patients and clients. Accordingly, all behavioral
health treatment services are reported on an aggregate basis under one segment.
The Company's segments are more fully described in Note A above. Residual income
and expenses from closed facilities are included in the administrative services
segment. The following summarizes the Company's segment data:
Behavioral Health
Treatment Administrative Online
Services Services Services Eliminations Total
_______________________________________________________________________________
For the nine
months ended March
31, 2000
Revenues - external
customers $13,599,089 $1,252,503 $-- $-- $14,851,592
Revenues -
intersegment -- 1,342,000 -- (1,342,000) --
Net income (loss) 231,107 248,051 (548,657) -- (69,499)
Total assets 9,988,294 25,366,980 18,931 (19,761,349) 15,612,856
For the nine
months ended March
31, 1999
Revenues - external
customers 12,587,893 1,783,636 -- -- 14,371,529
Revenues -
intersegment -- 1,203,000 -- (1,203,000) --
Net loss (608,183) (267,866) -- -- (876,049)
Total assets 10,203,994 24,992,297 -- (19,259,430) 15,936,861
9
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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 increased 27.9% to $5,541,406 for the three months
ended March 31, 2000 from $4,333,651 for the three months ended March 31, 1999
and 3.6% to $13,599,089 for the nine months ended March 31, 2000 from
$13,125,581 for the nine months ended March 31, 1999. This increase in revenue
is due to a 29.8% increase in census in our in patient facilities and the
expansion of treatment services at our chemical dependency facility in Salt Lake
City Utah to include dual diagnosis patients. During this period of increased
inpatient census, we also experienced a substantial increase in out patient
visits. The quarter ended March 31, 2000 also provided more services to private
pay patients and fewer patients paid under lower rate contracts than in most
prior periods providing for a more profitable payor mix.
Patient care expenses increased 14.8% to $2,485,483 for the three months
ended March 31, 2000 from $2,165,868 for the three months ended March 31, 1999
due to the increased costs of salaries, drugs, laboratory tests, food and other
hospital supplies related to the increase in census. Although there was an
increase in patient revenues for the nine months ended March 31, 2000 over the
same period in 1999, we experienced small decrease in patient care expenses for
the nine months ended March 31, 2000 due to recent streamlining and
consolidation of operations in prior quarters. Administrative expenses,
excluding bad debt and website expenses, have also increased 4.9% to $1,895,836
for the three months ended March 31, 2000 from $1,808,024 for the three months
ended March 31, 1999. This increase is primarily due to increased corporate
marketing expenses and increased consultant and maintenance costs related to our
Salt Lake City Utah facility. Administrative costs for the nine months ended
March 31, 2000 decreased 10% to $5,373,104 from $5,967,518 for the nine months
ended March 31, 1999. This decrease in expenses is also a result of the
reengineering and streamlining of all operations.
Website expenses include all costs relevant to the development and the
operations of the Behavioralhealthonline.com website. These expenses are
expected to continue to increase while the site is in development stages. The
site is not expected to produce revenues until the final quarter of fiscal 2000.
We are currently pursuing equity financing for the site development. The revenue
of the website will include only commissions on the sale of products and
services. A corresponding liability will be recorded at the time of the sale for
the cost of the product or service due to the provider. This is necessary since
the full amount of the sale will be charged to the end user and processed by
Behavioralhealthonline.com.
Interest expense decreased 40.6% to $601,071 for the nine months ended
March 31, 2000 from $1,013,046 for the nine months ended March 31, 1999. This
decrease is primarily due to one time interest charges on debt renewal and the
charge of the black scholes value of warrants issued in connection with the
renewal of the debt in the last fiscal year.
Provision for taxes represents State income taxes. The company has recorded
no provision for Federal income taxes for the nine months ended March 31, 2000
and 1999 due to available net operating loss carry forwards.
Preferred stock dividends increased to $533,318 for the quarter ended March
31, 2000 from $62,547 for the quarter ended March 31, 1999. The increase in the
price of the class A common stock in January prompted the conversion of all
outstanding preferred stock. This preferred stock carried a minimum conversion
price of $2.00 with an additional dividend due for the difference between the
actual conversion price and the minimum conversion price. Dividends recorded in
the quarter ended March 31, 2000 of $530,252 were a result of this minimum
conversion price and were paid in restricted class A common stock.
10
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We continue to view receivables most conservatively by maintaining the
ratio of reserves for bad debt to receivables at approximately 32% which is
evidenced by a 14.7% increase in bad debt expense for the nine months ended
March 31, 2000 over the same period last year. This amount is based on the
current age of accounts receivable and is expected to decrease as our more
aggressive collection practices decrease the number of days our patient
receivables remain unpaid. In addition to decreasing the number of days our
patient receivables remain outstanding, our more timely follow-up practice has
resulted in fewer accounts charged to bad debt due to untimely filing of claims
since errors on claims are identified and corrected in a more timely manner than
in prior years. The $639,000 shown as non-current patient accounts receivable is
presented at net realizable value. These amounts are due from individuals in
payment for treatment on which extended payment plans have been arranged and are
being met.
During the nine months ended March 31, 2000 we increased deferred costs
related to discontinued operations by $327,335 to $546,778. These costs
represent additional legal fees paid and accrued as a result of the ongoing
Quality Care Centers of Massachusetts litigation and investigation. This amount
will be offset by this discontinued segments liabilities of $2,641,537 when the
bankruptcy proceedings of that subsidiary have been finalized and result in
increased equity in that amount.
We also increased other assets by 28.7% to $100,849 as of March 31, 2000.
This is directly related to increases in deposits on expanded leased property
and deferred costs related to the equity financing for
Behavioralhealthonline.com.
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, 2000 by 4.8%,
approximately $335,381. 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, 2000 the Company met its cash flow needs
through ongoing accounts receivable financing and through debt and equity
transactions as follows:
During the quarter ended March 31, 2000 the Company issued 1,221,860 shares
of class A common stock in exchange for the remaining 781 shares of Series B
Convertible Preferred Stock and $533,318 in dividends.
In January 2000 the Company issued 13,572 shares of class A common stock in
conjunction with a consultant agreement.
In March 2000 the Company issued warrants to purchase 10,000 shares of
class A common stock exercisable at $1.50 in exchange for $10,000 in consultant
services provided to Behavioral Health Online, Inc.
Also in the quarter ended March 31, 2000 the Company issued 12,330 shares
of class A common stock as part of the employee stock purchase plan, 3,000
shares of class A common stock as an employee bonus and 5,000 shares of class A
common stock upon the exercise of employee stock options at $1.25 each.
We utilize our accounts receivable funding facilities to the maximum extent
available to meet current cash needs and sustain existing operations. Although
our existing operations are operating at a profit, expenses incurred by our
non-revenue producing start-up Company, Behavioral Health Online, Inc., cause
negative cash flow from operations and create the need for additional financing.
We are currently aggressively pursuing financing for our website operations to
help relieve the strain on cash flow from our behavioral health facilities. If
financing for our website operations does not become available in the near
future or should our existing operations result in unanticipated losses, we may
be required to borrow funds on less favorable terms than have been available in
the past.
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YEAR 2000 COMPLIANCE
As reported in the company's December 31, 1999 10-QSB the required
modifications to the Company's billing and receivable software were completed in
a timely manner to preclude major problems with the change over to the
eight-digit date on January 1, 2000. Some minor problems arose in the area of
reporting, which were immediately corrected without any major delays in work
progress.
We did not experience any stoppage or delays in receipt of essential
products nor were there any year 2000 equipment problems or utility service
interruptions.
12
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PART II OTHER INFORMATION
ITEM 6. EXHIBITS
EXHIBIT NO. DESCRIPTION
4.34 Warrant to purchase 40,000 shares of Class A Common Stock by and
between PHC, Inc. and CCRI, Inc. and Warrant to purchase 40,000 shares
of Class A Common Stock by and between PHC, Inc. and M&K Partners both
dated 3/3/97; replaces warrant for 160,000 shares dated 3/3/97 by and
between PHC, Inc. and CCRI, Inc.
10.70 Amendment number 1 to Loan and Security Agreement dated February 17,
2000 by and between PHC of Michigan, Inc., PHC, of Utah, Inc., PHC of
Virginia, Inc., PHC of Rhode Island, Inc. and Pioneer Counseling of
Virginia, Inc. and Heller Healthcare Finance, Inc., f/k/a HCFP Funding
in the amount of $2,500,000. (Filed as exhibit to the Company's report
on Form 10-QSB, filed with the Securities and Exchange Commission on
May 12, 2000. Commission file 0-22916)
27.00 Financial Data Schedule
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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 12, 2000 /s/ Bruce A. Shear
President
Chief Executive Officer
Date: May 12, 2000 /s/ Paula C. Wurts
Controller
Assistant Treasurer
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Exhibit 4.34
REPLACES WARRANT FOR 160,000 SHARES DATED MARCH 3, 1997
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR
SOLD EXCEPT (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT,
(II) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT (OR ANY
SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (III)
UPON THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, STATING THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
PHC, INC.
CONSULTANT WARRANT AGREEMENT
THIS AGREEMENT is made and entered into as of this 3rd day of March 1997,
by and between PHC, INC. (the "Company") and C.C.R.I. CORPORATION (the
"Consultant") (together, the "Parties").
RECITALS
A. As of March 3, 1997, the Company and the Consultant entered into a
Consulting Agreement, under which the Consultant received warrants to purchase
common stock of the Company ("Common Stock").
B. The Consulting Agreement provides for the issuance to Consultant of
warrants to purchase 40,000 shares of the common stock of the Company,
exercisable at a price of $1.00 per share.
C. The Company has agreed to issue and the Consultant is desirous of
obtaining the warrants on the terms and conditions herein contained.
IT IS THEREFORE agreed by and between the parties, for and in consideration
of the premises and the mutual covenants herein contained and for other good and
valuable consideration, as follows:
1. The Company hereby confirms and acknowledges that it has granted to the
Consultant, on March 3 1997, warrants to purchase shares of Common Stock (the
"Warrant") upon the terms and conditions herein set forth subject to the terms
and conditions of the Consulting, Agreement. The Warrant shall have a 5 year
life and is granted as compensation for services.
2. The purchase price of the shares of Common Stock underlying the warrants
which may be purchased pursuant to the Warrant is outline below.
3. The Warrant shall continue for five years after the date of grant set
forth in paragraph 1, unless sooner terminated or modified under the provisions
of this Agreement or the Consulting Agreement, and shall automatically expire at
midnight on the fifth anniversary of such date.
4. The Warrant shall vest in equal increments of 40,000 shares exercisable
as follows upon the occurrence of certain conditions set forth below:
a. The Warrant shall become exercisable at a price of $1.00 per share as to
40,000 shares upon execution and delivery of this Warrant Agreement.
15
<PAGE>
5. The shares of Common Stock issuable upon exercise of the Warrant shall
be included in a Registration Statement which shall be filed with the Securities
and Exchange Commission to permit Consultant's public resale of any shares
obtained upon exercise of the Warrant. The Company agrees to cause such
Registration Statement to be filed prior to December 31, 1997, with the
understanding that "consultant" warrants would be piggy-backed on any earlier
Registrations initiated by the Company. Warrant issuance will require Board
approval. The Company agrees to bear the reasonable costs and expenses of such
registration, and the costs and expenses of obtaining the registration or
qualification of the shares issuable upon exercise of the Warrant.
6. Subject to the terms of paragraph 8 hereof, this Warrant shall be
transferable upon surrender of this Warrant Agreement, with the form of
assignment attached hereto duly executed by Consultant, to the Company at its
office in the State of Massachusetts. Upon such surrender, the Company shall
cause a Warrant Certificate containing terms identical to those of this Warrant
Agreement, to be issued in the name of the transferee or transferees. If this
Warrant Agreement is assigned in respect of less than all the shares covered
hereby, Consultant shall be entitled to receive a new Warrant Agreement covering
the number of shares not so assigned.
7. Subject to the vesting requirements of paragraph 4 above, the Warrant
may be exercised in whole or in part by delivering to the Company written notice
of exercise on the Purchase Form included herein together with payment in full
for the shares being purchased upon such exercise. The Company will, upon
receipt of said notice and payment, issue or cause to be issued to the
Consultant a stock certificate for the number of shares purchased hereby.
8. The consultant represents and agrees that: (i) the Warrant shall not be
exercisable unless the purchase of Warrant shares upon the exercise of the
Warrant is pursuant to an applicable effective registration statement under the
Securities Act of 1933 (the "Act"), or unless in the opinion of counsel for the
Company, the proposed purchase of such Warrant shares would be exempt from the
registration requirements of the Act, and from the qualification requirements of
any state securities law; (ii) upon exercise of the Warrant, it will acquire the
Warrant shares for its own account for investment and not with any intent or
view to any distribution, resale or other disposition of the Warrant shares
except as permitted hereby; (iii) it will not sell or transfer the Warrant
shares, unless they are registered under the Act. The Company may require, as a
condition of the exercise of the Warrant, that the consultant sign such further
representations and agreements as it reasonably determines to be necessary or
appropriate to assure and to evidence compliance with the requirements of the
Act.
9. In case the Company shall at any time subdivide (by way of a stock split
or stock dividend) or combine the outstanding shares of Common Stock, the
exercise price shall be forthwith proportionately decreased (in the case of
subdivision) or increased (in the case of combination) and the number of shares
of Common Stock deliverable upon the exercise of this Warrant shall be
proportionately adjusted. If financing activities completed during the time
period of this contract increase fully diluted capitalization by more than 25%,
the before mentioned warrant numbers shall be increased proportionately. In the
event of a reduction in exercise price, the date for this calculation shall
correspond with the date of exercise price change.
10. The Consultant shall have no rights as a stockholder with respect to
the shares of Common Stock which may be purchased pursuant to the Warrant until
such shares are issued to the Consultant.
11. THIS AGREEMENT IS ENTERED INTO AND SHALL BE GOVERNED BY, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MASSACHUSETTS.
12. The terms and conditions contained in Consulting Agreement, and as it
may be amended from time to time hereafter, are incorporated into and made a
part of this Agreement by reference, as if the same were set forth herein in
full, and all provisions of the Warrant are made subject to any and all terms of
the Consulting Agreement.
13. Any notice to be given under the terms of this Agreement shall be given
in accordance with Section 10 of the Consulting Agreement.
16
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Consultant
Warrant Agreement as of the date first above mentioned.
PHC, INC.
By: /s/ Bruce Shear
Bruce Shear, C.E.O.
C.C.R.I. CORPORATION
By: /s/ Malcolm McGuire
Malcolm McGuire, President
Address:
3104 East Camelback Road, Suite 539
Phoenix, Arizona 85016
17
<PAGE>
REPLACES WARRANT FOR 160,000 SHARES DATED MARCH 3, 1997
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR
SOLD EXCEPT (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT,
(II) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT (OR ANY
SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (III)
UPON THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, STATING THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
PHC, INC.
CONSULTANT WARRANT AGREEMENT
THIS AGREEMENT is made and entered into as of this 3rd day of March 1997,
by and between PHC, INC. (the "Company") and C.C.R.I. Corporation (the
"Consultant") (together, the "Parties") and has been assigned to M & K Partners
(Assignee).
RECITALS
A. As of March 3, 1997, the Company and the Consultant entered into a
Consulting Agreement, under which the Consultant received warrants to purchase
common stock of the Company ("Common Stock").
B. The Consulting Agreement provides for the issuance to Consultant of
warrants to purchase 40,000 shares of the common stock of the Company,
exercisable at a price of $1.00 per share.
C. The Company has agreed to issue and the Consultant is desirous of
obtaining the warrants on the terms and conditions herein contained.
IT IS THEREFORE agreed by and between the parties, for and in consideration
of the premises and the mutual covenants herein contained and for other good and
valuable consideration, as follows:
1. The Company hereby confirms and acknowledges that it has granted to the
Consultant, on March 3 1997, warrants to purchase shares of Common Stock (the
"Warrant") upon the terms and conditions herein set forth subject to the terms
and conditions of the Consulting, Agreement. The Warrant shall have a 5 year
life and is granted as compensation for services.
18
<PAGE>
2. The purchase price of the shares of Common Stock underlying the warrants
which may be purchased pursuant to the Warrant is outline below.
3. The Warrant shall continue for five years after the date of grant set
forth in paragraph 1, unless sooner terminated or modified under the provisions
of this Agreement or the Consulting Agreement, and shall automatically expire at
midnight on the fifth anniversary of such date.
4. The Warrant shall vest in equal increments of 40,000 shares exercisable
as follows upon the occurrence of certain conditions set forth below:
a. The Warrant shall become exercisable at a price of $1.00 per share as to
40,000 shares upon execution and delivery of this Warrant Agreement.
5. The shares of Common Stock issuable upon exercise of the Warrant shall
be included in a Registration Statement which shall be filed with the Securities
and Exchange Commission to permit Consultant's public resale of any shares
obtained upon exercise of the Warrant. The Company agrees to cause such
Registration Statement to be filed prior to December 31, 1997, with the
understanding that "consultant" warrants would be piggy-backed on any earlier
Registrations initiated by the Company. Warrant issuance will require Board
approval. The Company agrees to bear the reasonable costs and expenses of such
registration, and the costs and expenses of obtaining the registration or
qualification of the shares issuable upon exercise of the Warrant.
6. Subject to the terms of paragraph 8 hereof, this Warrant shall be
transferable upon surrender of this Warrant Agreement, with the form of
assignment attached hereto duly executed by Consultant, to the Company at its
office in the State of Massachusetts. Upon such surrender, the Company shall
cause a Warrant Certificate containing terms identical to those of this Warrant
Agreement, to be issued in the name of the transferee or transferees. If this
Warrant Agreement is assigned in respect of less than all the shares covered
hereby, Consultant shall be entitled to receive a new Warrant Agreement covering
the number of shares not so assigned.
7. Subject to the vesting requirements of paragraph 4 above, the Warrant
may be exercised in whole or in part by delivering to the Company written notice
of exercise on the Purchase Form included herein together with payment in full
for the shares being purchased upon such exercise. The Company will, upon
receipt of said notice and payment, issue or cause to be issued to the
Consultant a stock certificate for the number of shares purchased hereby.
8. The consultant represents and agrees that: (i) the Warrant shall not be
exercisable unless the purchase of Warrant shares upon the exercise of the
Warrant is pursuant to an applicable effective registration statement under the
Securities Act of 1933 (the "Act"), or unless in the opinion of counsel for the
Company, the proposed purchase of such Warrant shares would be exempt from the
registration requirements of the Act, and from the qualification requirements of
any state securities law; (ii) upon exercise of the Warrant, it will acquire the
Warrant shares for its own account for investment and not with any intent or
view to any distribution, resale or other disposition of the Warrant shares
except as permitted hereby; (iii) it will not sell or transfer the Warrant
shares, unless they are registered under the Act. The Company may require, as a
condition of the exercise of the Warrant, that the consultant sign such further
representations and agreements as it reasonably determines to be necessary or
appropriate to assure and to evidence compliance with the requirements of the
Act.
9. In case the Company shall at any time subdivide (by way of a stock split
or stock dividend) or combine the outstanding shares of Common Stock, the
exercise price shall be forthwith proportionately decreased (in the case of
subdivision) or increased (in the case of combination) and the number of shares
of Common Stock deliverable upon the exercise of this Warrant shall be
proportionately adjusted. If financing activities completed during the time
period of this contract increase fully diluted capitalization by more than 25%,
the before mentioned warrant numbers shall be increased proportionately. In the
event of a reduction in exercise price, the date for this calculation shall
correspond with the date of exercise price change.
19
<PAGE>
10. The Consultant shall have no rights as a stockholder with respect to
the shares of Common Stock which may be purchased pursuant to the Warrant until
such shares are issued to the Consultant.
11. THIS AGREEMENT IS ENTERED INTO AND SHALL BE GOVERNED BY, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MASSACHUSETTS.
12. The terms and conditions contained in Consulting Agreement, and as it
may be amended from time to time hereafter, are incorporated into and made a
part of this Agreement by reference, as if the same were set forth herein in
full, and all provisions of the Warrant are made subject to any and all terms of
the Consulting Agreement.
13. Any notice to be given under the terms of this Agreement shall be given
in accordance with Section 10 of the Consulting Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Consultant
Warrant Agreement as of the date first above mentioned.
PHC, INC.
By: /s/ Bruce Shear
Bruce Shear, C.E.O.
M & K PARTNERS
By: /s/ Mickey McGuire
Mickey McGuire, President
Address:
10627 N Aberdeen Road
Scottsdale, Arizona 85254
20
<PAGE>
EXHIBIT 10.70
$2,500,000.00
AMENDMENT NO. 1
TO
LOAN AND SECURITY AGREEMENT
originally dated as of February 18, 1998
by and among
PHC OF MICHIGAN, INC.
PHC OF UTAH, INC.
PHC OF VIRGINIA, INC.
PHC OF RHODE ISLAND, INC.
PIONEER COUNSELING OF VIRGINIA, INC.
(collectively, "Borrower")
and
HELLER HEALTHCARE FINANCE, INC.
(F/K/A HCFP FUNDING, INC.)
("Lender")
Amended as of February 17, 2000
H:\WP\LEGAL\CLIENT\PHCINC\FirstAmendloan.doc
21
<PAGE>
AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made as of this 17th day of February, 2000, by and among PHC OF MICHIGAN, INC.,
a Massachusetts corporation, PHC OF UTAH, INC, a Massachusetts corporation, and
PHC OF VIRGINIA, INC., a Massachusetts corporation, (collectively "Borrower"),
PHC OF RHODE, INC., a Massachusetts corporation, ("PHCRI"), and PIONEER
COUNSELING OF VIRGINIA, INC., a Massachusetts corporation, ("PCVI") and
collectively with PHCRI, ("Withdrawing Borrowers"), and HELLER HEALTHCARE
FINANCE, INC., F/K/A HCFP FUNDING, INC., a Delaware corporation ("Lender").
RECITALS
A. Pursuant to that certain Loan and Security Agreement dated February 18,
1998 (as previously amended, and as amended hereby and as further amended,
modified and restated from time to time, collectively, the "Loan Agreement") by
and among Lender, Borrower and Withdrawing Borrowers (Borrower and Withdrawing
Borrowers are sometimes collectively referred to as "Original Borrower"), Lender
agreed to make available to Original Borrower a revolving credit loan (the
"Loan").
B. The parties have agreed that Withdrawing Borrowers shall no longer be
parties to the Loan Agreement.
C. Borrower and Lender wish to make certain additional changes to the
financing arrangements as set forth in this Amendment.
NOW, THEREFORE, in consideration of the foregoing, the terms and conditions
set forth in this Amendment, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Lender, Borrower, and
Withdrawing Borrowers hereby agree as follows:
SECTION 1. DEFINITIONS. Unless otherwise defined in this Amendment, all
capitalized terms shall have the meanings assigned to such terms in the Loan
Agreement.
SECTION 2. WITHDRAWAL OF WITHDRAWING BORROWERS. Lender, Borrower and
Withdrawing Borrowers hereby agree that, as of the date all of the Obligations
attributable to Collateral of Withdrawing Borrowers are repaid in full,
Withdrawing Borrowers shall no longer be parties to the Loan Agreement and shall
not be bound by any of the conditions, covenants, representations, warranties
and other agreements set forth in the Loan Agreement.
2
H:\WP\LEGAL\CLIENT\PHCINC\FirstAmendloan.doc
22
<PAGE>
SECTION 3. CONFIRMATION OF REPRESENTATIONS AND WARRANTIES. Each Borrower
hereby (i) confirms that all of the representations and warranties set forth in
Article IV of the Loan Agreement are true and correct with respect to such
Borrower, and (ii) specifically represents and warrants to Lender that it has
good and marketable title to all of its respective Collateral, free and clear of
any lien or security interest in favor any other person or entity.
SECTION 4. FEE. In consideration of Lender's agreement to enter into this
Amendment, Borrower hereby agrees to pay to Lender a fee equal to one percent
(1%) of the Maximum Loan Amount i.e. a fee of $25,000 (the "Fee"), which Fee (i)
shall be due and payable by Borrower on the date of its execution and delivery
of this Amendment, and (ii) shall constitute a portion of the Obligations
evidenced by the Note and secured by the Loan Agreement .and other Loan
Documents. Borrower hereby authorizes Lender to deduct the Fee from the proceeds
of the next Revolving Credit Loan.
SECTION 5. EXTENSION OF TERM. Subject to Lender's right to cease making
Revolving Credit Loans to Borrower upon or after any Event of Default, the Term
is hereby extended to February 18, 2002 unless terminated as provided in Section
2.8 of the Loan Agreement, and this Agreement shall be renewed for two-year
periods thereafter upon the mutual written agreement of the parties.
SECTION 6. AMENDMENT TO LOAN AGREEMENT. The Loan Agreement is hereby
amended as follows:
(a) A new Section 1.32a shall be added to read as follows:
"SECTION 1.32A MINIMUM TERMINATION FEE. `Minimum Termination Fee' shall
mean the amount equal to three percent (3%) of the Maximum Loan Amount."
(b) A new Section 1.46 shall be added to read as follows:
"SECTION 1.46 YIELD MAINTENANCE AMOUNT. `Yield Maintenance Amount' shall
mean the product obtained by multiplying (i) the difference between (A) the
all-in effective yield (measured as a percentage per annum) earned by Lender
under this Agreement during the three (3) full calendar months immediately
preceeding the Termination Date minus (B) Heller Financial Inc's weighted
average cost of capital (measured as a percentage per annum) for the most recent
publicly disclosed quarterly financial period; TIMES (ii) the average principal
amount of outstanding Revolving Credit Loans for the three (3) calendar months
immediately preceeding the Termination Date; TIMES (iii) the quotient of (A) the
number of months (full or partial) then remaining in the Term DIVIDED BY (B)
twelve (12)."
(c) Section 2.8(c) is hereby deleted and replaced in its entirety to read
as follows:
"2.8(c) Upon at least (30) days prior written notice to Lender (the
`Termination Notice Period'), Borrower may terminate this Agreement after
February 18, 2001, PROVIDED HOWEVER, at the effective date of such termination,
Borrower shall pay to Lender (in addition to the then outstanding principal,
accrued interest and other Obligations owing under the terms of this Agreement
and any other Loan Documents) as yield maintenance for the loss of bargain and
not as a penalty, an amount equal to the greater of (i) the applicable minimum
Termination Fee or (ii) the Yield Maintenance Amount. Consistent with the
foregoing. Borrower has no right to terminate this Agreement until after
February 18, 2001."
3
H:\WP\LEGAL\CLIENT\PHCINC\FirstAmendloan.doc
23
<PAGE>
SECTION 7. EFFECTIVE DATE. This Amendment shall be effective upon execution
and delivery to Lender of this Amendment by each Borrower.
SECTION 8.COSTS. Borrower shall be responsible for the payment of all costs
of Lender incurred in connection with the preparation of this Amendment,
including but not limited to the reasonable fees of Lenders' in-house counsel.
SECTION 9. REFERENCE TO THE EFFECT ON THE LOAN AGREEMENT.
(a) Upon the effectiveness of this Amendment, each reference in the Loan
Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of
similar import shall mean and be a reference to the Loan Agreement as amended by
this Amendment.
(b) Except as specifically amended above, the Loan Agreement, and all other
Loan Documents, shall remain in full force and effect, and are hereby ratified
and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided in this Amendment, operate as a waiver of any
right, power or remedy of Lender, nor constitute a waiver of any provision of
the Loan Agreement, or any other documents, instruments and agreements executed
or delivered in connection with the Loan Agreement.
SECTION 10. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of Maryland.
SECTION 11. HEADINGS. Section headings in this Amendment are included for
convenience or reference only and shall not constitute a part of this Amendment
for any other purpose.
SECTION 12. COUNTERPARTS. This Amendment may be executed in counterparts,
and both counterparts taken together shall be deemed to constitute one and the
same instrument.
[SIGNATURES FOLLOW]
4
H:\WP\LEGAL\CLIENT\PHCINC\FirstAmendloan.doc
24
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the date first written above.
LENDER:
HELLER HEALTHCARE FINANCE, INC. (F/K/A HCFP FUNDING,
INC.) A DELAWARE CORPORATION
By: _____________________________________________
Name:
Title:_____________________________________________
BORROWER:
PHC OF MICHIGAN, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
Name
Title: President
PHC OF UTAH, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
Name
Title: President
PHC OF VIRGINIA, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
Name
Title: President
[SIGNATURES CONTINUE]
5
H:\WP\LEGAL\CLIENT\PHCINC\FirstAmendloan.doc
25
<PAGE>
WITHDRAWING BORROWERS:
PHC OF RHODE ISLAND, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
Name
Title: President
PIONEER COUNSELING OF VIRGINIA, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
Name
Title: President
6
H:\WP\LEGAL\CLIENT\PHCINC\FirstAmendloan.doc
26
<PAGE>
<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> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-1-1999
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1.000
<CASH> 172,852
<SECURITIES> 0
<RECEIVABLES> 10,647,708
<ALLOWANCES> 3,374,100
<INVENTORY> 0
<CURRENT-ASSETS> 7,738,731
<PP&E> 2,542,326
<DEPRECIATION> 1,164,510
<TOTAL-ASSETS> 15,612,856
<CURRENT-LIABILITIES> 10,292,213
<BONDS> 0
0
0
<COMMON> 77,326
<OTHER-SE> 3,202,838
<TOTAL-LIABILITY-AND-EQUITY> 15,612,856
<SALES> 0
<TOTAL-REVENUES> 14,851,592
<CGS> 0
<TOTAL-COSTS> 14,738,446
<OTHER-EXPENSES> 129,356
<LOSS-PROVISION> 1,629,029
<INTEREST-EXPENSE> 601,071
<INCOME-PRETAX> (16,210)
<INCOME-TAX> 53,289
<INCOME-CONTINUING> (69,499)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (69,499)
<EPS-BASIC> (.10)
<EPS-DILUTED> (.10)
</TABLE>
