PROSPECTUS
PHC, INC.
PIONEER BEHAVIORAL HEALTH
2,983,307 Shares of Class A Common Stock
This prospectus covers the sale from time to time of shares of the
company's class Class A common stock, by the selling security holders.
The company will only receive proceeds if outstanding warrants are
exercised. Such funds will be added to working capital. All other proceeds will
be realized by the Selling Security Holders. The Company is obligated to pay all
of the expenses incident to the prospectus estimated to be approximately
$53,000.
The class A common stock trades in the over-the-counter market and current
prices are available on the Nasdaq SmallCap market under the symbol PIHC. On
April 24, 2000, the closing bid price of the class A common stock was $l.8125.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" AT PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is June 19, 2000
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OUR COMPANY
Our Company is a national health care company, which provides psychiatric
services primarily to individuals who have alcohol and drug dependency, related
disorders and to individuals in the gaming and trucking industry. We operate
substance abuse treatment facilities in Utah and Virginia, four outpatient
psychiatric facilities in Michigan, two outpatient psychiatric facilities in
Nevada and an inpatient psychiatric facility in Michigan. We also provide
management and administrative services to psychotherapy and psychological
practices in New York and operate a website, Behavioralhealthonline.com, which
provides education, training and materials to behavioral health professionals.
Our Company provides behavioral health services and products through
inpatient and outpatient facilities and online to behavioral health
professionals. Our substance abuse facilities provide specialized treatment
services to patients who typically have poor recovery prognoses and who are
prone to relapse. These services are offered in small specialty care facilities,
which permit us to provide our clients with efficient and customized treatment
without the significant costs associated with the management and operation of
general acute care hospitals. We tailor these programs and services to
"safety-sensitive" industries and concentrate our marketing efforts on the
transportation, oil and gas exploration, heavy equipment, manufacturing, law
enforcement, gaming and health services industries. Our psychiatric facility
provides inpatient psychiatric care and intensive outpatient treatment, referred
to as partial hospitalization, to children, adolescents and adults. Our
outpatient mental health clinics provide services to employees of major
employers, as well as to managed care, Medicare and Medicaid clients. The
psychiatric services are offered in a larger, more traditional setting than
PHC's substance abuse facilities, enabling PHC to take advantage of economies of
scale to provide cost-effective treatment alternatives.
The Company treats employees who have been referred for treatment as a
result of compliance with Subchapter D of the Anti-Drug Abuse Act of 1988
(commonly known as the Drug Free Workplace Act), which requires employers who
are Federal contractors or Federal grant recipients to establish drug-free
awareness programs which, among other things, inform employees about
available drug counseling; rehabilitation and employee assistance programs.
We also provide treatment under the Department of Transportation implemented
regulations, which broaden the coverage and scope of alcohol and drug testing
for employees in "safety sensitive" positions in the transportation industry.
The Company was incorporated in 1976 and is a Massachusetts
corporation. Our corporate offices are located at 200 Lake Street, Suite
102, Peabody, MA 01960 and our telephone number is (978) 536-2777.
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THE OFFERING
Securities Outstanding as of March 31, 2000:
Class A common stock 7,005,404
Class B common stock 727,170
Class C common stock 0
Preferred stock 0
Securities Offered 2,983,307 shares of class A common stock, of
which 1,542,266 are outstanding, 250,000
are issuable on conversion of debt, and
1,191,041 are issuable on exercise of
outstanding warrants.
NASDAQ Symbol PIHC
Proceeds to the Company $2,298,352.20 Assuming the warrants are
exercised, this amount will be added to our
working capital. All other proceeds will
be retained by the selling security holders.
Summary Consolidated Financial Data
Nine Months Ended
March 31, Year Ended June 30,
2000 1999 1999 1998
---------------------------------------------
Statements of Operations Data:
Revenue $14,851,592 $14,371,529 $19,139,496 $21,246,189
Operating expenses 14,738,446 14,605,109 19,691,234 24,346,787
Income (loss) from operations 113,146 (233,580) (551,738) (3,100,598)
Other expense (129,356) (597,834) (742,914) (839,706)
Provision for taxes 53,289 44,635 59,434 219,239
Loss from continuing
operations $ (69,499) $(876,049) $(1,354,086)$(4,159,543)
Loss from discontinued
operations -- -- -- (2,220,296)
Net Loss $ (69,499) $(876,049) $(1,354,086)$(6,379,839)
Dividends (589,514) (92,356) (142,110) (207,060)
Loss applicable to common
shares $ (659,013) $(968,405) $(1,496,196)$(6,586,899)
Basic and diluted Loss per
common share $ (0.10) $ (0.16) $ (0.25)$ (1.26)
Basic and diluted weighted
average shares outstanding 6,645,742 5,910,928 6,008,263 5,237,168
As of
March
31,2000
_____________
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Balance Sheet Data:
Total assets $ 15,612,856
Working capital (2,553,482)
Long-term obligations 2,040,479
Stockholders' equity 3,280,164
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RISK FACTORS
An investment in the securities offered hereby is speculative in nature and
involves a high degree of risk. In addition to the other information in this
prospectus, the following risk factors should be considered carefully in
evaluating whether to invest in the securities offered hereby.
OPERATING RISKS
The concentration of accounts receivable due from government payors could
create a severe cash flow problem should these agencies fail to make timely
payment. We had substantial receivables from Medicaid and Medicare of
approximately $150,000 at December 31, 1999 and $400,000 at June 30, 1999, which
would create a cash flow problem should these agencies defer or fail to make
reimbursement payments as due, which would require us to borrow at unfavorable
rates.
If managed care organizations delay approving treatment, or reduce the
patient length of stay or number of visits or reimbursement, our company's
ability to meet operating expenses is affected. As managed care organizations
and insurance companies adopt policies that limit the length of stay for
substance abuse treatment, our business is materially adversely affected since
our revenues and cash flow go down and our fixed operating expenses continue.
Reimbursement for substance abuse and psychiatric treatment from private
insurers is largely dependent on our ability to substantiate the medical
necessity of treatment. The process of substantiating a claim often takes up to
four months and sometimes longer; as a result, we experience significant delays
in the collection of amounts reimbursable by third-party payors, which adversely
affects our working capital condition.
As our accounts receivable age and become uncollectable our cash flow is
negatively impacted. Our accounts receivable (net of allowance for bad debts)
were $6,498,365 at September 30, 1999 compared with $6,938,227 at June 30, 1999
and $8,126,972 at June 30, 1998. As we expand, we will be required to seek
payment from a larger number of payors and the amount of accounts receivable
will likely increase. The overall decrease in current accounts receivable is due
primarily to significant increases in reserves due to our more aggressive
reserve policies established in June 1997. If the amount of receivables, which
eventually become uncollectible, exceeds such reserves, we could be materially
adversely affected. In addition, any decrease in our ability to collect our
accounts receivable or any further delay in the collection of accounts
receivable would have a material adverse effect on our results of operations.
See the Consolidated Financial Statements and notes related thereto included
herein or incorporated herein by reference.
Due to the Company's current high debt to equity ratio and recent losses
from operations, if the Company needs additional financing it may require
borrowing at unfavorable rates. We are utilizing, to the maximum extent, our
accounts receivable funding facilities, which bear interest at the prime rate
plus 2.25%, to meet our current cash needs. Should we require additional funds
to meet our cash flow requirements or to fund growth or new investments, we may
be required to meet these needs with more costly financing. If we are unable to
obtain needed financing, it could have a material adverse effect on our
financial condition, operations and business prospects. See Consolidated
Financial Statements and related notes included or incorporated into this
prospectus by reference.
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The Company's reliance on contracts with key clients to maintain sufficient
patient census would impact our ability to meet our fixed costs should one or
more of these clients cancel contracts or be unable to pay for services
rendered. We have entered into relationships with large employers, health care
institutions and labor unions to provide treatment for psychiatric disorders,
chemical dependency and substance abuse in conjunction with employer-sponsored
employee assistance programs. The employees of such institutions may be referred
to us for treatment, the cost of which is reimbursed on a per diem or per capita
basis. Approximately 30% of our total revenue is derived from these key clients.
No one of these large employers, health care institutions or labor unions
individually accounts for 10% or more of our consolidated revenues, the loss of
any of these key clients would require us to expend considerable effort to
replace patient referrals and would result in revenue losses and attendant loss
in income.
Control of the healthcare industry exercised by federal, state and local
regulatory agencies can increase costs, establish maximum reimbursement levels
and limit expansion. Our Company and the health care industry are subject to
rapid regulatory change with respect to licensure and conduct of operations at
existing facilities, construction of new facilities, acquisition of existing
facilities, the addition of new services, compliance with physical plant safety
and land use requirements, implementation of certain capital expenditures,
reimbursement for services rendered and periodic government inspections.
Governmental budgetary restrictions have resulted in limited reimbursement rates
in the healthcare industry including our Company. As a result of these
restrictions we cannot be certain that payments under government programs will
remain at a level comparable to the present level or be sufficient to cover the
costs allocable to such patients. In addition, many states, including the State
of Michigan, are considering reductions in state Medicaid budgets.
Insurance companies and managed care organizations are entering into sole
source contracts with healthcare providers, which could limit our ability to
obtain patients. Private insurers, managed care organizations and, to a lesser
extent, Medicaid and Medicare, are beginning to carve-out specific services,
including mental health and substance abuse services, and establish small,
specialized networks of providers for such services at fixed reimbursement
rates. Continued growth in the use of carve-out systems could materially
adversely affect our business to the extent we are not selected to participate
in such smaller specialized networks or if the reimbursement rate is not
adequate to cover the cost of providing the service.
If we acquire new businesses or expand our businesses, the operating costs
may be far greater than revenues for a significant period of time. The operating
losses and negative cash flow associated with start-up operations or
acquisitions could have a material adverse effect on our profitability and
liquidity unless and until such facilities are fully integrated with our other
operations and become self sufficient. Until such time we may be required to
borrow at higher rates and less favorable terms.
The limited number of healthcare professionals in the areas in which we
operate may create staffing shortages. Our success depends, in large part, on
our ability to attract and retain highly qualified personnel, particularly
skilled health care personnel, which are in short supply. We face competition
for such personnel from governmental agencies, health care providers and other
companies and are constantly increasing our employee benefit programs, and
related costs, to maintain required levels of skilled professionals. These
increasing costs impact our profitability.
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MANAGEMENT RISKS
Bruce A. Shear is in control of the company since he is entitled to elect
and replace a majority of the board of directors. Bruce A. Shear and his
affiliates own and control 92.3% of the class B common stock which elects three
of the five members of the board of directors. Bruce A. Shear can establish,
maintain and control business policy and decisions by virtue of his control of
the board of directors.
Retention of key personnel with knowledge of key contracts and clients is
essential to the success of the Company. PHC is highly dependent on the
principal members of its management and professional staff, particularly Bruce
A. Shear, PHC's President and Chief Executive Officer, Robert H. Boswell, PHC's
Senior Vice President and the other members of PHC's management and their
continued relationship with key clients.
MARKET RISKS
The Nasdaq Stock Market may delist the Company's stock from the Nasdaq
exchange if the Company fails to meet listing requirements. The Nasdaq staff has
notified us of its concern regarding the continued listing of our Common Stock
on the Nasdaq SmallCap Market based on our failure to maintain a minimum bid
price greater than $1.00 over thirty consecutive trading days as required.
Nasdaq has also advised us that we are not in compliance with the required Net
Tangible Assets for listing. We believe that we are now in compliance with the
minimum bid price requirement since our bid price for Common Stock has closed
higher than $1.00 for the past 15 trading days. We have discussed the net
tangible asset requirement with the Nasdaq and believe that we will be in
compliance with this requirement following the close of our current fiscal year.
We are awaiting response from the Nasdaq as to whether it will grant us the time
required to get into compliance with this requirement.
Should the Company's securities be delisted from the Nasdaq Stock Market,
stockholders may have difficulty selling the stock. If our Common Stock is
delisted from Nasdaq, the Common Stock would be traded on the bulletin board.
Cost of trading on the bulletin board can be more than the cost of trading on
the SmallCap market and since there may be an absence of market makers on the
bulletin board the price may be more volatile and it may be harder to sell the
securities.
If our common stock is not actively traded, the small number of
transactions can result in significant swings in the market price, and it may be
difficult for stockholders to dispose of stock in a timely way at a desirable
market price or may result in purchasing of shares for a higher price.
Our right to issue convertible preferred stock may adversely affect the
rights of the common stock. Our Board of Directors has the right to establish
the preferences for and issue up to 1,000,000 shares of preferred stock without
further stockholder action. The terms of any series of preferred stock, which
may include priority claims to assets and dividends and special voting rights,
could adversely affect the market price of and the ability to sell common stock.
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AVAILABLE INFORMATION
The Company filed a registration statement with the Securities and Exchange
Commission covering the securities offered. This prospectus does not contain all
of the information set forth in the registration statement and the related
exhibits and schedules. For further information with respect to the Company and
the securities being offered, see the registration statement, and related
exhibits and schedules. Copies of these documents are available for review at
the public reference facilities maintained at the principal office of the
Commission at 450 Fifth Street, N. W., Room 1024, Washington D.C. 20549 and at
the Commission's regional offices at 7 World Trade Center, New York, New York
10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. You may obtain information on the operation of the
public reference facilities by calling the Commission at 1-800-SEC-0330. Copies
of such materials are available upon written request from the public reference
section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission also maintains an Internet site that contains
reports, proxy and information statements and other information about PHC that
is filed electronically at http:\\WWW.SEC.GOV. Reference is made to the copies
of any contracts or other documents filed as exhibits to the registration
statement.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, and in accordance therewith files reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information are available for inspection and copying at the
public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such material can be obtained at prescribed
rates from the Commission at such address. Such reports, proxy statements and
other information can also be inspected at the Commission's regional offices at
7 World Trade Center, New York, New York 10048 and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
A copy of our Annual Report on Form 10-KSB for the year ended June 30,
1999, as filed with the Commission, is available upon request, without charge,
by writing to PHC, Inc., 200 Lake Street, Suite 102, Peabody, Massachusetts
01960, Attention: Bruce A. Shear.
We furnish our stockholders and warrant holders with annual reports
containing audited financial statements and such other periodic reports as we
may from time to time deem appropriate or as may be required by law.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated herein by reference and made a part of this prospectus are the
following: (1) our Annual Report on Form 10-KSB for the fiscal year ended June
30, 1999 filed with the Commission on October 13, 1999 as amended on October 20,
1999 and November 29, 1999; (2) our Proxy Statement filed with the Commission on
November 18, 1999; (3) our Quarterly Report on Form 10-QSB for the quarters
ended September 30, 1999 filed with the Commission on November 15, 1999,
December 31, 1999 filed with the Commission on February 14, 2000 as amended on
May 3, 2000 and May 9, 2000 and March 31, 2000 filed with the Commission on May
12, 2000 as amended on June 1, 2000; and (4) the description of the Class A
Common Stock, which is registered under Section 12 of the Exchange Act,
contained in the Company's Registration Statement on Form 8-A dated December 17,
1993, and the amendment thereto on Form 8-A/A dated March 2, 1994. All documents
subsequently filed by the Company with the Commission, as required by Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus
and prior to the termination of the offering, will be deemed to be incorporated
by reference into this prospectus and to be a part of this prospectus from the
respective dates of filing of such documents. Any statement contained in any
document incorporated by reference shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained in this
prospectus or in any other subsequently filed document which also is or is
deemed to be incorporated by reference modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this prospectus. All information
appearing in this prospectus is qualified in its entirety by the information and
financial statements (including notes to the financial statements) appearing in
the documents incorporated by reference, except to the extent set forth in the
immediately preceding statement.
The Company will provide without charge to each person who receives a
prospectus, upon written or oral request of such person, a copy of the
information that is incorporated by reference herein. Requests for such
information should be directed to: PHC, Inc., 200 Lake Street, Suite 102,
Peabody, Massachusetts 01960, Attention: Bruce A. Shear.
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SELLING SECURITY HOLDERS
The selling security holders consist of several groups of investors who
acquired Preferred Stock or Debentures convertible into Class A Common Stock or
warrants entitling the holder to purchase shares of Class A Common Stock from
the Company. The Preferred Stock or Debenture holders also acquired warrants to
purchase shares of Class A Common Stock.
The following table identifies the investors who acquired Preferred Stock
or Debentures, which are convertible into Common Stock and those individuals who
acquired warrants entitling the holder to purchase shares of Class A Common
Stock. All Shares of Class A Common Stock issuable on conversion of the
Preferred Stock or Debentures or on the exercise of the warrants may be sold
from time to time by the selling security holders in the over the counter
market. The information contained in the following table indicates beneficial
ownership based on the Company's records and on information provided by our
transfer agent as of January 31, 2000. None of the selling security holders is
an affiliate of our Company.
Our Company will receive an aggregate of $2,298,352.20 if the holders of
all of the warrants exercise the warrants and purchase shares of Class A Common
Stock. The average exercise price is $1.93. The selling security holders will
retain all other proceeds from the sale of the shares being registered.
None of the selling security holders beneficially own greater than 5% of
the outstanding Class A Common Stock except ProFutures Special Equities Fund,
LP, which owns 11.5% and Augustine Fund LP which owns 5.3%.
Shares of Class A
Common Stock Number of
Beneficially Shares of
Name, Address and Owned or Issuable Class A
primary contact of on Conversion of Common
Selling Security Outstanding Stock
Holder Convertible Warrants to Purchase Offered
Securities Before shares of Class A Common
the Offering Stock
Exclusive of
Warrants
_______________________________________________________________________________
Exercise Expiration
Number Price Date
Holders of Convertible Preferred Stock
and Convertible Debentures
ProFutures Special 459,960 50,000 $2.75 6/04/2000 625,482
Equities Fund, LP 86,207 $2.90 9/19/2002
John Gray 3,000 $2.90 3/10/2003
11612 Bee Cave RD 26,315 $2.31 3/16/2001
Austin, TX 78734
Augustine Fund LP 309,298 10,525 $2.31 3/16/2001 319,823
Tom Duszynski
141 W. Jackson Blvd.
Suite 2181
Chicago, IL 60604
John F. Mauldin 179,047 5,260 $2.31 3/16/2001 184,307
1000 Ballpark in
Arlington
Suite 216
Arlington, TX 76011
Gary D. Halbert 253,402 7,890 $2.31 3/16/2001 261,292
11612 Bee Cave RD
Suite 100
Austin, TX 78734
Dean and Company 250,000 26,960 $1.00 12/31/2004 276,960
Gerald Heine
10950 N. Cedarburg RD
56 West
Mequon, WI 53092
Yakov Burstein 104,020 -0- -0- -0- 104,020
184-63 Aberdeen Road
Jamaica, NY 11432
Irwin Mansdorf 236,539 -0- -0- -0- 236,539
3 Nachshon Street
Raanana, Israel
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Shares of Class A
Common Stock
Beneficially Owned
or Issuable on
Name, Address and Conversion of Number of
primary contact of Outstanding Shares of
Selling Security Convertible Warrants to Purchase Class A
Holder Securities Before shares of Class A Common Common
the Offering Stock Stock
Exclusive of Offered
Warrants
_______________________________________________________________________________
Exercise Expiration
Number Price Date
Warrant Holders
George Gordon -0- 64,705 $1.00 12/31/2003 190,149
1613 Tiffany Ave 11,677 $2.00 12/31/2003
Racine WI 53402 17,045 $1.50 12/31/2003
10,786 $1.00 12/01/2003
10,784 $1.00 01/01/2004
10,784 $1.00 02/01/2004
10,747 $1.00 03/11/2004
10,747 $1.00 04/01/2004
10,747 $1.00 05/01/2004
10,709 $1.00 06/01/2004
10,709 $1.00 07/01/2004
10,709 $1.00 08/01/2004
Heller Financial, fka -0- 62,467 $2.38 03/10/2003 146,298
Healthcare Financial 61,032 $1.81 07/10/2003
Partners, Inc. 22,799 $1.50 07/10/2003
Debra VanAlstyne
4th Floor
2 Wisconsin Circle, #320
Chevy Chase, MD 20815
National Securities -0- 42,457 $1.45 01/15/2004 168,209
Corp. 42,104 $1.45 04/05/2004
Steven Rothstein 41,824 $1.45 07/05/2004
875 N. Michigan Ave. 41,824 $1.45 10/05/2004
Suite 1560
Chicago, IL 60611
Barrow Street -0- 4,166 $3.50 02/18/2002 7,465
John Attaliente 3,299 $1.20 02/23/2004
130 Barrow ST, #313
New York, NY 10014
Barrie Atkin -0- 5,373 $1.00 4/21/2004 5,373
255 Bishops Forest
Drive
Waltham, MA 02452
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Shares of Class A
Common Stock
Beneficially Number of
Name, Address and Owned or Issuable Shares of
primary contact of on Conversion of Class A
Selling Security Outstanding Common
Holder Convertible Warrants to Purchase shares Stock
Securities Before of Class A Common Stock Offered
the Offering
Exclusive of
Warrants
_______________________________________________________________________________
Exercise Expiration
Number Price Date
Howard J. Shaffer -0- 5,356 $1.00 5/18/2004 5,356
27 Algonquin AVE
Andover, MA 01810
Jim Hippler -0- 5,373 $1.00 4/21/2004 5,373
c/o Boyd Gaming
2950 Industrial RD
Las Vegas, NV 89109-1150
Lisa Waumbley -0- 1,071 $1.00 5/18/2004 1,071
c/o Boyd Gaming
2950 Industrial RD
Las Vegas, NV 89109-1150
Alpine Capital -0- 25,000 $2.00 10/07/2001 25,000
Partners, Inc.
Evan Bines
599 Lexington Ave
22nd Floor
New York, NY 10022
Brean Murray & Co. -0- 108,354 $2.50 5/31/2002 108,354
Steve Margulies
570 Lexington Ave
New York, NY 10022
Joan Finsilver -0- 72,236 $2.50 5/31/2002 72,236
Brean Murray & Co.
570 Lexington AVE
New York, NY 10022
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Shares of Class A
Common Stock
Beneficially
Owned or Issuable
on Conversion of Number of
Name, Address and Outstanding Shares of
primary contact of Convertible Class A
Selling Security Securities Before Warrants to Purchase shares Common
Holder the Offering of Class A Common Stock Stock
Exclusive of Offered
Warrants
_______________________________________________________________________________
Exercise Expiration
Number Price Date
CCRI -0- 80,000 $2.62 3/03/2002 80,000
Malcom McGuire
3104 E. Camelback RD
#539
Phoenix, AZ 85016
Infinity Investors -0- 90,000 $2.00 3/31/2002 90,000
c/o Clark K. Hunt
Hunt & Wissman
1601 Elm St, Ste 4000
Dallas, TX 75201
Summit Capital -0- 60,000 $2.00 3/31/2002 60,000
c/o Unity Hunt, Inc.
Shawn T. Wells
1601 Elm St, Ste 4000
Dallas, TX 75201
Delta Systems -0- 10,000 $1.50 3/31/2004 10,000
Peter Drakos
1200 Salem St. 182
Lynnfield, MA 01940
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In May 1997 the Company issued Series A Convertible Preferred Stock to
ProFutures Special Equity Fund, LP with an aggregate value of $1,000,000.
ProFutures also acquired warrants to purchase 50,000 shares of Class A Common
Stock. The Shares of Series A Convertible Preferred Stock were converted into
475,945 shares of Class A Common Stock.
In October 1997 the Company issued units consisting of 172,414 shares of
Class A Common Stock and warrants to purchase 86,207 shares of Class A Common
Stock to ProFutures Special Equity Fund, LP in a private placement. Also in
connection with this transaction, the Company issued warrants to purchase 3,000
shares of Class A Common Stock in March 1998.
In March 1998 the Company issued a total of 950 shares of Series B
convertible Preferred Stock as follows: 200 shares to Augustine Fund; 500 shares
to ProFutures; 150 shares to G. Halbert and 100 shares to J. Mauldin. At the
same time the Purchasers of the Preferred Stock also acquired 49,990 warrants to
purchase Class A Common Stock. This Preferred Stock was convertible into Class A
Common Stock at a conversion price that was 80% of the average closing bid price
five days prior to the conversion date. The Company was obligated to issue the
Selling Security Holder a promissory Note for the difference between $2.00 (the
"Minimum Conversion Price") and the market price of Class A Common Stock (the
"Price Guarantee"). In a subsequent agreement the price guarantee was later
revised to allow the Company to issue Class A Common Stock in lieu of the
promissory note. As of this date all outstanding Series B Preferred Stock have
been converted.
In December 1998 the Company issued to Dean and Company $500,000 in 12%
Convertible Debentures, which are convertible into 250,000 shares of Class A
Common Stock at a price of $2.00 per share. In connection with this financing
the Company also issued 26,960 warrants to purchase shares of Class A Common
Stock. The Company also issued warrants to purchase 190,149 shares of Class A
Common Stock as a finders fee to George Gordon for introducing Dean and Company
to the Company.
In October 1996 the Company entered into an Agreement and Plan of Merger
with Irwin Mansdorf and Yakov Burstein the then owners of Behavioral Stress
Centers, Inc. which called for the issuance of Class A Common Stock to the
former owners as part of the purchase price. The Company issued an aggregate of
564,396 shares of Class A Common Stock to Irwin Mansdorf and 170,422 shares of
Class A Common Stock to Yakov Burstein in connection with these agreements. The
number of shares also include 236,539 shares to Irwin Mansdorf and 67,558 shares
to Yakov Burstein in connection with a share price guarantee.
On March 10, 1998 the Company borrowed $350,000 from Heller Financial fka
Healthcare Financial Partners, Inc. bearing interest at the Prime rate plus 3
1/2% and maturing on July 10, 1998. In conjunction with this financing the
Company issued warrants to purchase 62,467 shares of Class A Common Stock. On
July 10, 1998 the Company signed an extension on this Note to extend the
maturity date to November 10, 1998. In conjunction with this extension the
Company issued warrants to purchase an additional 61,032 shares of Class A
Common Stock. Also in connection to this extension, as a form of price
protection for the initial 62,467 warrants issued the Company issued an
additional 22,799 warrants to purchase Class A Common Stock. This Note has been
repaid.
During 1999 the Company issued warrants to purchase an aggregate of 168,209
shares of Class A Common Stock to National Securities Corp. as payment for
Investment Banker Services.
In June 1997 the Company issued warrants to purchase 180,590 shares of
Class A Common Stock to Brean Murray & Co. as payment for Investment Banker
Services, of which 72,236 were transferred to Joan Finsilver, a principle of
Brean Murray & Co.
In February 1997 the Company issued warrants to purchase 4,166 shares of
Class A Common Stock to Barrow Street Research and in February 1999 the Company
issued warrants to purchase an additional 3,299 shares of Class A Common Stock
to Barrow Street Research. All of these warrants were issued in payment of
investor relations services.
In March 1997 the Company issued 160,000 warrants to purchase Class A
Common Stock to CCRI for investor relation services as of this date only 80,000
warrants remain exercisable.
In April 1999 the Company issued warrants to purchase 5,373 shares of Class
A Common Stock to Barrie Atkin and in May 1999 the Company issued warrants to
purchase 5,356 shares of Class A Common Stock to Howard J. Shaffer. These
warrants were issued in payment of website development services.
In April 1999 the Company issued warrants to purchase 5,373 shares of Class
A Common Stock to Jim Hippler and in May 1999 the Company issued warrants to
purchase 1,071 shares of Class A Common Stock to Lisa Waumbley. These warrants
were issued in payment of management consultant services.
In November 1996 the Company issued $3,125,000 in Convertible Debentures,
$1,875,000 to Infinity Investors, which was converted into 799,079 shares of
Class A Common Stock, and $1,250,000 to Seacrest Capital which was converted
into 532,617 shares of Class A Common Stock. Also in connection with this
transaction, Infinity Investors received warrants to purchase 90,000 shares of
Class A Common Stock and Seacrest Capital received warrants to purchase 60,000
shares of Class A Common Stock, which were subsequently transferred to Summit
Capital. The Company issued 25,000 warrants to purchase shares of Class A common
Stock to Alpine Capital Partners for services rendered in connection with this
transaction.
In March 2000 the company issued warrants to purchase 10,000 shares of
Class A Common Stock to Delta Systems and Solutions in payment of computer
technology consulting services relating to Behavioral Health Online, Inc.
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<PAGE>
PLAN OF DISTRIBUTION
The Class A Common Stock offered hereby may be sold from time to time in
the over the counter market through underwriters, dealers, brokers or other
agents. PHC will receive $2,298,352.20 if the warrants to purchase 1,191,041
shares being registered are exercised; however, PHC will receive no proceeds
from the sale of the additional 1,792,266 shares of Class A Common Stock
included in this registration statement.
The Class A Common Stock offered may be sold from time to time in one or
more transactions at a fixed offering price, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices. The Selling
Security Holder will determine the selling price at the time of the transaction
or by an agreement with its underwriters, dealers, brokers or other agents.
Any underwriters, dealers, brokers or other agent to or through whom Class
A common stock offered hereby is sold may receive compensation in the form of
underwriting discounts, concessions, commissions or fees from a Selling Security
Holder and/or purchasers of Class A common stock for whom they may act as agent
or to whom they may sell as principal, or both (which compensation to a
particular underwriter, broker, dealer or other agent might be in excess of
customary commissions). In addition, a Selling Security Holder and any such
underwriters, dealers, brokers or other agents may be deemed to be underwriters
under the Securities Act, and any profits on the sale of Class A common stock by
them and any discounts, commissions or concessions received by any of such
persons may be deemed to be underwriting discounts and commissions under the
Securities Act. Those who act as underwriter, broker, dealer or other agent in
connection with the sale of the Class A common stock will be selected by a
Selling Security Holder and may have other business relationships with PHC and
its subsidiaries or affiliates in the ordinary course of business. PHC cannot
presently estimate the amount of any such discounts, commissions or concessions.
PHC knows of no existing arrangements between the selling security holders and
any underwriter, dealer, broker or other agent.
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<PAGE>
LEGAL MATTERS
Arent Fox Kintner Plotkin & Kahn, Washington, DC have passed upon the
validity of the securities offered hereby for PHC.
EXPERTS
The financial statements incorporated by reference in this prospectus have
been audited by BDO Seidman, LLP., independent certified public accountants, to
the extent and for the periods set forth in their report incorporated herein by
reference and are incorporated herein by reference in reliance upon the
authority of said firm as experts in accounting and auditing.
17
<PAGE>
No dealer, salesman or any other person
has been authorized to give any
information or to make any
representations other than those
contained in this prospectus in PHC, INC.
connection with the offering made
hereby, and, if given or made, such PIONEER BEHAVIORAL HEALTH
information or representations must not
be relied upon as having been authorized
by PHC. This Prospectus does not
constitute an offer to sell or a 2,983,307 Shares of Class A
solicitation of an offer to buy, by any Common Stock
person in any jurisdiction in which it
is unlawful for such person to make such
offer or solicitation. Neither the
delivery of this prospectus nor any
offer, solicitation or sale made
hereunder shall under any circumstances
create any implication that the
information herein contained is correct
as of any time subsequent to the date of
the prospectus.
TABLE OF CONTENTS
Page
Prospectus Summary 3
Risk Factors
Operating Risks: 6-7
Delay in government payments 6
Managed care rates 6
Collectability of Accounts
Receivable 6
Lack of access to capital 6
Reliance on key clients 7
Rapid regulatory change 7
Negative cash flow 7
Sole source contracts 7
Acquisition and expansion 7
Staffing shortages 7
Management Risks: 8
Control of PHC by Bruce A.
Shear 8
Retaining key personnel 8
Market Risks: 8
Nasdaq delisting 8
Common Stock liquidity 8
Low trading volume 8
Issuance of Preferred Stock 8
Available Information 9
Incorporation of Documents by
reference 10
Selling security holders 11-15
Plan of Distribution 16
Legal Matters 17
Experts 17
PROSPECTUS
June 19, 2000
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