-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Poab7w6UJxr5YZz4XrwVsRmSwQUmPlpBpWutFTaxJal8SSGm5yGWkSE/qnz5FgUs gyTx42lxCSXonZSodTEsNQ== 0000915127-96-000002.txt : 19960617 0000915127-96-000002.hdr.sgml : 19960617 ACCESSION NUMBER: 0000915127-96-000002 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHC INC /MA/ CENTRAL INDEX KEY: 0000915127 STANDARD INDUSTRIAL CLASSIFICATION: 8082 IRS NUMBER: 042601571 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-22916 FILM NUMBER: 96564187 BUSINESS ADDRESS: STREET 1: 200 LAKE ST STE 102 CITY: PEABODY STATE: MA ZIP: 01960 BUSINESS PHONE: 5085362777 MAIL ADDRESS: STREET 1: 200 LAKE ST STREET 2: STE 102 CITY: PEABODY STATE: MA ZIP: 01960 10QSB 1 QUARTERLY REPORT FOR PHC, INC. 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, 1996 |_| TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 0-23524 PHC, INC. (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER) Massachusetts 04-2601571 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 200 Lake Street, Suite 102, Peabody MA 01960 - - -------------------------------------------- ----------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) 508-536-2777 (ISSUER'S TELEPHONE NUMBER) - - ------------------------------------------------------------------ (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| PHC, Inc. became subject to the Exchange Act on March 3, 1994. APPLICABLE ONLY TO CORPORATE ISSUERS Number of shares outstanding of each class of common equity, as of May 2, 1996 Class A Common Stock 2,227,310 Class B Common Stock 812,889 Class C Common Stock 199,816 TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (Check one): Yes |_| No |X| PART I. FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS PHC INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
Mar. 31 June 30 1996 1995 ASSETS (Unaudited) Current assets: Cash ............................................................. $ 82,552 $ 586,738 Accounts receivable, net of allowance for bad debts of 1,638,035 at Mar. 31, 1996 and 815,458 at June 30, 1995 .......... 9,090,625 5,964,279 Prepaid expenses ................................................. 279,742 174,539 Other receivables and advances ................................... 73,232 81,889 Deferred Income Tax Asset ........................................ 364,646 251,863 ------------ ------------ Total current assets ........................................... 9,890,797 7,059,308 Accounts Receivable, Non Current .................................... 670,000 656,734 Loan Receivable ..................................................... -- 96,343 Property and equipment, net ......................................... 8,279,019 7,086,637 Other assets ........................................................ 1,138,405 352,795 Net assets of operations held for sale .............................. 56,474 163,568 ------------ ------------ Total .......................................................... 20,034,695 15,415,385 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable .................................................. 2,454,125 $ 2,282,765 Notes payable--related parties .................................... 36,600 46,598 Notes payable-- bank .............................................. -- 100,000 Current maturities of long term debt .............................. 290,330 61,438 Current portion of obligations under capital leases ............... 83,872 59,212 Accrued and withheld taxes ........................................ 13,910 17,948 Accrued payroll, payroll taxes and benefits ....................... -- 535,525 Accrued expenses and other liabilities ............................ 1,296,513 549,898 Deferred revenue .................................................. -- 55,453 ------------ ------------ Total Current liabilities ...................................... 4,175,350 3,708,837 ------------ ------------ Construction note payable ........................................... -- 5,041,243 Long-term debt ...................................................... 7,637,375 640,793 Obligations under capital lease ..................................... 1,484,498 1,474,976 Notes payable related parties ....................................... 55,296 88,996 ------------ ------------ Total noncurrent liabilities ...................................... 9,177,169 7,246,008 ------------ ------------ Total liabilities ................................................. 13,352,519 10,954,845 ------------ ------------ Stockholders' Equity: Preferred stock, $.01 par value; 1,000,000 shares authorized, none issued ................................................... -- -- Class A common stock, $.01 value; 10,000,000 shares authorized, 2,203,843 and 1,504,662 shares issued March 1996 and June 1995 .. 22,038 15,047 Class B common stock, $.01 par value; 2,000,000 shares authorized, 815,469 and 898,795 shares issued March 1996 and June, 1995, convertible into one share of Class A common stock .............. 8,155 8,988 Class C common stock, $.01 par value; 200,000 shares authorized and 199,816 and 199,966 shares issued March 1996 and June, 1995 . 1,998 2,000 Additional paid-in capital ........................................ 7,823,218 5,554,874 Notes receivable related to purchase of 31,000 shares of Class A common stock .................................................... (65,697) (75,362) Accumulated Deficit ............................................... (1,107,536) (1,045,007) ------------ ------------ Total Stockholders' Equity ........................................ 6,682,176 4,460,540 ------------ ------------ Total ............................................................. $ 20,034,695 $ 15,415,385 ============ ============ See Notes to Consolidated Financial Statements
PHC INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended March 31 March 31 1996 1995 1996 1995 Revenues: Patient Care, net ................. $ 6,567,335 $ 4,658,441 $ 15,935,970 $ 12,088,821 Management Fees ................... 63,599 31,387 164,844 94,656 ----------- ----------- ------------ ------------ Total revenue ............. 6,630,934 4,689,828 16,100,814 12,183,477 =========== =========== ============ ============ Operating expenses: Patient care expenses ........... 3,276,949 2,591,310 8,893,030 7,048,258 Administrative expenses ......... 2,966,822 1,591,092 6,589,688 4,330,765 Contract expenses ............... 31,671 33,328 93,673 101,586 ----------- ----------- ------------ ------------ Total operating expenses .. 6,275,442 4,215,730 15,576,391 11,480,609 =========== =========== ============ ============ Income from operations ............ 355,492 474,098 524,423 702,868 Other income (expense): Interest income ................. 4,225 1,996 10,787 23,737 Other income .................... 46,282 10,327 141,744 174,617 Startup costs nursing facility .. -- -- (128,313) -- Interest expense ................ (260,264) (145,775) (629,988) (413,282) Gain (loss) from operations held for sale ...................... 1,136 (1,926) 18,819 (589) ----------- ----------- ------------ ------------ Total other income expense) (208,621) (135,378) (586,951) (215,517) ----------- ----------- ------------ ------------ Income before Provision for Taxes . $ 146,871 $ 338,720 $ (62,528) $ 487,351 Provision for Income Taxes ........ -- 111,298 -- 164,775 ----------- ----------- ------------ ------------ NET INCOME ........................ 146,871 $ 227,422 (62,528) $ 322,576 =========== =========== ============ ============ Net Income (Loss) per share ....... .05 .09 (.02) .13 Weighted average number of shares outstanding ........... 2,783,505 2,418,518 2,539,800 2,427,951 See Notes to Consolidated Financial Statements
PHC INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended March 31 1996 1995 Cash flows from operating activities: Net income ............................................. $ (62,528) $ 322,576 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and Amortization .......................... 352,231 188,097 (Increase) in accounts receivable ...................... (3,139,612) (1,292,969) (Increase) in Prepaids and other current Assets .............................................. (209,329) (414,380) (Increase) decrease in other assets .................... (31,971) 445,240 (Increase) decrease in net assets of operations held for Resale .............................................. 107,094 (19,243) Increase in accounts payable ........................... 49,769 114,100 Increase (decrease) in accrued and withheld taxes ...... 13,910 -- Increase (decrease) in accrued expenses and other liabilities ........................................... 155,637 (269,536) ----------- ----------- Net cash used in operating activities .............. (2,764,799) (926,115) ----------- ----------- Cash flows from investing activities: Acquisition of PHC-MI .................................. -- (584,435) Acquisition of property & equipment .................... (1,530,567) (789,189) Cost related to business acquisition ................... (575,000) -- Disposal of property & equipment ......................... -- 20,422 ----------- ----------- Net cash used in investing activities .............. (2,105,567) (1,353,202) ----------- ----------- Cash flows from financing activities: Issuance of Common Stock ............................... 2,274,501 -- Net debt activity ...................................... 2,091,679 731,823 ----------- ----------- Net cash provided by financing activities .......... 4,366,180 731,823 ----------- ----------- NET INCREASE (DECREASE) IN CASH .......................... (504,186) (1,547,494) Beginning cash balance ................................... 586,738 2,209,777 ----------- ----------- ENDING CASH BALANCE ...................................... $ 82,552 $ 662,283 =========== =========== See Notes to Consolidated Financial Statements
PHC, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1996 NOTE A - THE COMPANY PHC, Inc. ("PHC") operates substance abuse treatment centers in several locations in the United States, a psychiatric hospital in Michigan, out-patient psychiatric centers in Nevada and Kansas and a long-term care facility in Massachusetts. The consolidated financial statements include PHC and its subsidiaries, all of which are 100% owned (collectively the "Company"): PHC's subsidiaries, PHC of Utah, Inc., ("PHU"), PHC of Virginia, Inc. ("PHV"), and PHC of Rhode Island , Inc. ("PHRI"), provide treatment of addictive disorders and chemical dependency. Prior to the closing of Marin Grove (a substance abuse treatment facility in California) in August 1994, PHC of California, Inc. ("PHCC") also provided treatment of addictive disorders and chemical dependency. PHC of Rhode Island, Inc. operates Good Hope Center which was purchased on March 16, 1994. Quality Care Centers of Massachusetts, Inc. ("Quality Care") operates a long-term care facility known as the Franvale Nursing and Rehabilitation Center. PHC of Michigan, Inc. ("PHM"), operates Harbor Oaks Hospital which was purchased on September 20, 1994. PHM provides inpatient psychiatric care to children, adolescents and adults and operates a partial hospitalization program that includes outpatient treatment services. PHC of Nevada, Inc. ("PHN"), operates Harmony Healthcare which was purchased on November 1, 1995 for $575,000 and 75,000 shares of PHC, Inc. stock. PHN provides outpatient psychiatric care to children, adolescents and adults. PHC of Kansas, Inc. (PHK), operates Total Concept EAP which was purchased on March 15, 1996 for 12,000 shares of PHC, Inc. class A common stock. PHK operates Employee Assistance Programs and provides outpatient behavioral health care to children, adolescents and adults. STL, Inc. ("STL") operated day care centers prior to July, 1993. Since that time, PHC has been systematically phasing out its day care center operations and the operating results of STL and its net assets have been classified as "operations held for sale" in the Condensed Consolidated Financial Statements. All significant intercompany transactions and balances have been eliminated in consolidation. 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, 1996 are not indicative of the results that may be expected for the year ending June 30, 1996. The accompanying financial statements should be read in conjunction with the June 30, 1995 consolidated financial statements and footnotes thereto included in the Company's 10-KSB filed on October 2, 1995. 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 41% from $4,658,441 for the three months ended March 31, 1995 to $6,567,335 for the three months ended March 31, 1996. This increase in revenue is due primarily to the acquisition in November 1995 of the Company's first outpatient psychiatric center, and an increase in available beds for the long term care facility. Net Income decreased 35% from $227,422 for the three months ended March 31, 1995 to $146,871 for the three months ended March 31, 1996. This decrease in net income is due primarily to start up costs incurred relating to the increase in long term care beds and costs associated with the acquisition of new outpatient psychiatric centers located in Nevada and Kansas. Net patient care revenue for the substance abuse facilities decreased from $2,344,675 for the quarter ended March 31, 1995 to $2,195,508 for the same period in 1996. This decrease in revenue is due to a decline in patient census. Net patient care revenue for the long term care facility increased from $1,073,360 for the three months ended March 31, 1995 to $1,742,732 for the three months ended March 31, 1996 due to an increase in net revenue per patient day and the number of occupied beds. The long term care facility opened the thirty-seven bed addition on September 29, 1995 which resulted in increased bed rates and census. LIQUIDITY AND CAPITAL RESOURCES On February 13, 1996, the Company issued in a private placement to accredited investors, shares of Class A Common Stock, par value $.01 per share, of the Company ("Class A Common Stock") and Warrants to purchase shares of Class A Common Stock ("Warrants"), in Units comprised of 6,250 Shares of Class A common Stock and 9,375 Warrants. A total of 79 Units, representing 493,750 shares of Class A Common Stock and 740,625 Warrants were issued in the offering at a gross purchase price of $1,975,000. Fees and expenses payable in connection with the offering include $256,750 of fees and expenses payable to the Placement Agent. Subject to the terms and conditions of the applicable Warrant Agreement, each Warrant is exercisable for one share of Class A Common Stock at an exercise price of $4.00, subject to adjustment upon certain events. The Warrants expire three years from the date of issuance. The Company granted the purchasers in such offering certain registration rights with respect to their offer and sale of the securities issued in such offering. Upon the issuance of the Units described above, certain additional shares of Class A Common Stock or securities exercisable therefor became issuable under the antidilution provisions of certain outstanding securities of the Company. In addition, a total of 33,694 Bridge Warrants were exercised during the quarter resulting in approximately $153,950 in additional cash flow to the company. A significant factor in the liquidity and cash flow of the Company is the timely collection of its accounts receivable. Accounts receivable increased during the quarter ended March 31, 1996 by 19.2%, approximately $1,575,500, which contributed to cash used in operations during the quarter of approximately $2,167,500. This increase in accounts receivable is primarily the result of an increase in revenue, a change in receivables ownership, and a decrease in receivables funding due to a stronger cash position. The company continues to closely monitor its accounts receivable balances and is working to reduce amounts due consistent with growth in revenues. The Company believes that it has the necessary liquidity and capital resources and contingent funding commitments to sustain existing operations for the foreseeable future. The Company also intends to expand its operations through the acquisition or establishment of additional treatment facilities. The Company's expansion plans will be dependent upon obtaining adequate financing as such opportunities arise. Signatures In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PHC, Inc. Registrant Date: May 14, 1996 /s/ Bruce A. Shear Bruce A. Shear President Chief Executive Officer Date: May 14, 1996 /s/ Paula C. Wurts Paula C. Wurts Controller Assistant Treasurer EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 27 Financial Data Schedule. EX-27 2 FDS -- FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the consolidated balance sheet and the consolidated statement of income filed as part of the report on Form 10-Q and is qualified in its entirety by reference to such report on Form 10-Q. 0000915127 PHC, Inc. 9-MOS JUN-30-1996 JUL-01-1995 MAR-31-1996 82,552 0 10,728,660 1,638,035 0 9,890,797 9,611,081 1,332,062 20,034,695 4,175,350 0 0 0 32,191 6,649,985 20,034,695 0 16,100,814 0 15,576,391 758,301 968,818 629,988 (62,528) 0 (62,528) 0 0 0 (62,528) (.02) (.02)
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