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, 2001.
|_| 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 8,508,308
Class B Common Stock 726,991
Transitional Small Business Disclosure Format
(Check one):
Yes______ No X
PHC, Inc.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - March 31, 2001 and June 30,
2000.
Condensed Consolidated Statements of Operations - Three months ended
March 31, 2001 and March 31, 2000; Nine months ended March 31, 2001
and March 31, 2000.
Condensed Consolidated Statements of Cash Flows - Nine months ended
March 31, 2001 and March 31, 2000.
Notes to Condensed Consolidated Financial Statements - March 31,
2001.
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits
Signatures
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements PHC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March, 31 June, 30
2001 2000
_________________________________________
ASSETS (Unaudited)
Current assets:
Cash & cash equivalents $ 75,319 $ 551,713
Accounts receivable, net of allowance for bad
debts of $2,879,859 at March 31, 2001, 5,790,487 6,286,490
$2,850,470 at June 30, 2000
Prepaid expenses 112,393 120,481
Other receivables and advances 229,654 148,554
Deferred income tax asset 459,280 459,280
Other receivables, related party RPS 329,289 --
Other receivables, related party 78,256 77,500
____________ ____________
Total current assets 7,074,678 7,644,018
Accounts receivable, noncurrent 736,000 642,000
Other receivables, noncurrent, related party, net
of allowance for doubtful accounts of -- 3,239,456
$1,125,054 at June 30, 2000 (Note B)
Other receivables 132,537 95,214
Property and equipment, net 1,361,767 1,327,630
Deferred income taxes 154,700 154,700
Deferred financing costs, net of amortization of
$112,108 at March 31, 2001 and $87,555 at June 22,000 46,554
30, 2000
Goodwill, net of accumulated amortization of
$251,667 at March 31, 2001 and $296,907 at June 1,093,170 2,630,265
30, 2000 (Note B)
Other assets 127,284 107,972
_____________ _____________
Total assets $10,702,136 $15,887,809
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,617,879 $ 1,717,362
Notes payable--related parties 200,000 200,000
Current maturities of long-term debt 989,174 1,622,239
Revolving credit note 1,860,767 1,555,149
Deferred Revenue 19,504 --
Current portion of obligations under capital 18,946 45,482
leases
Accrued payroll, payroll taxes and benefits 413,149 416,111
Accrued expenses and other liabilities 1,270,010 1,798,400
Net liabilities of discontinued operations
(Note F) 965,213 1,884,234
_____________ _____________
Total current liabilities 8,354,642 9,238,977
_____________ _____________
Long-term debt 2,893,476 2,508,715
Obligations under capital leases 15,349 12,808
Convertible debentures 500,000 500,000
_____________ _____________
Total noncurrent liabilities 3,408,825 3,021,523
_____________ _____________
Total liabilities 11,763,467 12,260,500
_____________ _____________
Stockholders' equity (deficit):
Preferred stock, $.01 par value; 1,000,000
shares authorized, 155,700 and 136,000 issued
and outstanding March 31, 2001 and June 30,
2000, respectively 1,557 1,360
Class A common stock, $.01 par value;
20,000,000 shares authorized, 8,370,209 and
7,019,608 shares issued March 31, 2001 and 83,702 70,196
June 30, 2000, respectively
Class B common stock, $.01 par value; 2,000,000
shares authorized, 726,991 issued
and outstanding March 31, 2001 and June 30,
2000, convertible into one share of Class A
common stock 7,270 7,270
Additional paid-in capital 18,676,954 17,895,162
Treasury stock, 14,526 and 2,776 shares at (22,122) (12,122)
cost at March 31, 2001 and June 30, 2000
Notes receivable, common stock (80,000) --
Accumulated deficit (19,728,692) (14,334,557)
_____________ _____________
Total stockholders' equity (deficit) (1,061,331) 3,627,309
_____________ _____________
Total liabilities and stockholders'
equity (deficit) $10,702,136 15,887,809
============= ============
See Notes to Condensed Consolidated Financial Statements.
PHC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended
March 31 March 31
______________________________________________
2001 2000 2001 2000
Revenues:
Patient Care, net $5,763,309 $5,541,406 $15,516,547 $13,599,089
Management Fees -- 290,192 345,111 783,427
Pharmaceutical Study 115,196 -- 210,104 --
Website services 1,405 -- 16,486 --
Contract Support Services 334,945 148,434 723,098 469,076
__________ ___________ ___________ __________
Total revenue 6,214,855 5,980,032 16,811,346 14,851,592
__________ ___________ ___________ __________
Operating expenses:
Patient care expenses 2,555,605 2,485,483 7,140,700 6,822,757
Cost of management contracts 288,470 147,133 651,602 364,899
Provision for doubtful
accounts 289,687 532,248 1,914,594 1,522,691
Website expenses 365,946 200,817 1,103,835 548,657
Administrative expenses 1,980,646 1,895,836 5,427,774 5,373,104
Practice management
closing expenses
(Note B) -- -- 4,855,966 --
__________ ___________ ___________ __________
Total operating
expenses 5,480,354 5,261,517 21,094,471 14,632,108
__________ ___________ ___________ __________
Income (loss) from
operations 734,501 718,515 (4,283,125) 219,484
__________ ___________ ___________ __________
Interest income 8,288 111,604 22,774 309,780
Other income 24,663 7,481 46,790 55,597
Interest expense (268,661) (215,793) (782,826) (601,071)
__________ ___________ ___________ __________
Total other expenses (235,710) (96,708) (713,262) (235,694)
Income (loss) before
Provision for Taxes 498,791 621,807 (4,996,387) (16,210)
Provision for Income Taxes -- 53,189 44,450 53,289
__________ ___________ ___________ __________
Net income (loss) $ 498,791 $ 568,618 $(5,040,837) $ (69,499)
=========== =========== =========== ==========
BASIC AND DILUTED EARNINGS PER SHARE
Net income (loss) $ 498,791 $ 568,618 $(5,040,837) $ (69,499)
Dividends (31,613) (533,318) (180,385) (589,514)
__________ ___________ ___________ __________
Income (loss) applicable
to common shareholders $ 467,178 $ 35,300 $(5,221,222) $ (659,013)
__________ ___________ ___________ __________
Basic income (loss) per
common share $ 0.05 $ 0.00 $ (0.63) $ (0.10)
Basic weighted average
number of shares
outstanding 8,655,613 7,225,013 8,264,481 6,645,742
Diluted income (loss) per
common share $ 0.05 $ 0.00 $ (0.63) $ (0.10)
Diluted weighted average
number of shares
outstanding 9,743,334 7,651,468 8,264,481 6,645,742
See Notes to Condensed Consolidated Financial Statements
PHC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended
March 31
2001 2000
_____________________________
Cash flows from operating activities:
Net loss $ (5,040,837) $ (69,499)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 187,942 249,474
Goodwill impairment 1,545,609 --
Write down of accounts receivable, 3,071,310 --
professional corporation
Compensatory stock options, stock and
warrants issued for obligations 22,630 104,490
Changes in:
Accounts receivable 121,681 (580,750)
Prepaid expenses 8,088 (60,419)
Other assets (19,312) (22,511)
Accounts payable 900,517 (148,397)
Accrued expenses and other liabilities (511,848) 151,648
Net liabilities of discontinued operations (919,021) (327,335)
_____________ ____________
Net cash used in operating activities (633,241) (703,299)
Cash flows from investing activities:
Acquisition of property and equipment (154,796) (64,231)
Web development (70,226) --
Disposition of property, equipment and
intangibles 3,689 --
_____________ ____________
Net cash used in investing activities (221,333) (64,231)
Cash flows from financing activities:
Revolving debt, net 305,618 244,811
Proceeds (repayment) of debt, net (272,299) 318,248
Deferred financing costs 24,554 (5,288)
Preferred stock dividends (93,292) (4,809)
Issuance of preferred stock at a discount 250,000 --
Common stock issued in earnout 297,500 --
Issuance of common stock -- 6,250
Cost related to issuance of capital stock (43,901) --
Notes issued for stock purchase (90,000) --
_____________ ____________
Net cash provided by financing activities 378,180 559,212
_____________ ____________
NET DECREASE IN CASH AND CASH EQUIVALENTS (476,394) (208,318)
Beginning cash 551,713 381,170
_____________ ____________
ENDING CASH $ 75,319 $ 172,852
============= ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 780,072 $ 616,071
Income taxes 94,780 88,689
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Conversion of preferred stock to
common stock $ 143,000 $ 756,346
Issuance of preferred stock in
lieu of cash dividends 0 33,386
Issuance of common stock in lieu of
cash dividends 3,506 551,319
See Notes to Condensed Consolidated Financial Statements
PHC, INC. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
March 31, 2001
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.
BSC-NY, Inc., a subsidiary of PHC, Inc., which is now closed, provided
management services on behalf of physician owned behavioral health practices in
the greater New York City metropolitan area (see below). Pioneer Development and
Support Services ("PDSS") provides help line services primarily through
contracts with major railroads. Pioneer Pharmaceutical Research conducts studies
of the effects of FDA approved psychiatric pharmaceuticals on a controlled
population through contracts with major manufacturers of these pharmaceuticals;
and
(3) Behavioral health online services, which includes behavioral health
education, training and products for the behavioral health professional, through
its website wellplace.com formerly known as behavioralhealthonline.com.
Note B - Practice Management Closing Expenses
In December 2000 the Board decided to close its' BSC-NY, Inc. practice
management operations due to recent deterioration of operating results. Revenues
of BSC-NY, Inc were dependent on the success of the professional corporation,
Rubenfaer Physician Services, P.C., for which it provided management services.
Although the New York practice management operations reported operating income
of approximately $131,000 for the fiscal year ended June 30, 2000, adverse
business conditions resulted in a loss of approximately $399,000 for the six
months ended December 31, 2000 before facility closing expenses of $4,855,966.
These adverse operating conditions were caused by the decline in revenues
produced by the professional corporation which is in the process of closing down
its' business operations. The table below outlines practice management closing
expenses.
Goodwill impairment $1,545,609
Write down of the receivable
due from the professional corporation 3,071,310
Lease termination and other expenses 239,047
_____________
$4,855,966
=============
Note C - 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, 2001
are not necessarily indicative of the results that may be expected for the year
ending June 30, 2001. The accompanying financial statements should be read in
conjunction with the June 30, 2000 consolidated financial statements and
footnotes thereto included in the Company's 10-KSB filed on September 29, 2000.
Note D - Reclassifications
Certain amounts have been reclassified to conform with the March 31, 2001
presentation.
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 administrative services segment for the nine months ended March 31,
2001 include $4,855,966 of facility closing expenses for the New York operations
as detailed above. The following summarizes the Company's segment data:
BEHAVIORAL HEALTH
TREATMENT ADMINISTRATIVE ONLINE
SERVICES SERVICES SERVICE ELIMINATIONS TOTAL
_________________________________________________________
For the three
months ended
March 31, 2001
Revenues - external
customers $5,763,309 $ 450,141 $ 1,405 $ -- $6,214,855
Revenues -
intersegment -- 478,698 17,928 (496,626) --
Net income (loss) 1,173,941 (440,241) (234,909) -- 498,791
For the three
months ended
March 31, 2000
Revenues - external
customers $5,541,406 $ 438,626 $ -- $ -- $5,980,032
Revenues -
intersegment -- 464,000 -- (464,000) --
Net income (loss) 1,253,849 (559,414) (125,817) -- 568,618
For the nine
months ended
March 31, 2001
Revenues -
external
customers $15,516,547 $1,278,313 $ 16,486 $ -- $16,811,346
Revenues -
intersegment -- 1,454,094 31,448 (1,485,542) --
Net income (loss) 2,148,422 (6,499,041) (690,218) -- (5,040,837)
Total Assets 8,932,971 24,440,166 130,505 (22,801,506) 10,702,136
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) 1,294,107 (1,039,949) (323,657) -- (69,499)
Total Assets 9,988,294 25,366,980 18,931 (19,761,349) 15,612,856
Note F - Net Liabilities of Discontinued Operations
Net liabilities of discontinued operations relates to the Franvale closure
in 1998 and consists of the following:
March 31, June 30,
2001 2000
__________________________________
Debt forgiveness and
reserve for contingencies $ 2,641,537 $ 2,641,537
Less legal and other
expenses incurred to date 1,676,324 757,303
____________ _____________
Net liabilities of discontinued
operations 965,213 1,884,234
============ ============
The recognition of gain, if any, has been deferred until final resolution of all
contingent liabilities related to the discontinued operations.
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 4.0% to $5,763,309 for the three months
ended March 31, 2001 from $5,541,406 for the three months ended March 31, 2000
and 14.1% to $15,516,547 for the nine months ended March 31, 2001 from
$13,599,089 for the nine months ended March 31, 2000. This increase in revenue
is due primarily to an increase in rates, a more favorable payor mix and an
increase in patient days for the nine months ended March 31, 2001, over the same
period last year. Marketing efforts have continued to aid in maintaining a high
patient census at all three in patient facilities.
The key indicators of profitability of inpatient facilities are patient
days, or census, and payor mix. Patient days is the product of the number of
patients times length of stay. Increases in the number of patient days result in
higher census, which coupled with a more favorable payor mix (more patients with
higher paying insurance contracts or paying privately) will usually result in
higher profitability. Therefore, patient census and payor mix are monitored very
closely.
During the quarter ended December 31, 2000 the company decided to close the
New York practice management operations due to recent deterioration of operating
results. The nine months ended March 31, 2001 includes practice management
closing expenses of $4,855,966 which consists of goodwill impairment of
$1,545,609, write down of the receivable due from the professional corporation
of $3,071,310 and lease termination and other expenses of $239,047. The practice
management impaired goodwill and a substantial portion of the accounts
receivable relate to the purchase of the operations which was partially paid
through the issuance of PHC class A common stock.
Income before interest, taxes, depreciation, amortization, dividends,
Behavioral Health Online and the New York operations was $1,077,139 for the
three months ended March 31, 2001 and $1,908,350 for the nine months ended March
31, 2001 compared to $1,018,718 and $847,179 for the same periods last year.
Contract support services revenue provided by PDSS increased 125.7% to
$334,945 for the three months ended March 31, 2001 from $148,434 for the three
months ended March 31, 2000 and 54.2% to $723,098 for the nine months ended
March 31, 2001 from $469,076 for the same period last year. The cost of
providing these services increased 96.1% to $288,470 for the three months ended
March 31, 2001 from $147,133 for the three months ended March 31, 2000 and 78.6%
to $651,602 for the nine months ended March 31, 2001 from $364,899 for the same
period last year. These changes in revenue and expenses are due primarily to the
addition of a new contract, which is being serviced jointly by PDSS and
Behavioral Health Online, and carries with it high startup costs and an increase
in services provided under existing contracts.
The company also booked a small amount of revenue for website products and
services and is now providing an additional revenue producing service by
developing and hosting private label websites for individual therapists. The
company's failure to secure funding for further web development has forced the
company to change direction of this subsidiary to primarily provide support to
the other Pioneer subsidiaries and continue to produce revenues through the
private label websites.
The company also booked pharmaceutical study revenue of $115,196 for the
three months ended March 31, 2001 and $210,104 for the nine months ended March
31, 2001 in its newest, fastest growing subsidiary, PPR, Inc., which does
business as Pioneer Pharmaceutical Research.
Administrative expenses remained relatively constant increasing
approximately 4.5% for the quarter ended March 31, 2001 and increasing slightly
over one percent for the nine months ended March 31, 2001 compared to the same
periods last year. The largest increase was in contract expenses related to PDSS
of 96.6% for the three months ended March 31, 2001 and 78.6% for the nine months
ended March 31, 2001. We also experienced increased expenses for our capitated
rate contract services in Nevada.
Website expenses include all costs relevant to the development and the
operations of the Wellplace.com website. Website expenses increased 82.3% to
$365,946 for the period ended March 31, 2001 from $200,817 for the three months
ended March 31, 2000 and 101.2% to $1,103,835 for the nine months ended March
31, 2001 from $548,657 for the same period last year. The company has taken
steps to reduce expenses for the internet company, largely through reduced
staffing and consolidating office space with the corporate office.
Patient care expenses increased by 2.8% to $2,555,605 for the three months
ended March 31, 2001 from $2,485,483 for the three months ended March 31, 2000
and 4.7% to $7,140,700 for the nine months ended March 31, 2001 from $6,822,757
for the nine months ended March 31, 2000. These increases in expenses are due
primarily to the increase in patient days as noted above with the primary
increases in expenses directly related to patient census such as payroll, food,
laundry, patient transportation and pharmacy.
Bad debt expense decreased 45.6% to $289,687 for the three months ended
March 31, 2001 from $532,248 for the three months ended March 31, 2000. This
decrease is due to a larger percentage of accounts receivable in aging
categories less than 150 days from the date of service, which carries with it a
lower reserve requirement. Bad debt expense did increase 25.7% to $1,914,594 for
the nine months ended March 31, 2001 from $1,522,691 for the same period last
year. This increase is due primarily to increased patient care revenues and the
company's continued assessment of collection exposures.
Interest expense increased 24.5% to $268,661 for the three months ended
March 31, 2001 from $215,793 for the three months ended March 31, 2000 and 30.2%
to $782,826 for the nine months ended March 31, 2001 from $601,071 for the same
period last year. This increase is due to increased utilization of the accounts
receivable revolving credit and additional interest paid to secure and maintain
a $330,000 overline in December, which was paid in full in April 2001. .
Preferred stock dividends decreased to $31,613 for the quarter ended March
31, 2001 from $533,318 for the quarter ended March 31, 2000. The decrease in
dividends is due primarily to the recording of the additional beneficial
conversion feature of the series B preferred stock recorded upon conversion of
the last of the Series B preferred stock in the quarter ended March 31, 2000.
The dividends recorded in the quarter ended March 31, 2001, are a result of the
8% per year dividend rate on the series C convertible preferred stock.
We continue to closely monitor accounts receivable collections and are
maintaining significant reserves for bad debts. The bad debt reserve was
approximately 31% of the accounts receivable balance, which decreased 5.8% to
$6,526,487 at March 31, 2001 from $6,928,490 at June 30, 2000. The reserve for
bad debt is based on he 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 debts due to untimely
filing of claims since errors on claims are identified and corrected in a more
timely manner than in prior years. The $736,000 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 three months ended March 31, 2001 costs of $66,796 were incurred
related to discontinued operations. These costs represent additional legal fees
paid and accrued as a result of the ongoing Quality Care Centers of
Massachusetts litigation and investigation as previously reported. When the
bankruptcy proceedings of that subsidiary have been finalized any remaining net
liabilities of the bankrupt subsidiary will result in increased equity in that
amount.
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 decreased during the nine months ended March 31, 2001 by 5.8%,
approximately $402,000. 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, 2001 the Company met its operating needs
through ongoing accounts receivable financing and through debt and equity
transactions as follows:
In March 2001 the Company issued 18,838 shares of class A common stock as
performance bonuses to the chief executive officers of high performing
facilities.
During the quarter ended March 31, 2001 the Company issued warrants to
purchase 25,000 shares of class A common stock as payment for consulting
services.
In March 2001 the company signed an amendment to the Secured Term Note
dated March 1997 extending payments on the Note through March 2003.
We utilize our accounts receivable funding facilities to the maximum extent
available to meet current cash needs and sustain existing operations. Although
our treatment facilities are operating at a profit, expenses incurred by our
internet company, Behavioral Health Online, Inc., losses incurred by the New
York practice management company and the cash required for the Franvale
settlement have caused negative cash flow from operations and created the need
for additional financing. We have reduced expenses of the internet company
through staff reductions. We are also in the process of closing the unprofitable
New York operations. 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. Management believes cash from operations and current
financing arrangements will meet the company's operating cash needs for the
immediate future.
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of stockholders was held on January 11, 2001.
In addition to the election of directors (with regards to which (I) proxies were
solicited pursuant to Regulation 14A under the Securities and Exchange Act of
1934, as amended, (II) there was no solicitation in opposition to the
management's nominees as listed on the proxy statement, and (III) all of such
nominees were elected), the stockholders ratified the selection by the Board of
Directors of BDO Seidman, LLP as the Company's independent auditors for the
fiscal year ending June 30, 2001.
Item 6. Exhibits
Exhibit No. Description
___________ ________________________________________________________________
3.1.2 Restated Articles of Organization of the Registrant, as amended
4.39 Certificate of Designation of Series C Convertible Preferred Stock of
PHC, Inc. adopted by the Board of Directors on June 15, 2000 and June
26, 2000.
4.40 Warrant Agreement issued to Union Atlantic Capital, LC. to purchase
25,000 Class A Common shares dated March 20, 2001
4.41 Warrant Agreement issued to Union Atlantic Capital, LC. to purchase
10,000 Class A Common shares dated April 15, 2001
10.53 Consolidated Restated Mortgage by and between PHC of Michigan, Inc.
and Heller Healthcare Finance, Inc., Second Amended and Restated
Cross-Collateralization and Cross-Default Agreement dated March 9,
2001.
10.54 Amendment number one, dated March 2001, to the Secured Term Note by
and between PHC of Michigan, Inc. and Heller Financial Partners -
Funding II, L.P. in the amount of $1,100,000 dated March 1997.
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, 2001 /s/ Bruce A. Shear
President
Chief Executive Officer
Date: May 14, 2001 /s/ Paula C. Wurts
Controller Treasurer