As Filed with the Securities and Exchange Commission on
October 7, 2004 Registration No. 333-117146
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT #2
REGISTRATION STATEMENT ON FORM S-3
UNDER THE SECURITIES ACT OF 1933
PHC, INC.
(Exact name of registrant as specified in its charter)
Massachusetts
(State or other jurisdiction of incorporation or organization)
04-2601571
(I.R.S. Employer Identification
No.)
Bruce A. Shear
President and Chief Executive Officer
PHC, Inc.
200 Lake Street - Suite 102
Peabody, Massachusetts 01960
(978) 536-2777
(Address and telephone number of principal executive offices)
with a copy to:
ARNOLD WESTERMAN
ARENT FOX, PLLC
1050 Connecticut Avenue, NW
Washington, DC 20036
(202) 857-6000
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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C A L C U L AT I ON O F R E G I S T R A T I ON F E E
Number of Proposed Maximum Proposed Maximum Amount of
Title of each Class of Shares being Offering Price Aggregate Offering Registration
Securities to be Registered Registered Per Share Price Fee
Class A Common Stock, $.01
par value 3,941,342(1) $1.10 $4,335,476 $1,036(2)
Class A Common Stock, $.01
par value 1,521,663(1)(3) $4,762(4)
1. Includes 907,675 shares that may be issued upon exercise of warrants.
2. Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) using the closing bid price of Class A common stock
June 29, 2004.
3. This number reflects a reduction of 692,468 shares of Class A common stock
registered in registration statement file numbers 333-59927 and 333-76137
declared effective by the commission on August 3, 1998 and June 19, 2002,
respectively, which were to have been issued upon the exercise of warrants
which have expired or convertible debt, which has been extinguished, which
shares are being deregistered hereby.
4. Pursuant to rule 429(b) this registration statement constitutes a post
effective amendment to registration statement file numbers 333-25231,
333-44045, 333-59927 and 333-76137 declared effective by the commission on
November 19, 1997, January 15, 1998, August 3, 1998 and June 19, 2002,
respectively, on which filing fees of $2,912, $261, $840 and $749 were
previously paid. The number of securities has been adjusted to reflect
adjustments pursuant to anti-dilution provisions in the instruments issued
evidencing the securities.
________________________________________________________________________________
The Registrant hereby amends the subject Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that the
subject registration statement shall thereafter become effective in accordance
with section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the commission, acting pursuant
to said section 8(a) may determine.
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Subject to Completion, dated October , 2004
PROSPECTUS
PHC, INC.
PIONEER BEHAVIORAL HEALTH
5,463,005 Shares of Class A Common Stock
This prospectus covers the sale of shares of the Company's Class A common
stock, from time to time, by the selling security holders.
The Class A common stock trades in the over-the-counter market and current
prices are available on the Nasdaq Bulletin Board under the symbol PIHC. On
August 30, 2004, the closing bid price of the Class A common stock was $1.05.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" AT PAGE 7.
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 October , 2004
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OUR COMPANY
Our Company is a national health care company, which, through wholly owned
subsidiaries, provides psychiatric services to individuals who have behavioral
health disorders including alcohol and drug dependency and to individuals in the
gaming and trucking industry. Our subsidiaries operate substance abuse treatment
facilities in Utah and Virginia, three outpatient psychiatric facilities in
Michigan, two outpatient psychiatric facilities in Nevada, an inpatient
psychiatric facility in Michigan and, until recently, one outpatient psychiatric
facility in Kansas. We provide management, administrative and help line services
through contracts with major railroads, a smoking cessation contract with the
State of Kansas and a call center contract with Wayne County, Michigan. Through
another subsidiary we conduct studies on the effects of psychiatric
pharmaceuticals on a controlled population through contracts with the
manufacturers of these pharmaceuticals. We recently expanded our operations
related to pharmaceutical studies through the acquisition of Pivotal Research
Centers, LLC. We also operate a website, Wellplace.com, which provides
education, training and products for the behavioral health professional and
internet support services to all of our subsidiaries.
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. As used herein, our Company
refers to and includes the Company and each of its subsidiaries through which
substantially all of our business and operations are conducted.
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THE OFFERING
Securities Outstanding as of September 30, 2004:
Class A common stock 16,590,610
Class B common stock 776,991
Class C common stock 0
Preferred stock 0
Securities Offered 5,463,005 shares of Class A common stock, of which
4,430,330 were outstanding as of September 30,
2004, 125,000 are issuable on conversion of
debt, and 907,675 are issuable on exercise of
outstanding warrants.
NASDAQ Symbol PIHC
Proceeds to the Company $0.00 Assuming the warrants are exercised, the
Company will receive $819,986. This amount
will be added to our working capital. All
other proceeds will be retained by the selling
security holders.
PHC, Inc.
Summary Consolidated Financial Data
Year Ended
June 30,
____________________________________________
2004 2003 2002
____________________________________________
Statements of Operations Data:
Revenue $26,648,845 $23,833,323 $22,698,268
Operating expenses 26,503,309 22,387,634 20,933,994
___________ ___________ ___________
Income (loss) from operations 145,536 1,445,689 1,764,274
Other expenses, net (391,245) (413,713) (664,933)
Provision for income taxes 11,121 54,234 15,446
___________ ___________ ___________
Income (loss) 257,003 977,742 1,083,895
Dividends -- -- (98,411)
Net income (loss) applicable to
common sharesholders $(257,003) $ 977,742 $ 985,484
___________ ___________ ___________
Basic income (loss) per common
share $ (0.02) $ 0.07 $ 0.10
=========== =========== ===========
Basic weighted average number of
shares outstanding 14,731,395 13,944,047 10,232,286
=========== =========== ===========
Diluted income (loss) per common
share $ (0.02) $ 0.07 $ 0.09
=========== =========== ===========
Diluted weighted average number of
shares outstanding 14,731,395 14,564,078 11,012,861
=========== =========== ===========
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As of As of
June 30, 2004 June 30, 2003
Balance Sheet Data:
Total assets $13,311,569 $ 9,411,723
Working capital (deficit) 240,855 736,177
Long-term obligations less
current maturities 553,871 2,067,154
Stockholders' equity 5,367,037 1,935,257
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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
NEGATIVE CASH FLOW COULD ARISE AS A RESULT OF SLOW GOVERNMENT PAYMENTS WHICH
COULD REQUIRE THE COMPANY TO BORROW ADDITIONAL FUNDS AT UNFAVORABLE RATES AND
EFFECT OUR NET INCOME, WORKING CAPITAL AND LIQUIDITY
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 $1,135,000 at June 30, 2004 and $1,078,000 at June 30, 2003, 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 or pay additional interest as overline fees on current debt instruments.
This would result in lower net income for the same services provided and lower
earnings per share.
NEGATIVE CASH FLOW COULD IMPACT OUR ABILITY TO MEET OBLIGATIONS WHEN DUE WHICH
COULD REQUIRE THE COMPANY TO BORROW ADDITIONAL FUNDS AT UNFAVORABLE RATES AND
EFFECT OUR NET INCOME
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 or
increase based on the additional resources required to collect accounts
receivable.
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 requires
us to increase staff to pursue payment and adversely affects our working capital
condition. This causes amounts borrowed on our accounts receivable revolver to
remain outstanding for longer periods of time resulting in higher interest
expense in addition to the reduced income resulting from the shorter lengths of
stay, which combined reduce net income and earnings per share.
AGING OF ACCOUNTS RECEIVABLES COULD RESULT IN OUR INABILITY TO COLLECT
RECEIVABLES REQUIRING US TO INCREASE OUR DOUBTFUL ACCOUNTS RESERVE WHICH WOULD
DECREASE OUR NET INCOME AND WORKING CAPITAL
As our accounts receivable age and become uncollectable our cash flow is
negatively impacted. Our accounts receivable from patient accounts (net of
allowance for bad debts) were $5,261,202 at June 30, 2004 compared with
$4,945,301 at June 30, 2003. 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. Because the behavioral health industry is typically a difficult
collection environment, we have focused on better accounts receivable management
through, increased staff, standardization of some procedures for collecting
receivables and a more aggressive collection policy in order to keep the change
in receivables consistent with the change in revenue. We have also established a
more aggressive reserve policy, allowing greater amounts of reserves as accounts
age from the date of billing. If the amount of receivables, which eventually
become uncollectible, exceeds such reserves, we could be materially adversely
affected. The following chart represents our Accounts Receivable, Allowance for
Doubtful Accounts at June 30, 2004, 2003 and 2002, respectively and Bad Debt
Expense for the fiscal years ended June 30, 2004, 2003 and 2002:
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Accounts Allowance for
Receivable Doubtful Accounts Bad Debt Expense
June 30, 2004 $7,287,090 $2,025,888 $1,355,770
June 30, 2003 7,293,746 2,348,445 1,108,498
June 30, 2002 8,269,361 2,715,760 716,681
RECENT LOSSES RESULTING FROM A LITIGATION SETTLEMENT AND RELATED LEGAL FEES MAY
LIMIT THE COMPNAY'S ABILITY TO BORROW AT FAVORABLE RATES WHICH WOULD INCREASE
OUR EXPENSES AND REDUCE NET INCOME
Due to the Company's recent losses from operations as a result of a medical
malpractice litigation settlement and related legal fees of approximately
$1,030,000, 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. Our current financing
relationship is scheduled to terminate or renew as of November 2004. If we are
unable to obtain needed financing, it could have a material adverse effect on
our financial condition, operations and business prospects.
The litigation involved a medical malpractice claim that was filed by a
former patient against the Company's subsidiary, North Point-Pioneer, Inc. and a
former clinician, alleging sexual abuse by a former clinician that first
manifested itself prior to the Company's acquisition of the subsidiary in 1996.
At trial in December 2002, a jury returned a verdict in favor of the plaintiff
in the amount of approximately $9 million plus interest and taxable costs and
attorney's fee for conduct. The clinician declared bankruptcy and was not a
party to the proceeding. After numerous successful motions by the Company to
reduce the amount of the verdict, a judgment in the amount of $3,079,741 was
entered on October 24, 2003.
The Company's subsidiary, North Point-Pioneer, Inc., is covered by
malpractice insurance in the amount of $1 million provided by Frontier Insurance
Company, which is insolvent and is being administered by the State of New York.
Representatives of Frontier's receiver acknowledged to the Company, Frontier's
obligation under the policy and the Company has recovered a small portion of the
legal fees expended to date on this matter.
In April 2004, the Company successfully resolved this medical malpractice
lawsuit. The plaintiff received $1,100,000 in full and final settlement of the
matter of which $462,500 was paid by the Company and the balance was paid by the
insurance company. In addition to this settlement amount the company paid
approximately $567,000 during the fiscal year ended June 30, 2004 in related
legal fees. The Company has not released other parties, including an insurance
company. Payments made by insurance and other related parties, if collected,
could significantly reduce the Company's financial burden below the $1,030,000
expended.
As a result of this medical malpractice litigation and related legal fees
the Company's operations for the fiscal year ended June 30, 2004 resulted in a
net loss and negative cash flow from operations. See Consolidated Financial
Statements and related notes included or incorporated into this prospectus by
reference.
RELIANCE ON KEY CLIENTS THE LOSS OF ANY OF WHICH WOULD REDUCE OUR NET REVENUES
AND OUR NET INCOME.
The Company relies on contracts with more than ten clients to maintain
patient census at its inpatient facilities and the loss of any of such contracts
would impact our ability to meet our fixed costs. 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 clients. No one of these large employers,
health care institutions or labor unions individually accounts for 10% or more
of our consolidated revenues, but the loss of any of these clients would require
us to expend considerable effort to replace patient referrals and would result
in revenue losses and attendant loss in income.
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GOVERNMENT REGULATION COULD RESTRICT OUR ABILITY TO EXPAND REDUCE THE ALLOWABLE
REIMBURSEMENT TO THE COMPANY AND REDUCE OUR NET 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 where the majority of our Medicaid Revenue is generated, are
considering reductions in state Medicaid budgets.
SOLE SOURCE CONTRACTING BY MANAGED CARE ORGANIZATIONS MAY REDUCE OUR AVAILABLE
PATIENTS BY ELIMINATING OUR ABILITY TO SERVICE THEM
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. We are not aware of any lost business as a result of sole source
contracts to date, as we have not been advised by any payor that we have been
eliminated as a provider from their system based on an exclusivity contract with
another provider. 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.
ACQUISITION AND EXPANSION COULD RESULT IN NEGATIVE CASH FLOW WHICH COULD REQUIRE
THE COMPANY TO BORROW ADDITIONAL FUNDS AT UNFAVORABLE RATES AND EFFECT OUR NET
INCOME
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 to supplement short term
operating cash flow shortages. The acquistion of Pivotal Research Centers, LLC
in April 2004 has impacted our net operating results positively by approximately
$131,000 for the months of May and June 2004. Since no receivables were
purchased in the acquisition, the operations of May and June have impacted the
Company's cash flow negatively by approximately $290,000, which will be reversed
as we collect the receivables.
POTENTIAL STAFFING SHORTAGES COULD REQUIRE US TO INCREASE OUR EMPLOYEE
COMPENSATION AND REDUCE OUR NET INCOME
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. As a result
of staffing shortages, we use professional placement services to supply us with
a pool of professionals from which to choose. These individuals generally are
higher skilled, seasoned individuals who require higher salaries, richer benefit
plans, and in some instances, require relocation. We have also entered into
contracts with agencies to provide short-term interim staffing in addition to
placement services. These additional costs impact our profitability.
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MANAGEMENT RISKS
CONTROL OF THE COMPANY PROVIDES THE PRINCIPLE SHAREHOLDER WITH THE POWER TO
APPROVE ALL TRANSACTIONS AND CONTROL THE BOARD OF DIRECTORS WITHOUT INPUT OF
OTHER SHAREHOLDERS
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 Shear and his affiliates
own and control 92.8% of the class B common stock, which elects four of the six
members of the Board of Directors. Bruce Shear can establish, maintain and
control business policy and decisions by virtue of his control of the board of
directors.
INABILITY TO RETAIN KEY PERSONNEL THE LOSS OF ANY OF WHOM COULD EFFECT OUR
CLIENT RELATIONS AND THUS REDUCE OUR REVENUE AND NET INCOME
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, who are: Bruce A.
Shear, PHC's President and Chief Executive Officer, Robert H. Boswell, PHC's
Senior Vice President and other members of PHC's management and their continued
relationship with key clients. In April 2004, the Company acquired Pivotal
Research Centers, LLC, which is engaged in clinical drug testing. Dr. Kirby, the
founder and medical director of Pivotal, has key relationships with the
pharmaceutical companies that provide contracts for the research business. We do
not anticipate any key member of management will leave the Company but do have
key man life insurance policies on Mr. Shear and Dr. Kirby and a three-year
employment agreement with Dr. Kirby entered into as part of the acquisition of
Pivotal.
MARKET RISKS
BULLETIN BOARD TRADED STOCKS ARE MORE VOLITILE AND CAN COST MORE TO TRADE
THEREFORE EFFECTING THE COST TO SHAREHOLDERS
The Company's failure to meet listing requirements resulted in the
delisting of the Company's stock from the Nasdaq Stock Market in December 2000.
Since then, the Company's stock has been a bulletin board traded stock. The 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. The shares have sold at prices varying between a low of $.56 and a
high of $1.71 from July 2002 through July 2004. 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.
PREFERRED STOCK ISSUANCE COULD RESULT IN DIVIDEND, VOTING AND LIQUITATION
PREFERENCES SUPERIOR TO THE COMMON STOCK
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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RECENT DEVELOPMENTS
On April 30, 2004, the Company closed on the acquisition of Phoenix-based
Pivotal Research Centers, LLC, ("Pivotal") significantly expanding the Company's
clinical research capabilities and geographic presence. The Company purchased
100% of the membership interest in Pivotal Research Centers, LLC, from the
former owners, Louis Kirby, Carol Colombo and Anthony Bonacci. In addition to
its currently enrolling research contracts, the acquisition brings with it the
expertise and reputation of Pivotal's founder, Louis Kirby, MD and its CEO,
Michael Colombo. The Company filed Current Reports on form 8-K and 8-K/A with
the Securities and Exchange Commission on May 13, 2004 and June 29, 2004,
respectively, on this transaction.
Pivotal performs all phases of clinical research for Phase I-IV drugs under
development through two dedicated research sites, including one of the largest
single psychiatric sites in the country. Pivotal currently has approximately 22
enrolling studies and an additional 31 ongoing studies with approximately 75-80
percent of Pivotal's research activity in central nervous system (CNS) research,
With a current client base including AstraZeneca, Bristol Meyers Squibb,
Cephalon, Forest, GlaxoSmithKline, Lilly, Merck, Mylan, Novartis, Organon,
Sepracor and Wyeth, the Company currently has protocols in Alzheimer's disease,
ADHD, Diabetes Type II, Generalized Anxiety Disorder, Insomnia, Major Depressive
Disorder, Obesity, Pain, Parkinson's Disease, and Shift Work Sleep Disorder.
The Company paid $1.5 million in cash and issued 427,350 shares of Class A
common stock valued at $500,000. The value of the Class A common stock was
determined in accordance with EITF 99-12, "Determination of the Measurement Date
for the Market Price of Acquirer Securities Issued in a Purchase Business
Combination". Additionally, the Company agreed to three performance-based notes,
which are staged during the next five years based on future profitability and
secured by all the assets of Pivotal as well as by PHC, Inc.'s ownership
interest in Pivotal.
Note A is a secured promissory note with a face value of $1,000,000, with
an annual interest rate of 6%, a maturity date of December 31, 2008 and payments
due in quarterly installments beginning January 2005. The outstanding principal
will be adjusted in the first and second years of the note based on annual
adjusted EBITDA as defined in the agreement of $780,000. Annual adjusted EBITDA
of greater than $780,000 for each period increases the note value by the
difference and annual adjusted EBITDA of less than $780,000 will decrease the
note value by the difference. Quarterly payments are then made based on the
adjusted value of the note.
Note B is a secured promissory note with a face value of $500,000, with an
annual interest rate of 6%, a maturity date of December 31, 2008 and payments
due in quarterly installments beginning January 2007. The outstanding principal
will be adjusted on February 1, 2006 based on annual adjusted EBITDA as defined
in the agreement of $780,000 for the adjustment period of January 1, 2005
through December 31, 2006. Annual adjusted EBITDA greater than $780,000 for the
adjustment period increases the note value by the difference and annual adjusted
EBITDA of less than $780,000 for the adjustment period will decrease the note
value by the difference. Quarterly payments are then made based on the adjusted
value of the note.
Note C is a secured promissory note with a face value of $1,000,000, with
an annual interest rate of 6%, a maturity date of March 31, 2009 and annual
payments commencing on March 31, 2005. Note payment amounts will be determined
based on the annual adjusted EBITDA as defined in the agreement of the
non-Pivotal Research business for each payment period beginning at the effective
date of the agreement and ending on December 31, of 2004 and each year
thereafter multiplied by .35. In addition, this note provides for the issuance
of up to $200,000 in PHC, Inc. Class A common stock, should the total of the
five note payments be less than the $1,000,000 face value of the note.
In accordance with SFAS No 141, "Business Combinations," the value of the
notes is considered to be contingent consideration and will be recorded as
additional purchase price as the contingencies are resolved and the price is
fixed. However, the floor of note C of $200,000 was recorded as purchase price
on the date of acquisition.
The Notes are secured by the membership interest in Pivotal Research
Centers, LLC and all the assets of Pivotal Research Centers, LLC.
- 11 -
In addition to the usual representations and warranties made in agreements
such as this, the Membership Purchase agreement also includes a sellers'
covenant to the buyers not to compete or interfere with the business and a
buyers' covenant regarding the timely collection and transfer of the accounts
receivable of the seller and the public registration of the closing stock. In
addition, the sellers also provided an indemnification to the buyer from and
against any and all losses including, but not limited to, any litigation whether
or not disclosed resulting from a pre-closing event, facts, circumstances or
conditions whether or not asserted prior to the closing date.
In conjunction with the Membership Purchase Agreement, the Company also
executed employment and non-compete agreements with Dr. Louis C. Kirby and
Michael J. Colombo.
Dr. Kirby's employment agreement extends from April 30, 2004 through
December 31, 2006 and calls for an annual base salary of $200,000, subject to
adjustment from time to time at the discretion of the Board of Directors, and
incentive compensation of $30,000 if the annual adjusted EBITDA as defined in
the Membership Purchase Agreement is greater than $780,000.
Mr. Colombo's employment agreement extends from April 30, 2004 through
December 31, 2006 and calls for an annual base salary of $150,000, subject to
adjustment from time to time at the discretion of the Board of Directors, and
incentive compensation of $15,000 if the annual adjusted EBITDA as defined in
the Membership Purchase agreement is greater than $730,000 but less than
$800,000 or $25,000 if the annual adjusted EBITDA as defined in the Membership
Purchase agreement is greater than $800,000. Additional incentive compensation
will be provided to Mr. Colombo based on combined annual adjusted EBITDA of all
clinical research business in excess of $800,000, with incremental increases for
amounts over $800,000.
The loan adjustment periods and payment dates in the notes and the
employment agreements were amended to reflect the closing date of April 30,
2004, as agreed to by Sellers and Buyer pursuant to Section 2.6 (a) of the
Purchase Agreement.
The Company determined that it would be in the best interest of the
shareholders to finance the cash portion of the purchase price through equity as
well as raise additional working capital, since debt with favorable terms was
not available. Therefore, the Company offered 2,800,000 shares of Class A Common
Stock at $1.10 per share in a private placement. The private placement also
included 25% warrant coverage at an exercise price of $1.10 per share with a
three-year term and standard anti-dilution features. This offering was completed
in two stages. As a result of the first stage of the offering, in March 2004,
the Company issued 684,999 shares of Class A Common Stock for $753,500 and
warrants to purchase 171,248 additional shares of Class A Common Stock. As a
result of second stage of this offering, in April 2004, the Company issued
1,918,196 shares of Class A Common Stock for $2,110,016 and warrants to purchase
479,549 additional shares of Class A Common Stock. The private placement
facilitated the closing of the acquisition without incurring any additional bank
debt, and also provides the necessary working capital for Pivotal to execute its
business plan.
In connection with the acquisition, the Company is obligated to pay
$280,000 and issue 200,000 warrants to purchase shares of Class A common stock
as a finder's fee. To date, the Company has met the obligations of the agreement
and issued the 200,000 warrants and paid $180,000 of the fee.
- 12 -
The following is summary financial data for Pivotal for the periods
indicated. Complete financial information for Pivotal is available in the
Company's Current Report Form 8-K/A filed with the Securities and Exchange
Commission on June 29, 2004. The summary financial data of Pivotal is derived
from the financial statements audited by Woods & Dwyer, P.L.C. for the years
ended June 30, 2002 and 2003, included in the Company's Current Report on Form
8-K/A referenced above.
Pivotal Research Centers, LLC
Summary Financial Data
Nine Months
Ended
March 31, Year Ended June 30,
2004 2003 2002
___________ ___________ ___________
Statements of Operations Data:
Revenue $3,249,861 $3,941,428 $3,171,667
Operating expenses 2,641,866 3,215,220 3,059,949
___________ ___________ ___________
Income from operations 607,995 726,208 111,718
Other income 5,343 3,780 6,240
___________ ___________ ___________
Net income $ 613,338 $729,988 $ 117,958
___________ ___________ ___________
March 31, June 30,
2004 2003 2002
___________ ___________ ___________
Balance Sheet Data:
Total assets $1,876,650 $1,925,756 $1,334,775
Working capital 1,540,609 1,574,490 1,044,973
- 13 -
The following table includes a summary of unaudited pro forma financial data
based on the respective audited and unaudited historical consolidated financial
statements and the notes thereto of the Company and Pivotal after giving effect
to the acquisition using the purchase method of accounting and management's
estimated adjustments to various operating expenses such as depreciation,
amortization and interest income based on the acquisition. For more detailed
information see the Company's 8-K/A filed with the Securities and Exchange
Commission on June 29, 2004.
PHC, Inc.
Unaudited Summary Pro Forma
(in thousands except share and per share data)
Nine Months
Ended Year Ended
March 31, June 30,
2004 2003
___________ ___________
Statements of Operations Data:
Revenue $ 22,314 $ 27,774
Operating expenses 22,302 25,830
____________ ____________
Income from operations 12 1,944
Other expenses 363 414
Provision for taxes 11 54
____________ ____________
Income (loss) applicable to common shares $ (362) $ 1,476
____________ ____________
Basic income (loss) per common share $ (0.02) $ 0.09
____________ ____________
Basic weighted average number of shares
outstanding 16,494,807 16,289,593
============ ===========
Diluted income (loss) per common share $ (0.02) $ 0.09
____________ ____________
Diluted weighted average number of shares
outstanding 16,494,807 17,014,725
=========== ===========
March 31,
2004
____________
Balance Sheet Data:
Total assets $ 13,595
Working capital (667)
Long-term obligations 656
- 14 -
SUMMARY DESCRIPTION OF CAPITAL STOCK
Common Stock
The Company has authorized two classes of common stock. The Class A common
stock and the Class B common stock. Subject to preferential rights in favor of
the holders of the Preferred Stock, the holders of the common stock are entitled
to dividends when, as and if declared by the Company's Board of Directors.
Holders of the Class A common stock and the Class B common stock are entitled to
share equally in such dividends, except that stock dividends (which shall be at
the same rate) shall be payable only in Class A common stock to holders of Class
A common stock and only in Class B common stock to holders of Class B common
stock.
Class A Common Stock
The Class A common stock is entitled to one vote per share with respect to
all matters on which shareholders are entitled to vote, except as otherwise
required by law and except that the holders of the Class A common stock are
entitled to elect two members to the Company's Board of Directors.
The Class A common stock is non-redeemable and non-convertible and has no
pre-emptive rights. The shares of Class A common stock offered hereby and the
shares issued on the exercise of the warrants will be fully paid and
non-assessable.
Class B Common Stock
The Class B common stock is entitled to five votes per share with respect
to all matters on which shareholders are entitled to vote, except as otherwise
required by law and except that the holders of the Class A common stock are
entitled to elect two members to the Company's Board of Directors. The holders
of the Class B common stock are entitled to elect all of the remaining members
of the Board of Directors.
The Class B common stock is non-redeemable and has no pre-emptive rights.
Each share of Class B common stock is convertible, at the option of its
holder, into a share of Class A common stock. In addition, each share of Class B
common stock is automatically convertible into one fully-paid and non-assessable
share of Class A common stock (i) upon its sale, gift or transfer to a person
who is not an affiliate of the initial holder therof or (ii) if transferred to
such an affiliate, upon its subsequent sale, gift or other transfer to a person
who is not an affiliate of the initial holder. Shares of Class B common stock
that are converted into Class A common Stock will be retired and cancelled and
shall not be reissued.
All of the outstanding shares of Class B common stock are fully paid and
nonassessable.
Preferred Stock
The Board of Directors is authorized, without further action of the
shareholders, to issue up to 1,000,000 shares in one or more classes or series
and to determine, with respect to any series so established, the preferences,
voting powers, qualifications and special or relative rights of the established
class or series, which rights may be in preference to the rights of common
stock. No shares of the Company's preferred stock are currently issued or
outstanding.
Included in short-term liabilities as of June 30, 2004, is approximately
$1.5 million mortgage debt held by our long term lender which matures in
November 2004. The Company's auditors indicated preliminarily that it would be
necessary to modify their opinion if this debt was not replaced or a binding
commitment was not secured prior to the required filing of the audited financial
statements.
In response to this requirement, on September 20, 2004, the Company entered
into an agreement pursuant to which the Company has the option to require an
- 15 -
investor to purchase 526,316 shares of a new series of preferred stock from the
Company for $1,500,000. If the Company does not close on this transaction by
November 1, 2004, all rights and obligations under the agreement will be null
and void. This agreement was entered into to provide part of the documentation
required by the Company's auditors in their consideration of the Company's
ability to continue as a going concern.
The preferred stock, if issued, would be convertible into shares of common
stock at the option of the Company at the rate of three shares of common stock
for each share of preferred stock, equivalent to $1.12 per share, would vote as
one class with the common stock with three votes per share, would be entitled to
cumulative dividends of 8% of the stated value of each share of preferred stock,
which is $3.36 per share, from the date of issuance and would be subject to
normal adjustments in the event of mergers, consolidations or liquidations.
The Company does not anticipate that it will close on this agreement since
the Company is negotiating a renewal or replacement of this debt and is
confident that it will be successful.
- 16 -
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 The Woolworth Building, 233 Broadway, New
York, New York 10279 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
The Woolworth Building, 233 Broadway, New York, New York 10279.
A copy of our Annual Report on Form 10-KSB for the year ended June 30,
2004, 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.
- 17 -
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, 2004 filed with the Commission on September 24, 2004, commission file
#0-22916; (2) our Proxy Statement filed with the Commission on November 24,
2003; (3) our Quarterly Report on Form 10-QSB for the quarters ended September
30, 2003 filed with the Commission on November 13, 2003, December 31, 2003 filed
with the Commission on February 13, 2004 and March 31, 2004 filed with the
Commission on May 14, 2004; and (4) Current reports on Form 8-K and Form 8-K/A
reporting the acquisition by the Company of Pivotal Research Centers, LLC, filed
with the Commission on May 13, 2004 and June 29, 2004 and reporting the material
definitive agreement entered into by the company to require an investor to
purchase preferred stock, filed with the Commission on September 23, 2004. The
commission file # for the foregoing reports is 0-22916. 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.
- 18 -
SELLING SECURITY HOLDERS
The selling security holders consist of several groups of investors who
acquired Class A common 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 debenture holders also acquired warrants to purchase
shares of Class A common stock.
The following table identifies the investors who acquired 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 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, on reports filed
by the selling security holders with the SEC or otherwise provided by the
selling security holders and on information provided by our transfer agent as of
June 30, 2004. None of the selling security holders is or has been an affiliate
of our Company in the last three years.
Our Company will receive an aggregate of $819,986 if the holders of all of
the warrants exercise the warrants and purchase shares of Class A common stock.
The average exercise price is $0.90. The selling security holders will retain
all other proceeds from the sale of the shares being registered. However, there
can be no assurance that the holders will exercise these warrants and the
proceeds will be received by the Company.
None of the selling security holders beneficially own greater than 5% of
the outstanding Class A Common Stock and, when the offering is complete, except
for Peter Lynch, none of the selling security holders will hold greater than one
percent of the outstanding Class A common stock. Mr. Lynch will own
approximately 2.6% of the outstanding Class A common stock after the offering is
complete.
- 19 -
Shares of Class A
Common Stock
Beneficially Owned
or Issuable on
Conversion of
Outstanding
Convertible
Securities Warrants to Number of
Before Purchase Shares of
Name, Address and primary the Offering shares of Class A
contact of Selling Exclusive of Class A Common Stock
Security Holder Warrants Common Stock Offered
Exercise Expiration
Number Price Date
2004 Private Placement 1
Fiserv Securities FBO 140,000 25,000 $1.10 02/03/2007 125,000
Steve Bathgate, IRA 2 8
Bathgate Capital
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Fiserv Securities FBO Richard 20,000 5,000 $1.10 02/03/2007 25,000
Huebner, IRA 2 8
Bathgate Capital
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Fiserv Securities FBO 20,000 5,000 $1.10 02/03/2007 25,000
Kim Gloystein, IRA
Bathgate Capital
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Fiserv Securities FBO 20,000 5,000 $1.10 02/03/2007 25,000
George Johnson, IRA 2
Bathgate Capital
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Vicki D. E. Barone 2 8 14,000 2,500 $1.10 02/03/2007 12,500
Bathgate Capital
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Fiserv Securities FBO 20,000 5,000 $1.10 02/03/2007 25,000
Jon Kruljac, IRA 2 8
Bathgate Capital
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
- 20 -
Shares of Class A
Common Stock
Beneficially Owned
or Issuable on
Conversion of
Outstanding
Convertible
Securities Warrants to Number of
Before Purchase Shares of
Name, Address and primary the Offering shares of Class A
contact of Selling Exclusive of Class A Common Stock
Security Holder Warrants Common Stock Offered
Exercise Expiration
Number Price Date
Fiserv Securities 10,000 2,500 $1.10 02/03/2007 12,500
FBO Kent Lund, IRA 2
Bathgate Capital
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
David H. Drennen 2 8 16,000 2,500 $1.10 02/03/2007 12,500
Bathgate Capital
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
David Spitz 2 8 20,455 5,113 $1.10 02/03/2007 25,568
Bathgate Capital
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Core Fund, LP 227,272 56,818 $1.10 02/03/2007 284,090
David Baker 2 3
601 California Street
Suite 1150
San Francisco, CA 94108
Pilot Ventures Trust, George 28,408 -0- $1.10 02/03/2007 28,408
McCabe, Trustee 2 3
2E. 73rd Street, 15th Floor
New York, NY 10021
Peter Lynch 668,681 -0- $1.10 02/03/2007 255,681
Lynch Foundation
82 Devonshire Street S4
Boston, MA 02109
Sandor Capital Master Fund, LP, 100,000 25,000 $1.10 04/29/2007 125,000
John Lemak 2 3
2828 Routh Street,
Suite 500
Dallas, TX 75201
- 21 -
Shares of Class A
Common Stock
Beneficially Owned
or Issuable on
Conversion of
Outstanding
Convertible
Securities Warrants to Number of
Before Purchase Shares of
Name, Address and primary the Offering shares of Class A
contact of Selling Exclusive of Class A Common Stock
Security Holder Warrants Common Stock Offered
Exercise Expiration
Number Price Date
Select Contrarian Value 300,000 75,000 $1.10 04/29/2007 375,000
Partners, LP
David Berry 3
4200 Montrose Blvd.,
Suite 510
Houston, TX 77006
Meadowbrook Opportunity Fund, 200,000 50,000 $1.10 04/29/2007 250,000
LLC
Michael Ragins 3
520 Lake Cook Road Su 690
Deerfield, IL 60015
UVE Partners LLC 194,400 25,000 $1.10 04/29/2007 125,000
Gary Simon 3
1270 Avenue of the Americas,
Suite 1800
New York, NY 10020
Westpark Capital, LP 300,000 75,000 $1.10 04/29/2007 375,000
Patrick Brosnahan 3
4965 Preston Park Boulevard #220
Plano, TX 75093
Centaur Value Fund, LP 68,200 17,050 $1.10 04/29/2007 85,250
Zeke Ashton 3
100 Crescent Court, Su 800
Dallas, TX 75201
Asamara LLC 386,360 96,590 $1.10 04/29/2007 482,950
Stephen Heyman
415 S. Boulder, 9th Floor
Tulsa, OK 74103
- 22 -
Shares of Class A
Common Stock
Beneficially Owned
or Issuable on
Conversion of
Outstanding
Convertible
Securities Warrants to Number of
Before Purchase Shares of
Name, Address and primary the Offering shares of Class A
contact of Selling Exclusive of Class A Common Stock
Security Holder Warrants Common Stock Offered
Exercise Expiration
Number Price Date
Incline Capital LP 200,000 50,000 $1.10 04/29/2007 250,000
Mark Hood 3
4965 Preston Park Blvd
Suite 250
Plano, TX 75093
Hammerstone Capital Partners 163,636 40,909 $1.10 04/29/2007 204,545
Jack Alfandary 2 3
237 Park Avenue
New York, NY 10023
Morgan Stanley Dean Witter, 194,000 25,000 $1.10 04/30/2007 125,000
Custodian for Jeffrey W. Waters 2
11311 McCormick Road
Suite 450
Hunt Valley, MD 21031
Pivotal Acquisition (4)
Louis Kirby 405,982 -0- -0- -0- 405,982
5633 North Royal Circle
Paradise Valley, AZ 85253
Anthony Bonacci 10,684 -0- -0- -0- 10,684
2525 E. Camelback Road, Suite
840
Phoenix, AZ 85016
Carol Colombo 10,684 -0- -0- -0- 10,684
2525 E. Camelback Road, Suite
840
Phoenix, AZ 85016
Finder's Fee (5)
David Spitz 2 9 -0- 90,000 $1.24 04/30/2007 90,000
c/o Bathgate Capital Partners
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
- 23 -
Shares of Class A
Common Stock
Beneficially Owned
or Issuable on
Conversion of
Outstanding
Convertible
Securities Warrants to Number of
Before Purchase Shares of
Name, Address and primary the Offering shares of Class A
contact of Selling Exclusive of Class A Common Stock
Security Holder Warrants Common Stock Offered
Exercise Expiration
Number Price Date
Curtis Akey 2 -0- 10,000 $1.24 04/30/2007 10,000
c/o Bathgate Capital Partners
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
David Drennen 2 9 16,000 4,500 $1.24 04/30/2007 4,500
c/o Bathgate Capital Partners
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Lee Schlessman -0- 4,050 $1.24 04/30/2007 4,050
c/o Bathgate Capital Partners
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Greg & Ann Fulton 2 -0- 2,700 $1.24 04/30/2007 2,700
c/o Bathgate Capital Partners
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Scott Liolios 2 -0- 2,500 $1.24 04/30/2007 2,500
c/o Bathgate Capital Partners
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Jeff Kohler 2 -0- 2,500 $1.24 04/30/2007 2,500
c/o Bathgate Capital Partners
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Pete Bloomquist 2 -0- 2,500 $1.24 04/30/2007 2,500
c/o Bathgate Capital Partners
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Jon Kruljac 2 9 -0- 2,500 $1.24 04/30/2007 2,500
c/o Bathgate Capital Partners
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
- 24 -
Shares of Class A
Common Stock
Beneficially Owned
or Issuable on
Conversion of
Outstanding
Convertible
Securities Warrants to Number of
Before Purchase Shares of
Name, Address and primary the Offering shares of Class A
contact of Selling Exclusive of Class A Common Stock
Security Holder Warrants Common Stock Offered
Exercise Expiration
Number Price Date
Andrea Bauer 2 -0- 2,500 $1.24 04/30/2007 2,500
c/o Bathgate Capital Partners
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Michael Donnelly 2 -0- 1,250 $1.24 04/30/2007 1,250
c/o Bathgate Capital Partners
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Susan Ross 2 -0- 2,000 $1.24 04/30/2007 2,000
c/o Bathgate Capital Partners
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Nancy Stratton 2 -0- 1,000 $1.24 04/30/2007 1,000
c/o Bathgate Capital Partners
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Steven Bathgate 2 9 140,000 24,000 $1.24 04/30/2007 24,000
c/o Bathgate Capital Partners
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Richard Huebner 2 9 -0- 24,000 $1.24 04/30/2007 24,000
c/o Bathgate Capital Partners
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
Vicki Barone 2 9 14,000 24,000 $1.24 04/30/2007 24,000
c/o Bathgate Capital Partners
5350 S. Roselyn St., #400
Greenwood Village, CO 80110
- 25 -
Shares of Class A
Common Stock
Beneficially Owned
or Issuable on
Conversion of
Outstanding
Convertible
Securities Warrants to Number of
Before Purchase Shares of
Name, Address and primary the Offering shares of Class A
contact of Selling Exclusive of Class A Common Stock
Security Holder Warrants Common Stock Offered
Exercise Expiration
Number Price Date
Investor Relations (6)
Hayden Communications -0- 30,000 $0.86 10/20/2006 60,000
Mathew Hayden 3 30,000 $0.84 10/20/2006
1401 Havens Drive
N. Myrtle Beach, SC 29582
Previously Registered (7)
ProFutures Special (a) 459,960 -0- -0- -0- 459,960
Equities Fund, LP
Gary D. Halbert 2 3
11612 Bee Cave RD
Austin, TX 78734
John F. Mauldin (a) 2 179,047 -0- -0- -0- 179,047
1000 Ballpark in Arlington
Suite 216
Arlington, TX 76011
Gary D. Halbert (a) 2 253,402 -0- -0- -0- 253,402
11612 Bee Cave RD, Suite 100
Austin, TX 78734
William D. Kyle, Jr. (b) 125,000 43,695 $1.00 2/31/2004 168,695
10950 N. Cedarburg RD,
56 West
Mequon, WI 53092
George Gordon (b) 110,000 -0- -0- -0- 110,000
1613 Tiffany Ave.
Racine, WI 53402
Yakov Burstein (c) 151,954 -0- -0- -0- 104,020
184-63 Aberdeen Road
Jamaica, NY 11432
Irwin Mansdorf (c) 236,539 -0- -0- -0- 236,539
3 Nachshon Street
Raanana, Israel
- 26 -
Shares of Class A
Common Stock
Beneficially Owned
or Issuable on
Conversion of
Outstanding
Convertible
Securities Warrants to Number of
Before Purchase Shares of
Name, Address and primary the Offering shares of Class A
contact of Selling Exclusive of Class A Common Stock
Security Holder Warrants Common Stock Offered
Exercise Expiration
Number Price Date
Delta Systems & Solutions (d) 12,000 10,000 $0.90 03/31/2005 10,000
Peter Drakos 3
1200 Salem St. #182
Lynnfield, MA 01940
1. In March and April 2004, the Company issued 2,660,012 shares of Class A
common stock, at $1.10 per share and 593,980 warrants to purchase shares of
Class A common stock at an exercise price of $1.10, in connection with this
private placement.
2. These individuals are associated with a firm that is registered as a
broker-dealer with the Commission and which is a member of the National
Association of Security Dealers, Inc. The individuals acquired the shares
for their own account as an investment and paid the full purchase price on
acquisition. The individuals are not acting in concert with respect to any
sale and have no plans to enter into a firm commitment underwriting.
3. The named individual, who is a natural person, has all investment power
including the right to vote and dispose of the shares.
4. In April 2004, the Company purchased 100% of the membership interest in
Pivotal Research Centers, LLC ("Pivotal"). In connection with this
transaction the Company issued 427,350 shares of Class A common stock to
the former membership holders, Louis Kirby, Anthony Bonacci and Carol
Colombo.
5. In connection with the purchase of the membership interest in Pivotal, the
Company issued 200,000 warrants to purchase shares of Class A common stock
to individuals who were associated with Bathgate Capital as a finders fee.
For additional information see "RECENT DEVELOPMENTS" on page 11 of this
report.
6. In October 2003, the Company issued 60,000 warrants to purchase shares of
Class A common stock to Hayden Communications for investor relations
consulting services including but not limited to investment community
awareness, shareholder communications and media relations.
7. This prospectus also serves as a post effective amendment for 1,521,663
shares of Class A common stock to be sold by selling security holders which
were previously registered as follows:
a. 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. 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.
- 27 -
b. 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 Fiscal year
2003, the debentures were transferred to William D. Kyle, Jr. and the
holders exercised the put provision in the agreement as to 50% of the
debentures leaving $250,000 outstanding convertible into 125,000
shares of Class A common stock. In connection with this financing the
Company also issued 25,000 warrants to purchase shares of Class A
common stock to the holders of the debentures which remain outstanding
and 175,000 warrants to purchase shares of Class A common stock as a
finders fee to George Gordon for introducing Dean and Company to the
Company, of which have been exercised.
c. 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 includes 236,539 shares to Irwin Mansdorf and
67,558 shares to Yakov Burstein in connection with a share price
guarantee.
d. In March 2000, the Company issued 10,000 warrants to purchase shares
of Class A common stock to Delta Systems and Solutions in payment of
computer technology consulting services relating to Behavioral Health
Online, Inc. In March 2004 the Board voted to extend these warrants
for one year until March 2005.
8. Does not include shares issued on exercise of warrants issued as a finder's
fee, which shares are included under the caption finder's fee in this
prospectus.
9. Does not include common stock and shares issued on exercise of warrants
issued as part of a private placement, which shares are included under the
caption private placement in this prospectus.
- 28 -
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 $819,986 if the warrants to purchase 907,675 shares
being registered are exercised; however, PHC will receive no proceeds from the
sale, by the selling security holders, of the additional 4,430,330 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 with respect to the sale of the
shares covered by this prospectus.
The Company has been advised that the persons who are associated with
broker-dealers acquired the shares for their own account for investment and have
not entered into any agreement or arrangement between themselves or with any
other person with respect to the sale or distribution of the shares covered by
this prospectus. See the information under the caption Selling Security Holders.
Several of the selling security holders are registered broker-dealers with
the Commission. Each acquired the shares covered by this prospectus in the
ordinary course of business as an investment.
- 29 -
LEGAL MATTERS
Arent Fox PLLC, Washington, DC have passed upon the validity of the
securities offered hereby for PHC.
EXPERTS
The consolidated financial statements of our Company as of and for the
years ended June 30, 2003 and 2004, incorporated by reference in the prospectus
constituting a part of this amendment number 2 to the registration statement on
Form S-3, have been audited by BDO Seidman, LLP, an independent registered
public accounting firm, to the extent and for the periods set forth in their
reports incorporated herein by reference, and are incorporated herein in
reliance upon such reports given upon the authority of said firm as experts in
auditing and accounting.
The financial statements of Pivotal Research Centers, LLC as of and for the
years ended June 30, 2002 and 2003, incorporated by reference in the prospectus
constituting a part of this registration statement on Form S-3 have been audited
by Woods & Dwyer, P.L.C., independent certified public accountants, to the
extent and for the periods set forth in their reports incorporated herein by
reference and are incorporated herein in reliance upon such reports given upon
the authority of said firm as experts in accounting and auditing.
- 30 -
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 connection with the offering made
hereby, and, if given or made, such information or
representations must not be relied upon as having PHC, INC.
been authorized by PHC. This Prospectus does not
constitute an offer to sell or a solicitation of PIONEER BEHAVIORAL HEALTH
an offer to buy, by any 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 5,463,005 Shares of Class
any implication that the information herein A Common Stock
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: 7-9
Delay in government payments 7
Managed care rates 7
Collectability of Accounts Receivable 7
Lack of access to capital 8
Reliance on key clients 8
Rapid regulatory change 9
Sole source contracts 9
Acquisition and expansion 9
Staffing shortages 9
Management Risks: 10
Control of PHC by Bruce A. Shear 10
Retaining key personnel 10
Market Risks: 10
Bulletin Board traded stock 10
Common Stock liquidity 10
Low trading volume 10
Issuance of Preferred Stock 10
Recent Developments 11-14
Summary Description of Capital Stock 15-16
Available Information 17
Incorporation of Documents by Reference 18
Selling security holders 19-28
Plan of Distribution 29
Legal Matters 30
Experts 30
PROSPECTUS
October , 2004
- 31 -
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
It is estimated that the following expenses were incurred in connection with the
offering hereunder:
SEC Registration Fee $ 1,082.00
Legal Fees and Expenses 10,000.00
Accounting Fees and Expenses 8,000.00
Miscellaneous 4,918.00
___________
Total $24,000.00
===========
The Registrant will bear all expenses shown above.
Item 15. Indemnification of Directors and Officers.
Section 6 of the Registrant's Restated Articles of Organization provides,
in part, that the Registrant shall indemnify its directors, trustees, officers,
employees and agents against all liabilities, costs and expenses, including but
not limited to amounts paid in satisfaction of judgments, in settlement or as
fines and penalties, and counsel fees, reasonably incurred by such person in
connection with the defense or disposition of or otherwise in connection with or
resulting from any action, suit or proceeding in which such director or officer
may be involved or with which he may be threatened, while in office or
thereafter, by reason of his actions or omissions in connection with services
rendered directly or indirectly to the Registrant during his term of office,
such indemnification to include prompt payment of expenses in advance of the
final disposition of any such action, suit or proceeding.
In addition, the Restated Articles of Organization of the Registrant, under
authority of the Business Corporation Law of The Commonwealth of Massachusetts,
contain a provision eliminating the personal liability of a director to the
Registrant or its stockholders for monetary damages for breach of fiduciary duty
as a director, except for liability (1) for any breach of the director's duty of
loyalty to the Registrant or its stockholders, (2) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, or (3) for any transaction from which the director derived an improper
personal benefit. The foregoing provision also is inapplicable to situations
wherein a director has voted for, or assented to the declaration of, a dividend,
repurchase of shares, distribution, or the making of a loan to an officer or
director, in each case where the same occurs in violation of applicable law.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of PHC pursuant
to the foregoing provisions, or otherwise, PHC has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by PHC of expenses incurred or paid by a director, officer or
controlling person of PHC in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, PHC will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
- 32 -
Item 16. Exhibits.
Exhibit No. Description
3.1 Restated Articles of Organization of the Registrant, as amended.
(Filed as exhibit 3.1 to the Company's Registration Statement on March
2, 1994. Commission file number 333-71418).
3.1.1 Articles of Amendment filed with the Commonwealth of Massachusetts.
(Filed with the 10-QSB dated May 1997. Commission file #0-22916).
3.1.2 Restated Articles of Organization of the Registrant, as amended.
(Filed as exhibit 3.1.2 to the Company's report on Form 10-QSB dated
May 14, 2001. Commission file number 0-22916).
3.2 By-laws of the Registrant, as amended. (Filed as exhibit 3.2 to the
Company's Post-Effective Amendment No. 2 on Form S-3 to Registration
Statement on Form SB-2 under the Securities Act of 1933 dated November
13, 1995. Commission file number 333-71418).
4.1 Warrant Guaranty Agreement for Common Stock Purchase Warrants issuable
by PHC, Inc. dated August 14, 1998 for Warrants No. 2 and No. 3.
(Filed as exhibit 4.19 to the Company's report on Form 10-KSB, filed
with the Securities and Exchange Commission on October 14, 1997.
Commission file number 0-22916).
4.2 12% Convertible Debenture by and between PHC, Inc., and Dean & Co.,
dated December 3, 1998 in the amount of $500,000. (Filed as exhibit
4.20 to the Company's report on Form 10-QSB dated February 12, 1999.
Commission file number 0-22916).
4.3 Securities Purchase Agreement for 12% Convertible Debenture by and
between PHC, Inc. and Dean & Co., a Wisconsin nominee partnership for
Common Stock. (Filed as exhibit 4.21 to the Company's report on Form
10-QSB dated February 12, 1999. Commission file number 0-22916).
4.4 Warrant Agreement to purchase up to 25,000 shares of Class A Common
Stock by and between PHC, Inc., and Dean & Co., dated December 3,
1998. (Filed as exhibit 4.22 to the Company's report on Form 10-QSB
dated February 12, 1999. Commission file number 0-22916).
4.5 Warrant Agreements by and between PHC, Inc., and George H. Gordon for
10,000 shares of Class A Common Stock dated July 1, 1999. (Filed as
exhibit 4.29 to the Company's report on Form 10-KSB dated October 13,
1999. Commission file number 0-22916).
4.6 Warrant Agreements by and between PHC, Inc., and George H. Gordon for
10,000 shares of Class A Common Stock dated August 1, 1999. (Filed as
exhibit 4.30 to the Company's report on Form 10-KSB dated October 13,
1999. Commission file number 0-22916).
4.7 Warrant to purchase up to 37,500 shares of Class A Common Stock by and
between PHC, Inc., and National Securities Corporation dated April 5,
1999. (Filed as exhibit 4.31 to the Company's report on Form 10-KSB
dated October 13, 1999. Commission file number 0-22916).
4.8 Warrant to purchase up to 37,500 shares of Class A Common Stock by and
between PHC, Inc., and National Securities Corporation dated July 5,
1999. (Filed as exhibit 4.32 to the Company's report on Form 10-KSB
dated October 13, 1999. Commission file number 0-22916).
4.9 Common Stock Purchase Warrant by and between PHC, Inc. and Heller
Healthcare Finance, Inc. for 60,000 shares of Class A Common Stock.
(Filed as exhibit 4.37 to the Company's report on Form 10-KSB, filed
with the Securities and Exchange Commission on September 29, 2000.
Commission file number 0-22916).
4.10 Equity Purchase Warrant to purchase 1% equity in Behavioral Health
Online by and between PHC, Inc., and Heller Healthcare Finance dated
March 16, 1998. (Filed as exhibit 4.38 to the Company's quarterly
report on Form 10-QSB, filed with the Securities and Exchange
Commission on November 14, 2000. Commission file number 0-22916).
4.11 Warrant Agreement issued to Marshall Sterman to purchase 10,000 Class
A Common shares dated April 15, 2001. (Filed as exhibit 4.41 to the
Company's report on Form 10-QSB dated May 14, 2001. Commission file
number 0-22916).
4.12 Equity Purchase Warrant to purchase 1% equity in Behavioral Health
Online by and between PHC, Inc., and Heller Healthcare Finance dated
December 18, 2000. (Filed as exhibit 4.36 to the Company's report on
Form 10-KSB dated September 25, 2001. Commission file number 0-22916).
- 33 -
Exhibit No. Description
4.13 Form of Subscription Agreement and Warrant. (Filed as exhibit 4.22 to
the Company's report on Form 8-K filed with the Securities and
Exchange commission on May 13, 2004. Commission file number 0-22916).
5.1 Opinion of Arent Fox PLLC. (filed as exhibit 5.1 to the Company's Form
S-3 filed with the Securities and Exchange commission on July 6, 2004.
Commission file number 333-117146).
10.1 Deed of Trust Note of Mount Regis Center Limited Partnership in favor
of Douglas M. Roberts, dated July 28, 1987, in the amount of $560,000,
guaranteed by PHC, Inc., with Deed of Trust executed by Mount Regis
Center, Limited Partnership of even date. (Filed as exhibit 10.33 to
Form SB-2 dated March 2, 1994. Commission file number 333-71418).
10.2 Assignment and Assumption of Limited Partnership Interest, by and
between PHC of Virginia Inc. and each assignor dated as of June 30,
1994. (Filed as exhibit 10.57 to Form 10-KSB on September 28, 1994.
Commission file #0-22916).
10.3 Copy of Note of Bruce A. Shear in favor of Steven J. Shear, dated
December 1988, in the amount of $195,695; Pledge Agreement by and
between Bruce A. Shear and Steven J. Shear, dated December 15, 1988;
Stock Purchase Agreement by and between Steven J. Shear and Bruce A.
Shear, dated December 1, 1988. (Filed as exhibit 10.52 to the
Company's Registration Statement on Form SB-2 dated March 2, 1994.
Commission file number 333-71418).
10.4 Unconditional Guaranty of Payment and performance by and between PHC,
Inc. in favor of HCFP. (Filed as exhibit 10.112 to the Company's
quarterly report on Form 10-QSB, filed with the Securities and
Exchange Commission on February 25, 1997. Commission file number
0-22916).
10.5 Agreement between Family Independence Agency and Harbor Oaks Hospital
effective January 1, 1997. (Filed as exhibit 10.122 to the Company's
report on Form 10-KSB, with the Securities and Exchange Commission on
October 14, 1997. Commission file number 0-22916).
10.6 Master Contract by and between Family Independence Agency and Harbor
Oaks Hospital effective January 1, 1997. (Filed as exhibit 10.123 to
the Company's report on Form 10-KSB, filed with the Securities and
Exchange Commission on October 14, 1997. Commission file number
0-22916).
10.7 Financial Advisory Agreement, Indemnification Agreement and Warrant by
and between Brean Murray & Company and PHC, Inc. dated 06/01/97.
(Filed as exhibit 10.125 to the Company's report on Form 10-KSB, filed
with the Securities and Exchange Commission on October 14, 1997.
Commission file number 0-22916).
10.8 Loan and Security Agreement by and among HCFP Funding, Inc., and PHC
of Michigan, Inc., PHC of Utah, Inc., PHC of Virginia, Inc., PHC of
Rhode Island, Inc., and Pioneer Counseling of Virginia, Inc. dated as
of February 18, 1998. (Filed as exhibit 10.139 to the Company's
Registration Statement on Form SB-2 dated July 24, 1998. Commission
file number 333-59927)
10.9 Credit Line Deed of Trust by and between PHC of Virginia, Inc., and
HCFP Funding II, Inc. dated July 1998. (Filed as exhibit 10.140 to the
Company's Registration Statement on Form SB-2 dated July 24, 1998.
Commission file number 333-59927).
10.10 Promissory Note for $50,000 dated May 18, 1998 by and between PHC,
Inc. and Tot Care, Inc. (Filed as exhibit 10.142 to the Company's
Registration Statement on Form SB-2 dated July 24, 1998. Commission
file number 333-59927).
10.11 Promissory Note for $50,000 dated June 9, 1998 by and between PHC,
Inc. and Tot Care, Inc. (Filed as exhibit 10.143 to the Company's
Registration Statement on Form SB-2 dated July 24, 1998. Commission
file number 333-59927).
10.12 Amendment No. 1 to Loan and Security Agreement in the amount of
$4,000,000 by and among HCFP Funding, Inc., and PHC of Michigan, Inc.,
PHC of Utah, Inc., PHC of Virginia, Inc., PHC of Rhode Island, Inc.,
and Pioneer Counseling of Virginia, Inc. dated as of February 18,
1998. (Filed as exhibit 10.57 to the Company's report on Form 10-KSB
dated October 13, 1998. Commission file number 0-22916).
- 34 -
Exhibit No. Description
10.13 Financial Advisory and Consultant Agreement by and between National
Securities Corporation and PHC, Inc. dated 01/05/99 (Filed as exhibit
10.61 to the Company's report on Form 10-QSB dated February 12, 1999.
Commission file number 0-22916).
10.14 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 10.70 to the Company's
report on Form 10-QSB filed with the Securities and Exchange
Commission on May 11, 2000. Commission file 0-22916).
10.15 Promissory Note for $532,000 dated May 30, 2000 by and between PHC,
Inc. and Irwin J. Mansdorf, Ph.D. (Filed as exhibit 10.76 to the
Company's report on Form 10-KSB, filed with the Securities and
Exchange Commission on September 29, 2000. Commission file number
0-22916).
10.16 Promissory Note for $168,000 dated May 30, 2000 by and between PHC,
Inc. and Yakov Burstein, Ph.D. (Filed as exhibit 10.77 to the
Company's report on Form 10-KSB, filed with the Securities and
Exchange Commission on September 29, 2000. Commission file number
0-22916).
10.17 Settlement Agreement and Mutual Releases by and between PHC, Inc. and
Yakov Burstein, Ph.D. and Irwin J. Mansdorf, Ph.D. dated May 30, 2000.
(Filed as exhibit 10.78 to the Company's report on Form 10-KSB, filed
with the Securities and Exchange Commission on September 29, 2000.
Commission file number 0-22916).
10.18 Amendment number 2 to Loan and Security Agreement originally dated
February 18, 1998 by and among PHC of Utah, Inc., PHC of Virginia,
Inc. and PHC of Michigan, Inc. and Heller Healthcare Finance, Inc. in
the amount of $3,000,000 amended as of May 24, 2001. (Filed as exhibit
10.46 to the Company's report on Form 10-KSB dated September 25, 2001.
Commission file number 0-22916).
10.19 Amendment Number 3 dated December 6, 2001 to Loan and Security
Agreement dated February 18, 1998 by and between PHC of Michigan,
Inc., PHC of Utah, Inc., and PHC of Virginia, Inc. and Heller
Healthcare Finance, Inc. providing collateral for the Loan and
Security Agreement in the amount of $3,000,000. (Filed as exhibit
10.50 to the Company's quarterly report on Form 10-QSB, filed with the
Securities and Exchange Commission on February 12, 2002. Commission
file number 0-22916).
10.20 Consolidating Amended and Restated Secured Term Note in the amount of
$2,575,542 dated December 6, 2001 by and between PHC of Michigan, Inc.
and Heller Healthcare Finance, Inc. (Filed as exhibit 10.51 to the
Company's quarterly report on Form 10-QSB, filed with the Securities
and Exchange Commission on February 12, 2002. Commission file number
0-22916).
10.21 Amended and Restated Revolving Credit Note in the amount of
$3,000,000 dated December 6, 2001 by and between PHC of Michigan,
Inc., PHC of Utah, Inc. and PHC of Virginia, Inc. and Heller
Healthcare Finance, Inc. (Filed as exhibit 10.52 to the Company's
quarterly report on Form 10-QSB, filed with the Securities and
Exchange Commission on February 12, 2002. Commission file number
0-22916).
10.22 Amended and Restated Consolidated Mortgage Note in the amount of
$5,688,598 dated December 6, 2001 by and between PHC of Michigan, Inc.
and Heller Healthcare Finance, Inc. (Filed as exhibit 10.53 to the
Company's quarterly report on Form 10-QSB, filed with the Securities
and Exchange Commission on February 12, 2002. Commission file number
0-22916).
10.23 Third Amended and Restated Cross-Collateralization and Cross-Default
Agreement dated December 6, 2001 by and between PHC, Inc., PHC of
Michigan, Inc., PHC of Utah, Inc. and PHC of Virginia, Inc. and Heller
Healthcare Finance, Inc. (Filed as exhibit 10.54 to the Company's
quarterly report on Form 10-QSB, filed with the Securities and
Exchange Commission on February 12, 2002. Commission file number
0-22916).
10.24 The Company's 1993 Stock Purchase and Option Plan, as amended
December 2002. (Filed as exhibit 10.34 to the Company's report on Form
S-8 dated January 8, 2003. Commission file number 333-102402).
- 35 -
Exhibit No. Description
10.25 The Company's 1995 Non-Employee Director Stock Option Plan, as amended
December 2002. (Filed as exhibit 10.35 to the Company's report on Form
S-8 dated January 8, 2003. Commission file number 333-102402).
10.26 The Company's 1995 Employee Stock Purchase Plan, as amended December
2002. (Filed as exhibit 10.36 to the Company's report on Form S-8
dated January 8, 2003. Commission file number 333-102402).
10.27 First Amended Consolidating Amended and Restated Secured Term Note by
and between PHC of Michigan, Inc. and Heller Healthcare Finance, Inc.
(Filed as exhibit 10.26 on form 10-KSB, filed with the Securities and
Exchange Commission on September 19, 2003. Commission file number
0-22916).
10.28 Membership Purchase Agreement between PHC, Inc. and Pivotal Research
Centers, LLC and its Sellers Louis C. Kirby, Carol A. Colombo and
Anthony A. Bonacci dated April 30, 2004. (Filed as exhibit 10.27 to
the Company's report on Form 8-K filed with the Securities and
Exchange Commission on May 13, 2004. Commission file number 0-22916).
10.29 Pledge Agreement entered into April 30, 2004 by and between PHC, Inc.
and Louis C. Kirby, Carol A. Colombo and Anthony A. Bonacci. (Filed as
exhibit 10.28 to the Company's report on Form 8-K filed with the
Securities and Exchange Commission on May 13, 2004. Commission file
number 0-22916).
10.30 Security Agreement entered into April 30, 2004 by and between PHC,
Inc. and Louis C. Kirby, Carol A. Colombo and Anthony A. Bonacci.
(Filed as exhibit 10.29 to the Company's report on Form 8-K filed with
the Securities and Exchange Commission on May 13, 2004. Commission
file number 0-22916).
10.31 Secured Promissory Note dated April 30, 2004 in the amount of
$1,000,000 by PHC, Inc. in favor of Louis C. Kirby, Carol A. Colombo
and Anthony A. Bonacci (Note A). (Filed as exhibit 10.30 to the
Company's report on Form 8-K filed with the Securities and Exchange
Commission on May 13, 2004. Commission file number 0-22916).
10.32 Secured Promissory Note dated April 30, 2004 in the amount of
$500,000 by PHC, Inc. in favor of Louis C. Kirby, Carol A. Colombo and
Anthony A. Bonacci (Note B). (Filed as exhibit 10.31 to the Company's
report on Form 8-K filed with the Securities and Exchange Commission
on May 13, 2004. Commission file number 0-22916).
10.33 Secured Promissory Note dated April 30, 2004 in the amount of
$1,000,000 by PHC, Inc. in favor of Louis C. Kirby, Carol A. Colombo
and Anthony A. Bonacci (Note C). (Filed as exhibit 10.32 to the
Company's report on Form 8-K filed with the Securities and Exchange
Commission on May 13, 2004. Commission file number 0-22916).
10.34 Kirby Employment and Non-Compete Agreement. (Filed as exhibit 10.33
to the Company's report on Form 8-K filed with the Securities and
Exchange Commission on May 13, 2004. Commission file number 0-22916).
10.35 Colombo Employment and Non-Compete Agreement. (Filed as exhibit 10.34
to the Company's report on Form 8-K filed with the Securities and
Exchange Commission on May 13, 2004. Commission file number 0-22916).
10.36 First Amendment to Membership Purchase Agreement and Colombo
Employment Agreement and Note C. (Filed as exhibit 10.35 the Company's
report on Form 8-K filed with the Securities and Exchange Commission
on May 13, 2004. Commission file number 0-22916).
10.37 Subscription agreement entered into September 20, 2004 by and between
PHC, Inc. and Sandor Capital Master Fund, LP, together with the
registration rights agreement and the form of certificate of
designation. (Filed as exhibit 10.37 to the Company's report on Form
8-K filed with the Securities and Exchange Commission on September 23,
2004. Commission file number 0-22916).
21.1 List of Subsidiaries.
*23.1 Consent of BDO Seidman, LLP.
*23.2 Consent of Woods & Dwyer P.L.C., independent auditors.
23.4 Consent of Arent Fox PLLC. Included in exhibit 5.1. (filed as exhibit
23.4 to the Company's Form S-3 filed with the Securities and Exchange
commission on July 6, 2004. Commission file number 333-117146).
- 36 -
Exhibit No. Description
24.1 Power of Attorney: included on signature page. (filed as exhibit 24.1
to the Company's Form S-3 filed with the Securities and Exchange
commission on July 6, 2004. Commission file number 333-117146).
* Indicates exhibits filed with this registration statement
Item 17. Undertakings.
Registrant undertakes that it will:
1. file, during any period in which it offers or sells securities, a
post-effective amendment to the registration statement to
i. include any prospectus required by section 10(a)(3) of the Securities
Act;
ii. reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement;
iii. include any additional or changed material information on the plan of
distribution.
2. for determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering; and
3. file a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
- 37 -
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Peabody, State of Massachusetts.
PHC, INC.
Date: October 7, 2004 By: /s/ Bruce A Shear
________________
Bruce A. Shear
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Bruce A. Shear President, Chief Executive October 7, 2004
_________________________ Officer and Director
Bruce A. Shear (principal executive officer)
/s/ Paula C. Wurts Controller and Treasurer October 7, 2004
_________________________ (principal financial and
Paula C. Wurts accounting officer)
/s/ Gerald M. Perlow* Director October 7, 2004
_________________________
Gerald M. Perlow
/s/ Donald E. Robar* Director October 7, 2004
_________________________
Donald E. Robar
/s/ Howard Phillips* Director October 7, 2004
_________________________
Howard Phillips
/s/ William F. Grieco* Director October 7, 2004
_________________________
William F. Grieco
/s/ David E. Dangerfield* Director October 7, 2004
_________________________
David E. Dangerfield
* Signed by Bruce A. Shear pursuant to power of attorney previously filed.
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