U. S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB/A-2 (Mark One) |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED December 31, 1996. |_| TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ___________ Commission file number 0-23524 PHC, INC. (Exact name of small business issuer as specified in its charter) Massachusetts 04-2601571 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 200 Lake Street, Suite 102, Peabody MA 01960 Address of principal executive offices) (Zip Code) 508-536-2777 (Issuer's telephone number) (Former Name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _____ No__X___ In a no action letter, the U. S. Securities and Exchange Commission indicated that the company's failure to file a report on Form 8-K in connection with its acquisition of Behavioral Stress Centers, Inc. in November 1, 1996 will not preclude stockholders from selling under Rule 144. Applicable only to corporate issuers Number of shares outstanding of each class of common equity, as of April 30, 1997: Class A Common Stock 2,578,052 Class B Common Stock 790,628 Class C Common Stock 199,816 Transitional Small Business Disclosure Format (Check one): Yes No X The Financial Statements as orginally filed have been adjusted to properly account for warrants issued in connection with financing and services rendered. PART I. FINANCIAL INFORMATION PHC INC. AND SUBSIDIARIES Item 1 Financial Statements CONSOLIDATED BALANCE SHEETS Dec. 31 June 30 1996 1996 ASSETS (Unaudited) Current assets: Cash........................................... 290,253 $293,515 Accounts receivable, net of allowance for bad debts of 1,517,586 at Dec. 31, 1996 and 1,492,983 at June 30, 1996........ 10,529,186 8,866,065 Prepaid expenses............................ 698,279 259,893 Other receivables and advances.............. 2,806,155 66,513 Deferred Income Tax Asset................... 515,300 515,300 ---------- ---------- Total current assets...................... 14,839,173 10,001,286 Accounts Receivable, Non Current............... 740,000 740,000 Loan Receivable................................ 112,805 113,805 Property and equipment, net.................... 7,926,515 7,884,063 Deferred income taxes.......................... 154,700 154,700 Deferred financing costs, net of amortization................................... 837,931 702,948 Goodwill, net of accumulated amortization...... 905,872 709,573 Other assets................................... 639,081 454,160 Net assets of discontinued operation........... 1,394 56,682 ---------- ---------- Total.......................................... 26,157,471 20,817,217 ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............................. 3,996,476 3,127,052 Notes payable--related parties............... 51,600 56,600 Current maturities of long term debt......... 1,104,875 403,894 Current portion of obligations under capital leases....................................... 113,374 88,052 Accrued and withheld taxes................... 49,048 -0- Accrued payroll, payroll taxes and benefits..................................... 555,790 715,515 Accrued expenses and other liabilities....... 421,769 738,784 Deferred revenue............................. --- --- ---------- ---------- Total Current liabilities................. 6,292,932 5,129,897 ---------- ---------- Long-term debt................................. 8,427,592 7,754,262 Obligations under capita1 lease................ 1,593,148 1,468,475 Notes payable related parties.................. 31,596 47,394 7% Convertible Debentures (3,125,000 les discount 546,875).............................. 2,578,125 ---- ---------- ---------- Total noncurrent liabilities................. 12,630,461 9,270,131 ---------- ---------- Total liabilities............................ 18,923,393 14,400,028 ----------- ---------- Stockholders' Equity: Preferred stock, $.01 par value; 1,000,000 shares authorized, none issued................ --- ---- Class A common stock, $.01 value; 10,000,000 shares authorized, 2,493,552 and 2,293,568 issued December and June 1996................. 24,936 22,936 Class B common stock, $.01 par value; 2,000,000 shares authorized, 790,628 and 812,127 shares issued Dec. and June, 1996, convertible into one share of Class A common stock........ 7,906 8,122 Class C common stock, $.01 par value; 200,000 shares authorized same as above and 199,816 shares issued December and June, 1996.......... 1,998 1,998 Additional paid-in capital..................... 8,889,408 8,078,383 Notes receivable related to purchase of 31,000 shares of Class A common stock................. (63,266) (63,928) Accumulated Deficit............................ (1,626,904) (1,630,322) ---------- ---------- Total Stockholders' Equity.................... 7,234,078 6,417,189 ---------- ---------- Total......................................... 26,157,471 $20,817,217 ---------- ---------- See Notes to Consolidated Financial Statements PHC INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Six Months Ended December 31 December 31 1996 1995 1996 1995 Revenues: Patient Care, net .............. $6,472,204 $4,875,755 12,257,060 $9,368,635 Management Fees................. 270,731 64,688 403,935 101,245 ---------- ---------- --------- ---------- Total revenue............... 6,742,935 4,940,443 12,660,995 9,469,880 ---------- ---------- ---------- ---------- Operating expenses: Patient care expenses........... 3,368,222 3,015,538 6,425,116 5,616,081 Administrative expenses......... 3,022,738 1,971,316 5,492,182 3,622,866 Contract expenses............... 70,005 30,365 139,898 62,002 ---------- ---------- ---------- ---------- Total operating expenses... 6,460,965 5,017,219 12,057,196 9,300,949 ---------- ---------- --------- ---------- Income (loss) from operations..... 281,970 (76,776) 603,799 168,931 ---------- ---------- --------- ---------- Interest income................. 30,681 3,799 33,331 6,562 Startup Cost Nursing Facility... --- (128,313) --- (128,313) Other income (expense).......... 129,475 45,716 210,939 95,462 Finance Cost.................... (120,000) --- (120,000) -- Interest expense................ (464,321) (221,726) (759,665) (369,724) Gain (loss) from operations held for sale...................... 37,202 18,650 36,478 17,683 ---------- ---------- ---------- ---------- Total other income (expense). (386,963) (281,874) (598,917) (378,330) ---------- ---------- --------- ---------- Income (loss) before Provision for Taxes.............................. (104,993) (358,650) 4,882 (209,399) Provision for Income Taxes......... (42,669) (54,378) 1.464 --- ---------- ---------- ---------- ---------- NET INCOME (LOSS)................ $(62,324) $(304,272) $ 3,418 $ (209,399) ---------- ---------- ---------- ---------- Net Income (Loss) per share........ (.02) (.13) --- (.09) Weighted average number of shares outstanding............ 3,183,908 2,433,588 3,175,775 2,419,246 See Notes to Consolidated Financial Statements PHC INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Six Months Ended December 31 1996 1995 Cash flows from operating activities: Net income............................ $ 3,418 $(209,399) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization......... 292,385 216,668 Increase in accounts receivable....... (2,374,540) (1,564,093) Compensaton Stock Options & stock warrants issued for obligations....... 125,000 --- Increase in prepaid expenses and other current assets........................ (438,386) (78,576) Decrease in other assets.............. 133,804 40,102 Decrease in net assets of operation held for sale......................... 55,288 107,371 Increase in accounts payable......... 524,622 740,269 Increase in accrued and withheld taxes................................. 16,736 16,224 Increase (decrease) in accrued expenses and other liabilities................ (374,026) 134,130 ----------- ---------- Net cash used in operating activities............................... (2,035,699) (597,304) ----------- ---------- Cash flows from investing activities: Acquisition of property and equipment.............................. (293,866) (1,125,862) Costs related to business acquisition........................... (2,718,201) (575,000) ----------- --------- Net cash used in investing activities... (3,012,067) (1,700,862) ----------- ---------- Cash flows from financing activities, Issuance of Common Stock.............. 688,471 --- Net debt activity..................... 1,777,908 1,771,473 Convertible debt...................... 2,578,125 --- ----------- --------- Net cash provided by financing activities............................... 5,044,504 1,771,473 ----------- ---------- NET INCREASE (DECREASE) IN CASH........... (3,262) (526,693) Beginning cash balance.................... 293,515 586,738 ----------- ---------- ENDING CASH BALANCE....................... 290,253 $60,045 ----------- ---------- See Notes to Consolidated Financial Statements Signatures In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PHC, Inc. Registrant Date: June 10, 1997 /s/ Bruce A. Shear Bruce A. Shear President Chief Executive Officer Date: June 10, 1997 /s/ Paula C. Wurts Paula C. Wurts Controller Assistant Treasurer