U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB/A (Mark One) |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999. | | TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ___________ COMMISSION FILE NUMBER 0-22916 PHC, INC. (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER) Massachusetts 04-2601571 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 200 Lake Street, Suite 102, Peabody MA 01960 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) 978-536-2777 (ISSUER'S TELEPHONE NUMBER) - ------------------------------------------------------------------------------- (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X No_ __ APPLICABLE ONLY TO CORPORATE ISSUERS Number of shares outstanding of each class of common equity, as of April 30, 1999: Class A Common Stock 5,530,206 Class B Common Stock 727,210 TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (Check one): Yes______ No X - 1 - PHC, INC. Part I, Item 1 financial statements filed in the Company's 10-QSB for the period ended March 31, 1999, filed with the Securities and Exchange Commission on May 14, 1999, are being amended to reflect the following: 1. The effect of the changes to the financial statements for the period ended June 30, 1998, as amended. a. Increase in general and administrative expenses amounting to approximately $148,000 related to the issuance of warrants to a financial advisor to the Company. b. Increase in dividends related to the beneficial conversion feature of series B convertible preferred stock of approximately $190,000. 2. The effect of changes to the financial statements for the period ended September 30, 1998 as amended. a. Increase in interest expense related to the issuance of warrants with debt, approximately $26,000 for the three months ended September 30, 1998. 3. The effect of changes to the financial statements for the period ended December 31, 1998 as amended. a. Increase in Interest expense related to the issuance of warrants with debt, approximately $26,000 for the three months ended December 31, 1998. b. Increase in Professional fees related to the issuance of warrants with convertible debentures as a finders fee, approximately $43,400 for the three months ended December 31, 1998. c. Increase in interest expense and reduction in intangible assets of approximately $92,000 resulting from the correction of the accounting for price guarantee shares issued to the former owners of BSC d. Decrease in extraordinary income resulting from the reversal of the recognition of part of the gain related to the liquidation of assets of Quality Care Centers of Massachusetts, Inc. that the Company subsequently determined was more appropriate to defer until final resolution of all potential liabilities. 4. Increase Professional fees related to the issuance of warrants with convertible debentures as a finders fee, approximately $31,400 for the three months ended March 31, 1999. - 2 - PART I. FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS PHC INC. AND SUBSIDIARIES (UNAUDITED) CONSOLIDATED BALANCE SHEETS MAR. 31 JUNE 30 1999 1998 ASSETS (as restated) (as restated) __________________________ Current assets: Cash & Cash Equivalents $ 137,949 $ 227,077 Accounts receivable, net of allowance for bad debts of $3,079,521 at Mar. 31, 1999, $3,488,029 at June 30, 1998 6,697,074 7,441,972 Prepaid expenses 322,207 156,695 Other receivables and advances 219,986 127,064 Deferred Income Tax Asset 459,280 515,300 Other Receivables, related party 75,531 64,065 ____________ ___________ Total current assets 7,912,027 8,532,173 Accounts Receivable, noncurrent 640,000 685,000 Other receivables, noncurrent, related party, net of allowance for accounts of $407,000 Mar 31, 1999 and $382,000 June 30, 1998 3,464,745 2,941,402 Other Receivable 115,520 426,195 Property and equipment, net 1,512,119 2,128,273 Deferred income taxes 154,700 154,700 Deferred financing costs, net of amortization of $50,181 at Mar. 31, $18,065 at June 30, 1998 56,927 53,608 Goodwill, net of accumulated amortization of $79,347 at Mar. 31, 1999 $307,707 at June 30, 1998 1,788,625 2,011,613 Other assets 292,198 19,386 ____________ ___________ Total assets $15,936,861 $16,952,350 ____________ ___________ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,540,947 $2,346,213 Notes payable--related parties 267,356 159,496 Current maturities of long term debt 1,292,666 1,107,167 Revolving credit note 1,400,277 1,683,458 Current portion of obligations under capital leases 62,349 67,492 Accrued Payroll, Payroll Taxes and Benefits 325,923 729,194 Accrued expenses and other liabilities 1,255,999 1,004,763 Net current liabilities of discontinued operations 2,641,537 2,641,537 ____________ ___________ Total Current liabilities 9,787,054 9,739,320 ____________ ___________ Long-term debt 1,865,665 2,850,089 Obligations under capital lease 67,787 93,747 Convertible Debentures 500,000 -- ____________ ___________ Total noncurrent liabilities 2,433,452 2,943,836 ____________ ___________ Total liabilities 12,220,506 12,683,156 ____________ ___________ Stockholders' Equity: Preferred stock, $.01 par value; 1,000,000 shares authorized, 864 and shares issued and outstanding Mar. 31, 1999 and June 30, 1998 liquidation preference ($864,000 and $950,000 respectively) 9 10 Class A common stock, $.01par value; 20,000,000 shares authorized, 5,530,206 and 4,935,267 shares issued Mar. 99 and June 98 55,302 49,353 Class B common stock, $.01 par value; 2,000,000 shares authorized, 727,210 and 727,328 issued Mar. 99 and June 98 respectively, into one share of Class A common stock 7,272 7,273 Additional paid-in capital 15,895,723 15,485,895 Treasury stock, 2,776 shares at cost (12,122) (12,122) Accumulated Deficit (12,229,829) (11,261,215) ____________ ___________ Total Stockholders' Equity 3,716,355 4,269,194 ____________ ___________ Total Liabilities and Stockholders' Equity $15,936,861 $16,952,350 ____________ ___________ See Notes to Consolidated Financial Statements - 3 - PHC INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED MARCH 31 MARCH 31 1999 1998 1999 1998 (as restated) (as restated) _____________________________________________________ Revenues: Patient Care, net $4,587,743 $5,362,955 $13,852,546 $15,503,447 Management Fees 122,141 182,290 518,983 644,983 __________ __________ ___________ ___________ Total revenue 4,709,884 5,545,245 14,371,529 16,148,430 __________ __________ ___________ ___________ Operating expenses: Patient care expenses 2,296,160 2,822,708 7,218,008 8,509,056 Provision for doubtful accounts 275,263 537,128 1,419,583 1,536,377 Administrative expenses 1,808,024 2,075,115 5,625,589 6,702,613 __________ __________ ___________ ___________ Total operating expenses 4,379,447 5,434,951 14,263,180 16,748,046 __________ __________ ___________ ___________ Income (loss) from operations 330,437 110,294 108,349 (599,616) __________ __________ ___________ ___________ Interest income 118,258 87,725 357,006 288,323 Other income 19,286 58,960 58,206 180,709 Interest expense (240,612) (336,943) (1,013,046) (935,145) Facility Closing Costs -- -- 304,994) -- HRH Relocation Expense -- -- (36,935) -- __________ __________ ___________ ___________ Total other income (expense) (103,068) (190,258) (939,763) (466,113) __________ __________ ___________ ___________ Income (Loss) before Provision for Taxes 227,369 (79,964) (831,414) (1,065,729) Provision for Income Taxes 43,724 98,309 44,635 105,509 __________ __________ ___________ ___________ Income (loss) from Continuing Operations $ 183,645 $ (178,273) $ (876,049) $(1,171,238) __________ __________ ___________ ___________ Loss from Discontinued Operations -- $ (807,802) -- (1,829,508) __________ __________ ___________ ___________ Net Income (Loss) $ 183,645 (986,075) $ (876,049) $(3,000,746) Dividends (62,547) -- (92,356) -- __________ __________ ___________ ___________ Loss applicable to common shareholders $ 121,098 $ (968,075) $ (968,405) $(3,000,746) __________ __________ ___________ ___________ Basic Earnings (loss) per common share: Income (loss) from continuing operations .02 (.03) (.16) (.23) Loss from discontinued operations -- (.15) -- (.36) Total .02 (.18) (.16) (.58) Basic Weighted average number of shares outstanding 6,182,204 5,431,196 5,910,928 5,090,919 Diluted Earnings (loss) per common share: Income (loss) from continuing operations .02 (.03) (.16) (.23) Loss from discontinued operations -- (.15) -- (.36) Total .02 (.18) (.16) (.58) Diluted Weighted average number of shares outstanding 6,194,456 5,431,196 5,910,928 5,090,919 See Notes to Consolidated Financial Statements - 4 - PHC INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED MARCH 31 1999 1998 (as restated) __________________________ Cash flows from operating activities: Net income (loss) $ (968,405) $(3,000,746) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Non-Cash charge (credit) related to discontinued operations -- 999,121 Depreciation and amortization 249,483 334,066 Compensatory stock options and stock and warrants issued for obligations 174,234 46,131 Changes in: Accounts Receivable 325,224 (710,969) Prepaid expenses and other current assets (165,512) 90,597 Other assets 66,540 (6,932) Accounts payable 194,736 (498,696) Accrued expenses and other liabilities (152,036) 291,201 ___________ ____________ Net cash used in operating activities (275,736) (2,456,227) ___________ ____________ Cash flows from investing activities: Acquisition of property and equipment (150,420) (112,911) Disposition of property, equipment and intangibles 363,104 (13,275) Costs related to business acquisition -- (626,267) Net cash provided by (used in) investing activities 212,684 (752,453) ___________ ____________ Cash flows from financing activities, Revolving debt, net (283,181) -- Other debt activity (165,339) 407,320 Preferred stock dividends paid (92,567) -- Issuance of Common Stock 15,011 2,049,480 Convertible debt 500,000 -- ___________ ____________ Net cash provided by (used in) financing activities (26,076) 2,456,800 ___________ ____________ NET INCREASE (DECREASE) IN CASH (89,128) (751,880) Beginning cash balance 227,077 844,471 ___________ ____________ ENDING CASH BALANCE $ 137,949 $ 92,591 ___________ ____________ SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 802,549 $ 619,523 Income taxes 94,919 82,703 SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES: Conversion of Debt to Common Stock -- 2,710,106 Conversion of Preferred Stock to Common Stock 185,571 500,000 Stock issued for Acquisitions and Earnou Agreement 219,165 614,280 Issuance of Preferred Stock in lieu of cash for Dividends due 44,000 -- See Notes to Consolidated Financial Statements - 5 - 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: December 7, 1999 /s/ Bruce A. Shear President Chief Executive Officer Date: December 7, 1999 /s/ Paula C. Wurts Controller - 6 -