<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission File Number 0001087216
Alliance HealthCard, Inc.
(Exact name of registrant as specified in its charter)
GEORGIA 58-2445301
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3500 Parkway Lane, Suite 310, Norcross, GA 30092
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (770) 734-9255
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter periods 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
---
Indicate the number of shares outstanding of the Registrant's common stock as of
the latest practicable date.
Class Outstanding at May 12, 2000
----- ---------------------------
Common Stock, $.001 par value 1,099,800
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INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of March 31, 2000 and September 30, 1999 3
Condensed Statements of Operations for the Three Months Ended and the
Six Months Ended March 31, 2000 and 1999 and the Period From
Inception (September 30, 1998) Through March 31, 2000 4
Condensed Statements of Cash Flows for the Six Months Ended March 31,
2000 and 1999 and the Period From Inception (September 30, 1998) Through
March 31, 2000 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 7
Item 3. Quantitative and Qualitative Disclosure of Market Risk 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
</TABLE>
2
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Alliance HealthCard, Inc.
(A Development Stage Company)
Condensed Balance Sheets
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
--------------- ---------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 112,460 $ 532,782
Accounts receivable 4,771 -
Prepaid expenses and other current assets 20,341 2,277
--------------- ---------------
Total current assets 137,572 535,059
Furniture and equipment, net 11,953 9,176
Other assets 6,357 -
--------------- ---------------
Total assets $ 155,882 $ 544,235
=============== ===============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 13,126 $ 27,259
Accrued compensation and benefits 56,003 51,436
Other accrued liabilities 15,003 -
Current portion of capital lease
Obligations 3,120 3,132
--------------- ---------------
Total current liabilities 87,252 81,827
Capital lease obligation 3,659 4,523
Commitments
Stockholders' equity:
Common stock, $.001 par value;
10,000,000 shares authorized;
1,099,800 shares issued and
outstanding at March 31, 2000
and September 30, 1999 1,100 1,100
Additional paid-in-capital 1,014,010 1,014,010
Deficit accumulated during
development stage (950,139) (557,225)
--------------- ---------------
Total stockholders' equity 64,971 457,885
--------------- ---------------
Total liabilities and stockholders'
Equity $ 155,882 $ 544,235
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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Alliance HealthCard, Inc.
(A Development Stage Company)
Condensed Statement of Operations
<TABLE>
<CAPTION>
Period From
Inception
Three Months Ended March 31, Three Months Ended March 31, September 30,
---------------------------- ----------------------------
1998) Through
2000 1999 2000 1999 March 31, 2000
---------- ---------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net revenues $ 2,700 $ - $ 2,700 $ - $ 2,700
Direct costs 25,867 17,040 46,476 17,040 133,500
---------- ---------- ----------- ---------- ----------------
Gross Profit (23,167) (17,040) (43,776) (17,040) (130,800)
Marketing and sales expenses 37,528 - 57,054 - 87,663
General and administrative expenses 165,992 99,120 297,940 108,621 742,319
---------- ---------- ----------- ---------- ----------------
Operating loss (226,687) (116,160) (398,770) (125,661) (960,782)
Interest income, net 2,029 - 5,857 - 10,644
---------- ---------- ----------- ---------- ----------------
Net loss $ (224,658) $ (116,160) $ (392,913) $ (125,661) $ (950,138)
========== ========== =========== ========== ================
Per share data:
Basic loss $ (0.20) $ (0.17) $ (0.36) $ (0.19) $ (1.14)
========== ========== =========== ========== ================
Diluted loss $ (0.20) $ (0.17) $ (0.36) $ (0.19) $ (1.14)
========== ========== =========== ========== ================
Basic and diluted weighted
average shares outstanding 1,099,800 696,933 1,099,800 649,055 829,871
========== ========== =========== ========== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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Alliance HealthCard, Inc.
(A Development Stage Company)
Condensed Statements of Cash Flow
<TABLE>
<CAPTION>
Period From
Inception
(September 30,
Six Months Ended March 31, 1998) Through
--------------------------
2000 1999 March 31, 1999
---------- ---------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (392,913) $ (125,661) $ (950,138)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 2,217 - 4,326
Warrants issued in connection with consulting
services - - 60,200
Changes in assets and liabilities:
Accounts receivable (4,771) - (4,771)
Prepaid expenses and other assets (24,421) (1,459) (26,698)
Accounts payable (14,133) 12,264 13,126
Accrued compensation and benefits 4,567 7,411 56,003
Other accrued liabilities 15,003 - 15,003
---------- ---------- --------------
Net cash used in operating activities (414,451) (107,445) 832,949
---------- ---------- --------------
Cash flows from investing activities:
Capital expenditures (4,994) (1,277) (6,888)
---------- ---------- --------------
Net cash used in investing activities (4,994) (1,277) (6,888)
---------- ---------- --------------
Cash flows from financing activities:
Borrowings from short-term debt - 22,500 22,500
Repayment of short-term debt - - (22,500)
Sale of membership units - 99,892 100,000
Sale of stock and other issuances - - 854,910
Repayment of capital lease obligation (877) - (2,613)
---------- ---------- --------------
Net cash provided by (used in) financing activities (877) 122,392 952,297
---------- ---------- --------------
Net increase (decrease) in cash and cash equivalents (420,322) 13,670 112,460
Cash and cash equivalents, at beginning of year 532,782 - -
---------- ---------- --------------
Cash and cash equivalents, at end of period $ 112,460 $ 13,670 $ 112,460
========== ========== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
Alliance HealthCard, Inc.
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000 and 1999
(Unaudited)
(1) Description of the Business
Alliance HealthCard, Inc. (the "Company") was organized on September 30,
1998 to provide comprehensive health care services through provider
networks at discounts to patients for services not covered by their primary
health insurance. The Company was originally formed as a limited liability
corporation and was reorganized into a Georgia corporation in February
1999. The Company's operations to date have been focused on organizational
and market development activities; therefore, the Company is considered a
development stage company for financial reporting purposes. The Company
filed a Form 10-SB on March 24, 2000 which was accepted by the Securities
and Exchange Commission with an effective date of May 24, 2000.
(2) Significant Accounting Policies
The accompanying financial statements are unaudited and have been prepared
by management of Alliance HealthCard, Inc. (the "Company" in accordance
with the rules and regulations of the Securities and Exchange Commission.
The unaudited financial information furnished herein in the opinion of
management reflects all adjustments, which were of a normal recurring
nature, which are necessary to fairly state the Company's financial
position, the results of its operations and its cash flows. For further
information refer to the financial statements and footnotes thereto
included in the Company's Form 10-SB for the period from inception
(September 30, 1998) through December 31, 1999. Footnote disclosure, which
would substantially duplicate the disclosure contained in those documents,
has been omitted.
Net income (loss) per share is computed in accordance with SFAS No. 128
"Earnings per Share." Basic and diluted net loss per share are the same in
the three and six month periods ended March 31, 2000 and 1999 and the
period from inception (September 30, 1998) through March 31, 2000 because
the Company's potentially dilutive securities are antidilutive in such
periods.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
The Company is a development stage company, which commenced operations in
September 1998. The Company is currently engaged in the business of sales of
membership cards to individuals through agents, brokers, third party
administrators, associations, employers, and direct sales. The card enables
individuals to receive discounts from a network of providers for a wide range of
services in seven major categories: dental, vision, pharmacy, cosmetic surgery,
chiropractic, alternative medicine/health life style and hearing. The Company
has financed its operations to date through the sale of its securities.
Results of Operations
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
The Company is a development stage company and began sales of membership
cards in November 1999. Net revenues for the company increased to $2,700 for the
three months ended March 31, 2000, which represent sales of approximately 185
membership cards.
Gross profit decreased $6,127 to a loss of $23,167 for the three months
ended March 31, 2000 from a loss of $17,040 for the same three months in the
prior year attributable to expenses incurred to continue developing the
Company's provider network.
Marketing and sales expenses increased to $37,528 for the three months
ended March 31, 2000. The Company did not incur any marketing and sales expenses
for the three months ended March 31, 1999. The Company is currently promoting
card sales through agents/brokers, insurance companies, associations, the
internet and direct sales in the United States. Expenses for the three months
ended March 31, 2000 included expenses for sales personnel, trade shows and
marketing collateral.
General and administrative expenses increased to $165,992 for the three
months ended March 31, 2000 from $99,120 in the same prior year period. The
increase is attributable to additional personnel and other expenses incurred to
continue to develop the operations of the Company.
Interest income increased to $2,029 for the three months ended March 31,
2000, due to interest earned from the investment of cash received from the sale
of the Company's unregistered securities in the second and third quarters of
1999.
The Company reported a net loss of $224,658 for the three months ended
March 31, 2000 compared to $116,160 for the same prior year period. The increase
in the net loss is a result of expenses incurred to continue to develop and
implement the infrastructure of the Company for network development, sales and
marketing, and card administration.
Six Months Ended March 31, 2000 Compared to Six Months Ended March 31, 1999
Net revenues for the company increased to $2,700 for the six months ended
March 31, 2000, which represent sales of approximately 185 membership cards.
The Company continues to develop and implement its provider network.
Gross profit decreased $26,736 to a loss of $43,776 for the six months
ended March 31, 2000 from a loss of $17,040 for the same six month period in the
prior year. The decline in gross profit was attributable to the expenses
incurred in developing the network of service providers of the Company.
Marketing and sales expenses increased to $57,054 for the six months ended
March 31, 2000. The Company did not incur any marketing and sales expenses for
the six months ended March 31, 1999. The Company is currently promoting card
sales through agents/brokers, insurance companies, associations, the internet
and direct sales in the United States.
General and administrative expenses increased to $297,940 for the six
months ended March 31, 2000 from $108,621 in the same prior year period. The
increase is primarily attributable to additional personnel expenses incurred to
develop the operations of the Company.
7
<PAGE>
Interest income increased to $5,857 for the six months ended March 31,
2000, due to interest earned from the investment of cash received from the sale
of the Company's unregistered securities in 1999.
The Company reported a net loss of $392,913 for the six months ended March
31, 2000 compared to $125,661 for the same prior year period. The increase in
the net loss is a result of expenses incurred to continue to develop the
infrastructure of the Company for network development, sales and marketing, and
card administration.
Liquidity and Capital Resources
The Company's operations used cash of $414,451 for the six months ended
March 31, 2000. The Company's net working capital was $50,320 during the six
months ended March 31, 2000, from $453,232 at September 30, 1999.
The Company's investing activities used cash of $4,994 for the six months
ended March 31, 2000 for capital expenditures primarily for office furniture in
connection with the increase in additional personnel.
The Company's financing activities used cash of $877 for principal payments
on capital leases for equipment.
The Company's future liquidity and capital requirements will depend upon
numerous factors, including the success of its product offerings and competing
market developments. The Company is a development stage business and has not yet
achieved profitable operations. The Company intends to fund its ongoing
development and operations through a combination of sales and borrowings for the
next twelve months. The Company has a commitment from Suntrust Bank in Atlanta,
Georgia for a line of credit of $400,000 to be secured by personal guaranties by
certain officers of the Company and certain members of the board of directors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has no material exposure to market risk from derivatives or
other financial instruments.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are filed herewith:
(27) Financial Data Schedule
The Company did not file any reports on Form 8-K during the three months ended
March 31, 2000.
8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Alliance HealthCard, Inc.
May 12, 2000 By: /s/ Robert D. Garces
--------------------------------
Robert D. Garces
Chairman and Chief Executive Officer
(Principal Executive Officer)
May 12, 2000 By: /s/ Rita McKeown
--------------------------------
Rita McKeown
Chief Financial Officer
(Principal Financial and Accounting
Officer)
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ALLIANCE HEALTHCARD, INC. FOR THE SIX MONTHS ENDED MARCH
31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-2000 SEP-30-1999
<PERIOD-START> OCT-01-1999 OCT-01-1998
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 112 14
<SECURITIES> 0 0
<RECEIVABLES> 5 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 138 15
<PP&E> 16 1
<DEPRECIATION> (4) 0
<TOTAL-ASSETS> 156 16
<CURRENT-LIABILITIES> 87 20
<BONDS> 0 0
0 0
0 0
<COMMON> 1 1
<OTHER-SE> 64 (27)
<TOTAL-LIABILITY-AND-EQUITY> 65 (26)
<SALES> 3 0
<TOTAL-REVENUES> 3 0
<CGS> 46 17
<TOTAL-COSTS> 46 17
<OTHER-EXPENSES> 355 109
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (393) (126)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (393) (126)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (393) (126)
<EPS-BASIC> (0.36) (0.19)
<EPS-DILUTED> (0.36) (0.19)
</TABLE>
