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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 EXCHANGEACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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 X No
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Indicate the number of shares outstanding of the Registrant's common stock as of
the latest practicable date.
Class Outstanding at August 11, 2000
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Common Stock, $.001 par value 1,099,800
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INDEX
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<CAPTION>
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C> <C>
Condensed Balance Sheets as of June 30, 2000 and September 30, 1999 3
Condensed Statements of Operations for the Three Months Ended and the
Nine Months Ended June 30, 2000 and 1999 and the Period From
Inception (September 30, 1998) Through June 30, 2000 4
Condensed Statements of Cash Flows for the Nine Months Ended June 30, 2000
and 1999 and the Period From Inception (September 30, 1998) Through
June 30, 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
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Alliance HealthCard, Inc.
(A Development Stage Company)
Condensed Balance Sheets
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<CAPTION>
June 30, September 30,
2000 1999
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Assets
Current assets:
Cash and cash equivalents $ 17,828 $ 532,782
Accounts receivable, net of allowance for
doubtful accounts of $1,500 in 2000 22,780 -
Prepaid expenses and other current assets 22,390 2,277
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Total current assets 62,998 535,059
Furniture and equipment, net 28,098 9,176
Other assets 6,357 -
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Total assets $ 97,453 $ 544,235
========== ==========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 40,512 $ 27,259
Accrued compensation and benefits 66,009 51,436
Other accrued liabilities 10,051 -
Current portion of capital lease
obligations 3,292 3,132
Line of credit 100,000 -
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Total current liabilities 219,864 81,827
Capital lease obligation 2,739 4,523
Commitments
Stockholders' equity:
Common stock, $.001 par value;
10,000,000 shares authorized;
1,099,800 shares issued and
outstanding at June 30, 2000
and September 30, 1999 1,100 1,100
Additional paid-in-capital 1,014,010 1,014,010
Deficit accumulated during
development stage (1,140,260) (557,225)
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Total stockholders' equity (125,150) 457,885
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Total liabilities and stockholders'
Equity $ 97,453 $ 544,235
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The accompanying notes are an integral part of these financial statements.
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Alliance HealthCard, Inc.
(A Development Stage Company)
Condensed Statement of Operations
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<CAPTION>
Period From
Inception
Three Months Ended June 30, Nine Months Ended June 30, September 30,
--------------------------- -------------------------- 1998) Through
2000 1999 2000 1999 June 30, 2000
----------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Net revenues $ 5,180 $ - $ 7,880 $ - $ 7,880
Direct costs 23,777 21,280 70,253 38,320 157,277
----------- --------- ---------- --------- ----------
Gross Profit (18,597) (21,280) (62,373) (38,320) (149,397)
Marketing and sales
expenses 36,900 439 93,954 439 124,563
General and administrative
expenses 134,463 143,382 432,403 252,003 876,782
----------- --------- ---------- --------- ----------
Operating loss (189,960) (165,101) (588,730) $(290,762) (1,150,742)
Interest, net (162) - 5,696 - 10,482
----------- --------- ---------- --------- ----------
Net loss $ (190,122) $(165,101) $ (583,034) $(290,762) $(1,140,260)
=========== ========= ========== ========= ===========
Per share data:
Basic loss $ (0.17) $ (0.20) $ (0.53) $ (0.41) $ (1.24)
=========== ========= ========== ========= ===========
Diluted loss $ (0.17) $ (0.20) $ (0.53) $ (0.41) $ (1.24)
=========== ========= ========== ========= ===========
Basic and diluted weighted
average shares outstanding 1,099,800 810,542 1,099,800 704,750 917,063
=========== ========= ========== ========= ===========
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The accompanying notes are an integral part of these financial statements.
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Alliance HealthCard, Inc.
(A Development Stage Company)
Condensed Statements of Cash Flow
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<CAPTION>
Period From
Inception
Nine Months Ended June 30, (September 30,
-------------------------- 1998) Through
2000 1999 June 30, 2000
---------- ---------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(583,034) $(290,762) $(1,140,260)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 3,571 - 5,680
Warrants issued in connection with consulting
services - - 60,200
Changes in assets and liabilities:
Accounts receivable (22,780) - (22,780)
Prepaid expenses and other assets (26,470) (2,877) (28,747)
Accounts payable 13,253 2,058 40,512
Accrued compensation and benefits 14,573 24,552 66,009
Other accrued liabilities 10,051 - 10,051
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Net cash used in operating activities (590,836) (267,029) (1,009,335)
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Cash flows from investing activities:
Capital expenditures (22,494) (1,277) (24,387)
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Net cash used in investing activities (22,494) (1,277) (24,387)
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Cash flows from financing activities:
Borrowings from short-term debt 100,000 22,500 122,500
Repayment of short-term debt - (22,500) (22,500)
Sale of membership units - 716,000 100,000
Sale of stock and other issuances - - 854,910
Repayment of capital lease obligation (1,624) - (3,360)
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Net cash provided by financing activities 98,376 716,000 1,051,550
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Net (decrease) increase in cash and cash equivalents (514,954) 447,694 17,828
Cash and cash equivalents, at beginning of year 532,782 - -
--------- --------- -----------
Cash and cash equivalents, at end of period $ 17,828 $ 447,694 $ 17,828
========= ========= ===========
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The accompanying notes are an integral part of these financial statements.
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Alliance HealthCard, Inc.
(A Development Stage Company)
Notes to Financial Statements
June 30, 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 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 nine month periods ended June 30, 2000 and 1999 and the
period from inception (September 30, 1998) through June 30, 2000 because
the Company's potentially dilutive securities are antidilutive in such
periods.
(3) Credit Agreement
On May 17, 2000 the Company entered into a $500,000 credit agreement with
Suntrust Bank in Atlanta, Georgia to be secured by certain Directors of the
Company in exchange for stock warrants. Refer to the Liquidity and Capital
Resources section of Item 2.
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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 and a
line of credit secured on May 17, 2000.
Results of Operations
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
The Company is a development stage company and began sales of membership
cards in November 1999. Net revenues for the company increased to $5,180 for
the three months ended June 30, 2000.
Gross profit increased $2,683 to a loss of $18,597 for the three months
ended June 30, 2000 from a loss of $21,280 for the same three months in the
prior year attributable to expenses incurred to continue expanding the Company's
provider network.
Marketing and sales expenses increased to $36,900 for the three months
ended June 30, 2000 from $439 in the same prior year period. 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 June 30, 2000 included expenses for sales personnel,
trade shows and marketing collateral.
General and administrative expenses decreased to $134,463 for the three
months ended June 30, 2000 from $143,382 in the same prior year period, which is
primarily attributable to a decrease in outside printing expenses.
Interest expense increased to $162 for the three months ended June 30,
2000, due to interest expense incurred on the line of credit effective May 17,
2000.
The Company reported a net loss of $190,122 for the three months ended June
30, 2000 compared to $165,101 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.
Nine Months Ended June 30, 2000 Compared to Nine Months Ended June 30, 1999
Net revenues for the company increased to $7,880 for the nine months ended
June 30, 2000. The Company began sales of membership cards in November 1999 and
continues to expand its provider network.
Gross profit decreased $24,053 to a loss of $62,373 for the nine months
ended June 30, 2000 from a loss of $38,320 for the same nine 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 $93,954 for the nine months ended
June 30, 2000 from $439 in the same prior year period. 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 $432,403 for the nine
months ended June 30, 2000 from $252,003 in the same prior year period. The
increase is primarily attributable to additional personnel expenses incurred to
develop the operations of the Company.
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Interest income, net increased to $5,696 for the nine months ended June 30,
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 $583,035 for the nine months ended June
30, 2000 compared to $290,762 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 $590,836 for the nine months ended
June 30, 2000. The Company's net working capital was ($156,867) during the nine
months ended June 30, 2000, from $453,232 at September 30, 1999.
The Company's investing activities used cash of $22,494 for the nine months
ended June 30, 2000 for capital expenditures for office equipment and furniture
in connection with the in-house card administration function and an increase in
additional personnel.
The Company's financing activities provided cash of $98,376 primarily from
the $500,000 line of credit from Suntrust Bank.
On May 17, 2000 the Company entered into a credit agreement with Suntrust
Bank in Atlanta, Georgia. The agreement provides the Company with a $500,000
working capital facility to be secured by personal guaranties from certain
directors of the Company in exchange for common stock warrants. The credit
agreement matures on March 31, 2001 and bears an interest rate of 9.5% per
annum. Interest only payments will begin on June 17, 2000 and will continue at
monthly time intervals thereafter. A final payment of the unpaid principal
balance plus accrued interest is due and payable on March 31, 2001. The working
capital facility will be used to continue to provide on-going capital to fund
network development, sales and marketing, card administration and general and
administrative expenses.
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 believes that with the
completion of the credit agreement discussed above combined with cash flows from
operations, there will be adequate cash resources to finance continuing
operations and the ongoing development of the Company for the next twelve
months.
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:
(4.1) Loan and Security Agreement, $500,000, working capital
facility, provided by Suntrust Bank, Atlanta, Georgia
(4.2) 2000 Stock Option Plan
(6.4) Form of Non-qualified Stock Option Agreement
(6.5) Form of Incentive Stock Option Agreement
(6.6) Form of Stock Warrant Agreement
(27) Financial Data Schedule
The Company filed a report on Form 8-K on August 10, 2000 disclosing a change in
auditors.
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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.
August 10, 2000 By: /s/ Robert D. Garces
--------------------
Robert D. Garces
Chairman and Chief Executive Officer
(Principal Executive Officer)
August 10, 2000 By: /s/ Rita McKeown
----------------
Rita McKeown
Chief Financial Officer
(Principal Financial and Accounting Officer)
