U.S. 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 quarter ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-14189
INTERWEST HOME MEDICAL, INC.
(Name of Small Business Issuer as specified in its charter)
Utah 87-0402042
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
235 East 6100 South, Salt Lake City, UT 84107
(Address of principal executive offices)
Registrant's telephone no., including area code: (801) 261-5100
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
No Par Value Common Stock
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 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 [ ].
Common Stock outstanding at March 31, 1996 - 3,298,287 shares of no par value
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
1
<PAGE>
FORM 10-QSB
FINANCIAL STATEMENTS AND SCHEDULES
INTERWEST HOME MEDICAL, INC.
For the Quarter Ended March 31, 1996
The following financial statements and schedules of the registrant and its
consolidated subsidiaries are submitted herewith:
PART I - FINANCIAL INFORMATION
Page of
Form 10-Q
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet-- March 31, 1996 . . . . 3
Condensed Consolidated Statements of Income--for the six months
and three months ended March 31, 1996 and 1995 . . . . 5
Condensed Consolidated Statements of Cash Flows--for the
six months ended March 31, 1996 and 1995 . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements. . . . . 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . 10
PART II - OTHER INFORMATION
Page
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6(a).Exhibits 12
Item 6(b).Reports on Form 8-K 12
2
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Balance Sheet
March 31, 1996
Assets 1996
Current assets:
Cash and cash equivalents $ 328,440
Marketable Securities 47,700
Accounts receivable (net of allowance for
doubtful accounts of $293,818) 4,608,556
Current portion of long-term receivable 2,179
Inventory 2,251,949
Current deferred tax asset 104,000
Deposits and prepaid expense 83,337
--------------
Total current assets 7,426,161
Note receivable 497,684
Investment in undeveloped real estate 332,234
Investment in office buildings (net of
accumulated depreciation of $150,947) 528,604
Property and equipment - net 2,607,340
Intangible assets (net of accumulated
amortization of $92,670) 1,799,912
Other assets 91,800
--------------
$13,283,735
==============
3
<PAGE>
Liabilities and Stockholders' Equity 1996
Current liabilities:
Checks written in excess of cash in bank $ 487,684
Current portion of long-term debt 593,669
Notes payable 2,651,157
Accounts payable 1,153,217
Accrued expenses 391,659
Income taxes payable 14,110
--------------
Total current liabilities 5,291,496
Deferred income taxes 263,000
Long-term debt 2,021,049
--------------
Total liabilities 7,575,545
Commitments and contingencies -
Stockholders' equity:
Preferred stock, $.01 par value,
10,000,000 shares authorized, 300,000
shares issued and outstanding 3,000
Common stock, no par value, 50,000,000 shares
authorized, 3,283,941 shares issued
and outstanding 1,894,002
Additional paid-in capital 447,000
Retained earnings 3,364,188
--------------
Total stockholders' equity 5,708,190
--------------
$13,283,735
==============
4
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Statement of Income
<TABLE>
Six months ended March 31, Three months ended March 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue:
Net sales $5,713,417 4,214,400 2,802,248 2,132,981
Net rental income 3,538,730 2,501,196 1,884,224 1,262,273
---------- --------- --------- ---------
Total revenue 9,252,147 6,715,596 4,686,472 3,395,254
Cost of sales and rental 3,700,578 2,570,476 1,854,926 1,255,832
---------- --------- --------- ---------
Gross profit 5,551,569 4,145,120 2,831,546 2,139,422
Operating expenses 4,914,568 3,537,887 2,447,523 1,855,750
---------- --------- --------- ---------
Income from operations 637,001 607,233 384,023 283,672
Other income (expense):
Interest expense (236,538) (153,673) (154,856) (85,627)
Interest income 28,013 3,693 16,356 1,194
Other (13,675) (7,047) (13,200) (4,067)
---------- --------- --------- ---------
Income before taxes 414,801 450,206 232,323 195,172
Income taxes 45,900 161,946 17,400 68,313
---------- --------- --------- ----------
Net income $ 368,901 288,260 214,923 126,859
========== ========= ========= ==========
Net income per share $0.11 0.13 0.07 0.05
Average number of shares ===== ===== ===== =====
outstanding 3,301,000 2,218,000 3,301,000 2,432,000
========= ========= ========= =========
</TABLE>
5
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Statement of Cash Flows
Six Months Ended March 31, 1996 and 1995
Cash flows from operating activities: 1996 1995
Reconciliation of net income to net cash
provided by operating activities:
Net income 368,901 288,260
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 929,169 206,882
Bad debt expense 16,816 2,009
Loss from sale of equipment - 2,522
(Increase) decrease in:
Accounts receivable (684,507) (375,472)
Inventories (277,022) (29,108)
Prepaid expenses (42,620) (13,989)
Other assets (16,881) (14,343)
Intangible assets 1,808 (80,466)
Increase (decrease) in:
Checks written in excess of
cash in bank 241,021 257,432
Accounts payable (65,578) (64,227)
Accrued expenses 56,350 4,055
Income tax payable (124,766) 41,153
--------- ---------
Net cash provided by
operating activities 402,691 224,708
--------- ---------
Cash flows from investment activities:
Collection of notes receivable 1,084 -
Cash used in acquisition (6,000) -
Capital expenditures (925,102) (353,963)
Current portion of long-term receiva 420,000 -
--------- ---------
Net cash used in
investing activities (510,018) (353,963)
6
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Statement of Cash Flows - Continued
Six Months Ended March 31, 1996 and 1995
1996 1995
Cash flows from financing activities:
Net proceeds from notes payable 147,738 256,446
Principle payments on long-term debt (290,333) (102,241)
--------- ---------
Net cash provided from
financing activities (142,595) 154,205
--------- ---------
Net (decrease) increase
in cash (249,922) 24,950
Cash, beginning of period 578,362 39,102
--------- ---------
Cash, end of period $ 328,440 64,052
========= =========
Supplemental schedule of non-cash investing and financing activities
On March 1, 1995, the Company acquired assets from a company in Colorado
and began operating at this location. The assets purchased consisted of the
following:
Accounts receivable $ 52,592
Inventory 5,000
Capital equipment 144,335
Intangible assets 204,073
----------
Net assets purchased 406,000
Less amount financed with debt 400,000
----------
Net cash investment $ 6,000
==========
7
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Statement of Cash Flows - Continued
Six Months Ended March 31, 1996 and 1995
Supplemental schedule of non-cash investing and financing activities - cont.
On January 1, 1995 the Company acquired assets and assumed certain
liabilities from a company in Salt Lake City, Utah and began operating at this
location. The net assets purchased consisted of the following:
Accounts receivable $ 59,911
Inventory 152,227
Intangible assets 330,059
Accounts payable (69,281)
Accrued expenses (22,916)
----------
Net assets purchased 450,000
Less amount financed with debt 450,000
----------
Net cash investment $ -
==========
On February 22, 1995, Beacon Financial, Inc. acquired Interwest Medical
in a merger transaction. For accounting purposes the merger transaction was
treated as a reverse merger whereby Interwest Medical is deemed to be the
acquiring and surviving entity of the acquisition transaction. Beacon issued
1,952,968 shares of its common stock for 100% of Interwest's common stock. The
net assets acquired through the combination are as follows:
Marketable securities $ 47,700
Notes receivable 201,962
Prepaid expenses 29,591
Undeveloped real estate investments 673,176
Office buildings 547,881
Property and equipment 5,150
Accounts payable (11,480)
Long-term debt (25,269)
Common stock (1,802,882)
-----------
Net cash received $ 334,171
===========
8
<PAGE>
INTERWEST HOME MEDICAL, INC.
Notes to Condensed Consolidated Financial Statements
(1) The consolidated unaudited financial statements include the accounts of
Interwest Home Medical, Inc. and include all adjustments (consisting of
normal recurring items) which are, in the opinion of management,
necessary to present fairly the financial position as of March 31, 1996
and the results of operations and changes in financial position of the
six month periods ended March 31, 1996 and 1995. The results of
operations for the six months ended March 31, 1996 and 1995 are not
necessarily indicative of the results to be expected for the entire year.
(2) Income per common share is based on the weighted average number of shares
outstanding during the period.
(3) On November 30, 1995 the Company completed a reverse stock split whereby
each shareholder received one share of common stock for each four shares
of common stock held. The consolidated financial statements have been
prepared giving effect to the 1 - for - 4 reverse stock split.
9
<PAGE>
PART 1 - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Prior to February 22, 1995, the Company (then named Beacon Financial,
Inc.) was primarily engaged in the real estate industry. The Company owned,
and continues to own, several undeveloped parcels of real property which it
intends to develop or sell. It also owns two small office buildings. On
February 22, 1995, the Company acquired Interwest Medical Equipment
Distributors, Inc. ("IMED") in a merger transaction. As a result of the
merger, IMED is now a wholly-owned subsidiary of the Company. The merger
transaction was treated as a reverse merger for accounting purposes whereby
IMED is deemed to be the acquiring and surviving entity of the acquisition
transaction. Therefore, the comparison of results of operations for the six
month period ended March 31, 1996 is a comparison of the results of IMED
operations for the six month period ended March 31, 1995 with the consolidated
results of operations of Interwest Home Medical, Inc. (formerly known as
Beacon Financial Inc.) and IMED for the period ended March 31, 1996.
As a result of the acquisition of IMED, the Company's primary operations
are, and will be, the operation of IMED which is engaged in the business of
selling and renting medical equipment and supplies, primarily to the home
medical care market. IMED currently has 17 retail locations and employs
approximately 200 persons. IMED also services and customizes wheelchairs. It
also customizes vans and other motor vehicles for use by wheelchair bound
persons.
Financial Condition
At March 31, 1996, the Company had total assets of $13,283,735 and
shareholders equity of $5,708,190 compared to total assets of $12,550,401 and
shareholders equity of $5,339,290 at September 30, 1995, the Company's last
fiscal year end. This 6% increase in assets and 7% increase in shareholder
equity is primarily the result of operations.
At March 31, 1996, the Company had notes receivable of $499,863 compared
to $920,947 at September 30, 1995. Notes receivable originated from the sale
of land and an apartment building. The decrease is primarily due to $420,000
in payments on the note from the land sale.
At March 31, 1996, the Company's working capital was $2,134,665 compared
to $2,014,429 at March 31, 1995, an increase of 6%.
The Company had capital expenditures of $925,102 for the six months
ended March 31, 1996 compared to $353,963 for the same period ended March 31,
1995. The increase is primarily from property and equipment obtained from
acquisitions and new rental equipment to support increased rental revenue.
During the last two years, IMED has had a plan of operation which
included the acquisition of other companies which are engaged in similar lines
of business. One of the reasons for IMED entering into the February 22, 1995
merger transaction with the Company was to facilitate such a plan of
acquisitions. Its management believed that by merging with a publicly-held
company it could utilize securities to effect acquisitions. From the February
22, 1995 merger transaction through the first calendar quarter of 1996, the
Company has acquired four companies for cash, notes and securities. In April,
1995, after the IMED acquisition transaction, the Company acquired Mtn.
Rehabilitation Services, Inc., a small Colorado-based corporation, for cash,
notes and securities. Approximately 67% of the purchase price of such
transaction was paid by issuing shares of the Company's preferred stock. On
June 9, 1995, IMED acquired Barclay's Oxygen Homecare of Pocatello, Inc. a
small privately-held Idaho based-corporation. The entire purchase prices was
paid in cash. In September 1995, the Company acquired the assets of Mountain
Air Homecare, a small Utah-based corporation. The entire purchase price was
paid in cash. On March 1, 1996 the Company acquired the assets of Alpine
Medical, Inc. a Colorado-based corporation. The purchase price was funded
with bank debt. The Company intends to continue with its acquisition plan.
Management continues to have acquisition discussions with several companies.
10
<PAGE>
At March 31, 1996, the Company had outstanding long term and short term
loans payable in the amount of $5,265,873 compared to $5,008,468 at September
30, 1995. This increase was primarily due to new borrowing to fund operations
and new acquisitions.
The Company has sufficient capital for its current operations but may be
required to obtain additional capital for use in future acquisitions. For six
months ended March 31, 1996, the Company generated $402,691 of cash from
operating activities.
Results of Operations
As a result of the acquisition of IMED, the Company's revenues are
primarily attributed to the sale and rental of medical equipment and products.
The following results of operations are primarily a comparison of the
operations of IMED for the six and three month periods ended March 31, 1996
and 1995.
Sale and Rental Revenue. The Company's revenues are derived from both
the sale and rental of equipment and products. For the six month period ended
March 31, 1996, sales and rental revenues were 62% and 38%, respectively, of
total revenues. This compares to 63% and 37% for the six month period ended
March 31, 1995. Sales and rental revenue for the three month period ended
March 31, 1996 were 60% and 40% compared with 63% and 37% for the three month
period ended March 31, 1995. Total revenues for the six and three month
periods ended March 31, 1996 were $9,252,147and $4,686,472 an increase of
approximately 38% over the six and three month periods ended March 31, 1995.
The increases were primarily attributed to revenues generated by the companies
acquired by IMED during 1995.
Costs of sales and rentals were approximately 40% and 38% for the six
month periods ended March 31, 1996 and 1995. For the three month periods
ended March 31, 1996 and 1995, costs of sales and rentals were 40% and 37% of
total revenues. This increase is primarily due to continued pressure on costs
of products sold and rented.
Operating Expenses. Operating expenses during the six month periods
ended March 31, 1996 and 1995 were 53% of total sales for both periods. Total
operating expenses decreased from 55% to 52% of total revenue for the three
month period ended March 31, 1996 and 1995. Management was able to maintain
control of operating expense and expect to see a further reduction as acquired
companies become fully integrated as reflected in the most recent quarters
decrease.
For the six month period ended March 31, 1996, total operating expenses,
including general and administrative expenses, were $4,914,568 as compared to
$3,537,887 for the six months ended March 31, 1995. For the six month period
ended March 31, 1996, total selling expenses were $658,475 (7% of total sales)
as compared to $470,693 (7% of total sales) for the six month period ended
March 31, 1995.
Interest Expense. Total interest expense for the six and three month
periods ended March 31, 1996 was $236,538 and $154,856 compared to $153,673
and $85,627 for the six and three month periods ended March 31, 1995. The
increase was attributed to increased bank debt to fund acquisitions effected
during 1995.
Net Income. For the six month period ended March 31, 1996, the Company
had net income of $368,901 compared to $288,260 for the six month period ended
March 31, 1995, an increase of approximately 24%. Net income for the three
month period ended March 31, 1996 was $214,923 compared to $126,859 for the
three month period ended March 31, 1995, an increase of 69%. The increase in
1996 is primarily due to the utilization of a net operating loss carryforward
resulting in a lower provision for income taxes.
11
<PAGE>
Inflation
The Company's business and operations have not been materially affected
by inflation during the past year and the current fiscal year.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. On February 15,
1996, the Company held its Annual Shareholders Meeting. The
following proposals were considered and ratified:
1. Election of the Board of Directors
Nominees For Against Abstain
a. James E. Robinson 2,605,196 13,848 -0-
b. Dr. Michael C. Romney 2,602,089 16,955 -0-
c. Dr. Jeffrey F. Poore 2,597,717 21,327 -0-
d. Daniel L. Richards 2,599,950 19,095 -0-
e. Jerald L. Nelson 2,599,776 19,268 -0-
f. James U. Jensen 2,607,573 11,471 -0-
2. 1995 Non-Employee Director's Stock Option Plan - A Total of
2,457,077 shares voted in favor of the proposal, -0- shares voted
against such proposal and -0- shares abstained from voting.
3. 1995 Stock Option Plan - A Total of 2,439,646 shares voted in
favor of the proposal, 42,536 shares voted against such proposal
and -0- shares abstained from voting.
4. 1995 Employee Stock Purchase Plan - A total of 2,463,974 shares
voted in favor of the proposal, 27,091 shares voted against such
proposal and 122,284 shares abstained from voting.
Item 5. Other Information. On March 4, 1996 the Company's application for
listing on the Nasdaq SmallCap Market system was approved.
Item 6(a).Exhibits.
Exhibit 27 - Financial Data Schedule
Item 6(b).Reports on Form 8-K. None.
12
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Dated: May 6, 1996
INTERWEST HOME MEDICAL, INC.
By: /s/ James E. Robinson
-------------------------------------------
James E. Robinson
President
Principal Executive Officer
By: /s/ Que H. Christensen
-------------------------------------------
Que H. Christensen
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTE FROM INTERWEST
HOME MEDICAL, INC. MARCH 31, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 328,440
<SECURITIES> 47,700
<RECEIVABLES> 5,402,237
<ALLOWANCES> 293,818
<INVENTORY> 2,251,949
<CURRENT-ASSETS> 7,426,161
<PP&E> 2,607,340
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,283,735
<CURRENT-LIABILITIES> 5,291,496
<BONDS> 0
<COMMON> 1,894,002
0
3,000
<OTHER-SE> 3,811,188
<TOTAL-LIABILITY-AND-EQUITY> 13,283,735
<SALES> 9,252,147
<TOTAL-REVENUES> 9,280,160
<CGS> 3,700,578
<TOTAL-COSTS> 8,615,146
<OTHER-EXPENSES> 13,675
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 236,538
<INCOME-PRETAX> 414,801
<INCOME-TAX> 45,900
<INCOME-CONTINUING> 368,901
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 368,901
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
