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 June 30, 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 June 30, 1996 - 3,283,941 shares of no par value
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>
FORM 10-QSB
FINANCIAL STATEMENTS AND SCHEDULES
INTERWEST HOME MEDICAL, INC.
For the Quarter Ended June 30, 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--June 30, 1996 . . . . . 3
Condensed Consolidated Statements of Income--for the nine months
And three months ended June 30, 1996 and 1995. . . . . . 5
Condensed Consolidated Statements of Cash Flows--for the
nine months ended June 30, 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
June 30, 1996
Assets 1996
Current assets:
Cash and cash equivalents $ 378,458
Marketable Securities 47,700
Accounts receivable (net of allowance for
doubtful accounts of $308,931) 4,943,078
Current portion of long-term receivable 2,179
Accrued Interest 8,511
Inventory 2,738,691
Current deferred tax asset 104,000
Deposits and prepaid expense 63,687
------------
Total current assets 8,286,304
Note receivable 497,137
Investment in undeveloped real estate 332,234
Investment in office buildings (net of
accumulated depreciation of $161,087) 523,534
Property and equipment - net 2,965,590
Intangible assets (net of accumulated
amortization of $92,670) 2,584,579
Other assets 101,073
-----------
$15,290,451
===========
3
<PAGE>
Liabilities and Stockholders' Equity 1996
Current liabilities:
Current portion of long-term debt $ 593,667
Notes payable 3,464,510
Accounts payable 1,239,285
Accrued expenses 299,353
Income taxes payable 74,566
-----------
Total current liabilities 5,671,381
Deferred income taxes 263,000
Long-term debt 3,422,431
-----------
Total liabilities 9,356,812
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 3,589,637
-----------
Total stockholders' equity 5,933,639
-----------
$15,290,451
===========
4
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Statement of Income
<TABLE>
Nine months ended June 30, Three months ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue:
Net sales $9,029,866 6,909,533 3,316,449 2,695,133
Net rental income 5,471,434 3,995,318 1,932,704 1,494,122
Total revenue 14,501,300 10,904,851 5,249,153 4,189,255
Cost of sales and rental 5,919,965 4,218,968 2,219,387 1,648,492
Gross profit 8,581335 6,685,883 3,029,766 2,540,763
Operating expenses 7,562,254 5,754,497 2,647,686 2,216,610
Income from operations 1,019,081 931,386 382,080 324,153
Other income (expense):
Interest expense (367,640) (257,216) (131,102) (103,543)
Interest income 64,543 12,208 36,531 8,515
Other (11,785) (12,179) 1,890 (5,132)
Income before taxes 704,200 674,199 289,399 223,993
Income taxes 109,850 231,940 63,951 69,994
Net income $594,349 442,259 225,448 153,999
Net income per share $0.17 0.16 0.07 0.05
Average number of
shares outstanding 3,406,327 2,790,906 3,406,327 3,363,940
</TABLE>
5
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Statement of Cash Flows
Nine Months Ended June 30, 1996 and 1995
Cash flows from operating activities: 1996 1995
Reconciliation of net income to net cash
provided by (used in) operating activities:
Net income $594,349 442,259
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 578,017 386,737
Bad debt expense 31,929 5,004
Loss from sale of equipment - 3,114
(Increase) decrease in:
Accounts receivable (775,468) (783,565)
Inventories (623,614) (429,805)
Prepaid expenses (22,970) 9,882
Other assets (26,154) 46,799
Intangible assets 13,913 (95,243)
Accrued interest (8,511)
Increase (decrease) in:
Accounts payable 20,490 112,979
Accrued expenses (35,956) (83,550)
Income tax payable (64,310) 135,304
Net cash provided by
(used in ) operating activities (318,285) (250,085)
Cash flows from investment activities:
Collection of notes receivable 1,631 -
Cash used in acquisition (6,000) -
Capital expenditures (551,848) (596,160)
Collection of long-term receivable 420,000 -
Net cash used in
investing activities (136,217) (596,160)
6
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Statement of Cash Flows - Continued
Nine Months Ended June 30, 1996 and 1995
1996 1995
Cash flows from financing activities:
Net proceeds from notes payable 714,428 1,085,505
Net Cash received from acquisition - 269,335
Principal payments on long-term debt (459,830) (227,467)
Net cash provided from
(Used in) financing activities 254,598 1,127,373
Net (decrease) increase
in cash (199,904) 281,128
Cash, beginning of period 578,362 39,102
Cash, end of period $ 378,458 320,230
Supplemental schedule of non-cash investing and financing activities
During the nine months ended June 30, 1996, the Company acquired
certain assets from companies in Utah, Colorado and Nevada. The purchased
assets were funded by bank debt and cash. The assets purchased consisted of
the following:
Accounts receivable $ 311,267
Inventory 145,150
Capital equipment 560,018
Intangible assets 960,445
---------
Net assets purchased 1,976,880
Less amount financed with debt 1,970,880
---------
Net cash investment $ 6,000
=========
7
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Statement of Cash Flows - Continued
Nine Months Ended June 30, 1996 and 1995
Supplemental schedule of non-cash investing and financing activities -
continued
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 June 30, 1996 and the results of
operations and cash flows for the nine and three month periods ended June 30,
1996 and 1995. The results of operations for the nine and three months ended
June 30, 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 nine
month period ended June 30, 1996 is a comparison of the results of IMED
operations for the nine month period ended June 30, 1995 with the consolidated
results of operations of Interwest Home Medical, Inc. (formerly known as
Beacon Financial Inc.) and IMED for the period ended June 30, 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 20 retail locations and employs
approximately 235 persons. IMED also services and customizes wheelchairs. It
also customizes vans and other motor vehicles for use by wheelchair bound
persons.
Financial Condition
At June 30, 1996, the Company had total assets of $15,290,451 and
shareholders equity of $5,933,639 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 22% increase in assets and 11% increase in shareholder
equity is primarily the result of operations and assets acquired through
acquisition.
At June 30, 1996, the Company had notes receivable of $497,137 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 June 30, 1996, the Company had total current assets of $8,286,304 and
current liabilities of $5,671,381 compared to current assets of $7,051,158 and
current liabilities of $5,036,729 at September 30, 1995. At June 30, 1996,
the Company's working capital was $2,614,923 compared to $2,014,429 at
September 30, 1995, an increase of 30% resulting from increased inventory
levels and accounts receivable balances from acquisitions and operating
activities.
The Company had capital expenditures of $551,848 for the nine months
ended June 30, 1996 compared to $596,160 for the same period ended June 30,
1995, an 8% decrease.
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 second calendar quarter of 1996, the
Company had 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
10
<PAGE>
small privately-held Idaho based-corporation. The entire purchase price 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. On May 22, 1996, the Company acquired the assets of Mesa
Medical, Inc., a Nevada-based corporation. On June 1, 1996, the Company
acquired the assets of Poudre Valley Respiratory, Inc., a Colorado-based
corporation and the assets of Western Healthcare Products, Inc., a Nevada-
based corporation. The purchase price of the acquisitions during the past
quarter have been funded with bank debt. The Company intends to continue with
its acquisition plan. Management continues to have acquisition discussions
with several companies.
Except for the Mtn. Rehabilitation Services, Inc. acquisition, none of
the acquisitions met the requirements for an 8-K filing individually or in the
aggregate. At June 30, 1996, the Company had outstanding long term and short
term loans payable in the amount of $6,700,372 compared to $5,008,468 at
September 30, 1995. This increase was primarily due to new borrowing to fund
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 the
nine months ended June 30, 1996, the Company generated $206,091 cash from
operating activities as compared to net cash used in operating activities of
$27,544 for the nine month period ended June 30, 1995.
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 nine and three month periods ended June 30, 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 nine month period
ended June 30, 1996, sales and rental revenues were 62% and 38%, respectively,
of total revenues. This compares to 63% and 37% for the nine month period
ended June 30, 1995. Sales and rental revenue for the three month period
ended June 30, 1996 were 63% and 37% compared with 64% and 36% for the three
month period ended June 30, 1995. Total revenues for the nine and three month
periods ended June 30, 1996 were $14,501,300 and $5,249,153 an increase of
approximately 33% and 26% over the nine and three month periods ended June 30,
1995. The increases were primarily attributed to revenues generated by the
companies acquired during 1995. The historical growth in revenue and sales is
not necessarily indicative of future performance.
Costs of sales and rentals were approximately 41% and 39% for the nine
month periods ended June 30, 1996 and 1995. For the three month periods
ended June 30, 1996 and 1995, costs of sales and rentals were 42% and 39% of
total revenues. This increase is primarily due to continued pressure on
costs of products sold and rented.
Operating Expenses. Operating expenses during the nine month periods
ended June 30, 1996 and 1995 were 52% and 53% of total sales. Total operating
expenses decreased from 53% to 50% of total revenue for the three month
periods ended June 30, 1996 and 1995. Management was able to maintain control
of operating expense and expects to see a reduction as acquired companies
become fully integrated.
For the nine month period ended June 30, 1996, total operating
expenses, including general and administrative expenses, were $7,562,254 as
compared to $5,754,497 for the nine months ended June 30, 1995. For the nine
month period ended June 30, 1996, total selling expenses were $1,030,867 (7%
of total sales) compared to $739,496 (7% of total sales) for the nine month
period ended June 30, 1995.
Interest Expense. Total interest expense for the nine and three month
periods ended June 30, 1996 was $367,640 and $257,216 compared to $131,102
and $103,543 for the nine and three month periods ended June 30, 1995. The
increase was attributed to increased bank debt to fund acquisitions effected
during the second calendar quarter of 1996.
11
<PAGE>
Net Income. For the nine month period ended June 30, 1996, the Company
had net income of $594.349 compared to $442,259 for the nine month period
ended June 30, 1995, an increase of approximately 34%. Net income for the
three month period ended June 30, 1996 was $225,448 compared to $153,999 for
the three month period ended June 30, 1995, and increase of 46%. The increase
in 1996 is primarily due to the utilization of a net operating loss
carryforward resulting in a lower provision for income taxes.
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. None
Item 5. Other Information. None.
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: August 13, 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
13
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTTRACTED 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> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 378,458
<SECURITIES> 47,700
<RECEIVABLES> 5,252,009
<ALLOWANCES> 308,931
<INVENTORY> 2,738,691
<CURRENT-ASSETS> 8,286,304
<PP&E> 2,65,590
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,290,451
<CURRENT-LIABILITIES> 5,671,381
<BONDS> 0
0
3,000
<COMMON> 1,894,002
<OTHER-SE> 4,037,637
<TOTAL-LIABILITY-AND-EQUITY> 15,290,451
<SALES> 14,505,300
<TOTAL-REVENUES> 14,565,843
<CGS> 5,919,965
<TOTAL-COSTS> 13,482,219
<OTHER-EXPENSES> 11,785
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 367,640
<INCOME-PRETAX> 704,200
<INCOME-TAX> 109,850
<INCOME-CONTINUING> 595,349
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 595,349
<EPS-PRIMARY> .17
<EPS-DIL^36 .17
</TABLE>
