U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-14189
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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 December 31, 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 December 31, 1996.
The following financial statements and schedules of the registrant and its
consolidated subsidiaries are submitted herewith:
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet--December 31, 1996. 3
Condensed Consolidated Statements of Income--for the three months
ended December 31, 1996 and 1995...................... 5
Condensed Consolidated Statements of Cash Flows--for the
three months ended December 31, 1996 and 1995.......... 6
Notes to Condensed Consolidated Financial Statements.... 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................... 9
PART II - OTHER INFORMATION
Page
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6(a)Exhibits 11
Item 6(b)Reports on Form 8-K 11
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Balance Sheet
December 31, 1996
Assets 1996
Current assets:
Cash and cash equivalents $ 277,181
Marketable Securities 47,700
Accounts receivable (net of allowance for
doubtful accounts of $345,166) 4,985,937
Current portion of long-term receivable 308,109
Accrued Interest 17,898
Inventory 2,636,987
Current deferred tax asset 96,000
Deposits and prepaid expense 38,042
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Total current assets 8,407,854
Note receivable 267,638
Investment in undeveloped real estate 332,234
Investment in office buildings (net of
accumulated depreciation of $153,177) 458,939
Property and equipment - net 3,597,071
Intangible assets (net of accumulated
amortization of $160,086) 3,990,825
Other assets 131,291
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$17,185,852
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4
<PAGE>
Liabilities and Stockholders' Equity 1996
Current liabilities:
Checks written in excess of cash in bank $ 489,145
Current portion of long-term debt 1,082,178
Notes payable 2,869,777
Accounts payable 1,205,897
Accrued expenses 310,941
Income taxes payable 29,855
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Total current liabilities 5,987,793
Deferred income taxes 259,000
Long-term debt 4,881,094
=========
Total liabilities 11,127,887
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 3,713,963
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Total stockholders' equity 6,057,965
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$17,185,852
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5
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Statement of Income
Three months ended December 31.
1996 1995
Revenue:
Net sales $3,259,042 2,911,169
Net rental income 2,123,119 1,654,506
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Total revenue 5,382,161 4,565,675
Cost of sales and rental 2,195,008 1,845,652
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Gross profit 3,187,153 2,720,023
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Operating expenses 2,896,213 2,467,045
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Income from operations 290,940 252,978
Other income (expense):
Interest expense (160,689) (81,682)
Interest income 8,272 11,657
Other (14,750) (475)
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Income before taxes 123,773 182,478
Income taxes 13,500 28,500
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Net income $110,273 153,978
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Net income per share $0.03 0.05
===== ====
Average number of shares
outstanding 3,328,000 3,211,000
========= =========
6
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Statement of Cash Flows
Three Months Ended December 31, 1996 and 1995
Cash flows from operating activities: 1996 1995
---- ----
Reconciliation of net income to net cash
provided by operating activities:
Net income $110,273 153,978
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 258,789 187,213
Bad debt expense (11,454) 10,197
(Increase) decrease in:
Accounts receivable (181,849) (560,800)
Current portion of notes receivable 56,304 210,000
Inventories 126,950 (23,319)
Prepaid expenses 36,245 (89,272)
Other assets (22,200) (7,386)
Intangible assets - (8,840)
Increase (decrease) in:
Checks written in excess of
cash in bank 6,693 558,190
Current portion of long-term debt (2,087)
Accounts payable (279,008) (199,709)
Accrued expenses (22,120) 108,099
Income tax payable 13,500 (103,811)
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Net cash provided by
operating activities 90,036 234,540
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Cash flows from investment activities:
Cash used in acquisition (30,000) -
Capital expenditures (96,746) (207,853)
Increase in long-term receivable (71,294) -
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Net cash used in
investing activities (198,043) (207,853)
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7
<PAGE>
INTERWEST HOME MEDICAL, INC.
Condensed Consolidated Statement of Cash Flows - Continued
Three Months Ended December 31, 1996 and 1995
1996 1995
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Cash flows from financing activities:
Net proceeds from notes payable 115,833 134,440
Principal payments on long-term debt (269,909) (423,498)
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Net cash provided from
(Used in) financing activities (154,076) (289,058)
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Net (decrease) increase
in cash (262,083) (262,371)
Cash, beginning of period 539,264 578,362
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Cash, end of period $ 277,181 315,991
========= =========
Supplemental schedule of non-cash investing and financing activities
During the three months ended December 31, 1996, the Company acquired
certain assets and assumed certain liabilities from companies in Colorado. The
purchased net assets were funded by bank debt and cash. The assets purchased
consisted of the following:
Accounts receivable $ 88,137
Capital equipment 558,550
Intangible assets 1,104,943
Capital leases (241,630)
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Net assets purchased 1,510,000
Less amount financed with debt 1,480,000
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Net cash investment $ 30,000
============
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 December 31, 1996 and the
results of operations and cash flows for the three month periods ended
December 31, 1996 and 1995. The resultof operations for the three months
ended December 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.
9
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Interwest Home Medical, Inc. (IHOM) is primarily engaged in the business
of selling and renting medical equipment and supplies, primarily to the home
medical care market. IHOM currently employs approximately 235 individuals at
twenty-three (23) retail locations. IHOM also services and customizes
wheelchairs. It also customizes vans and other motor vehicles for use by
wheelchair bound persons.
Financial Condition
The Company's primary needs for capital are to fund acquisitions, purchase
rental equipment, and cover debt service payments. Expansion into new geographic
markets results in increased accounts receivable, inventory and equipment
balances. For the three month months ended December 31, 1996, net cash provided
by operating activities was $90,036 as compared to $234,540 for the three months
ended December 31, 1995, a decrease of $144,504 or 62%. The Company has
sufficient capital for its current operations but may be required to obtain
additional capital for use in future acquisitions. At December 31, 1996, the
Company had total assets of $17,185,852 and shareholders equity of $6,057,965
compared to total assets of $15,788,961 and shareholders equity of $5,947,692 at
September 30, 1996, the Company's last fiscal year end. This 9% increase in
assets is primarily the result of increase in accounts receivable, capital
assets and intangible asset from acquisition activities. The 3% increase in
shareholder equity is primarily the result of operations.
On December 9, 1996, the Company entered into an option agreement with
eight private investors. The terms of the agreement provide the investors the
right to purchase, pursuant to options and warrants, up to an aggregate of
1,170,714 newly issued common shares at prices ranging from $4.28 to $7.00 per
share. On December 19, 1996, the investors paid $100,000 option fee providing
the right to exercise options to purchase 162,500 shares of common stock at a
price of $4.28 within 180 days. The $100,000 option fee will be credited towards
the purchase price of shares subsequently purchased by the investors. On
February 5, 1996, the investors exercised part of their option by paying an
additional $350,000 to the Company. The investors are entitled to warrants equal
to shares acquired during the first 90 days of the options agreement.
At December 31, 1995, the Company's working capital was $2,420,061
compared to $2,453,014 at September 30, 1996, an decrease of 1%.
The Company had capital expenditures of $96,746 for the three months ended
December 31, 1996 compared to $207,853 for the same period ended December 31,
1995.
During the last two years, IHOM has had a plan of operation which included
the acquisition of other companies which are engaged in similar lines of
business. The Company intends to continue with the IMED acquisition plan. Its
management continues to have acquisition discussions with several companies.
10
<PAGE>
Management has entered into an agreement to acquire the assets of a company
which they anticipates closing prior to the end of the second quarter.
At September 30, 1996, the Company had outstanding long term and short
term loans payable in the amount of $7,265,496 compared to $8,833,049 at
December 31, 1996. This increase was primarily due to new borrowings to fund
acquisitions.
Results of Operations
The Company's revenues are primarily attributed to the sale and rental of
medical equipment and products. The following results of operations is primarily
a comparison of the operations of IHOM for the periods ended December 31, 1996
and December 31, 1995.
Sale and Rental Revenue. The Company's revenue is comprised from both the
sale and rental of equipment and products. For the three month period ended
December 31, 1996, 61% of total revenues were derived from sales with the
remaining revenue derived from rental activity. This compares to 64% for the
three month period ended December 31, 1995. Total revenues for the three months
ended December 31, 1996 were $5,382,160 an increase of approximately 18% over
the three month period ended December 31, 1995. The increase was primarily
attributed to revenues generated by the companies acquired by IMED during 1996.
Costs of sales and rentals were approximately 41% and 40% for the three
month period ended December 31, 1996 and 1995. Increase in cost of sales and
rentals was primarily due to vendor price increases without corresponding
increases in reimbursement due to managed care and contractual relationships.
Operating Expenses. Operating expenses for the three month periods ended
December 31, 1996 and 1995 were 54% of total sales. Total operating expenses at
December 31, 1996 were $2,896,213, an increase of approximately 17% over the
three months ended December 31, 1995. The increase is primarily due to
acquisition cost, corresponding increase in revenues and costs associated with
two start-up branches. Operating expenses during the three month periods ended
December 31, 1996 and 1995 were 54% of total sales.
For the three month period ended December 31, 1996, total selling expenses
were $399,466 (7% of total sales) as compared to $335,968 (7% of total sales)
for the three month period ended December 31, 1995.
Interest Expense. Total interest expense for the three month period ended
December 31, 1995 was $160,689 compared to $81,682 for the three month period
ended December 31, 1994. The increase was attributed to increased bank debt to
fund acquisitions effected during 1996.
11
<PAGE>
Net Income. For the three month period ended December 31, 1996, the
Company had net income of $110,273 compared to $153,978 for the three month
period ended December 31, 1995, a decrease of approximately 28%. The decrease is
primarily due to acquisition costs, losses form home elevator operations which
were sold during the quarter, costs associated with two start-up branches and
increased interest expense from borrowings to fund acquisitions.
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. None.
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: February 13, 1997 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>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
INTERWEST HOME MEDICAL, INC.'S FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> 277,181
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 277,181
<SECURITIES> 47,700
<RECEIVABLES> 5,294,046
<ALLOWANCES> 345,166
<INVENTORY> 2,636,987
<CURRENT-ASSETS> 8,407,854
<PP&E> 3,597,071
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,185,852
<CURRENT-LIABILITIES> 5,987,793
<BONDS> 0
0
3,000
<COMMON> 1,894,002
<OTHER-SE> 4,160,963
<TOTAL-LIABILITY-AND-EQUITY> 17,185,852
<SALES> 3,259,042
<TOTAL-REVENUES> 5,382,161
<CGS> 2,195,008
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,896,213
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 160,689
<INCOME-PRETAX> 123,773
<INCOME-TAX> 13,500
<INCOME-CONTINUING> 110,273
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110,273
<EPS-PRIMARY> .003
<EPS-DILUTED> 0
</TABLE>
