<PAGE>
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 quarterly period ended June 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________ to __________
Commission file number 33-17387
ALLIANCE HEALTH, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 75-2192377
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) No.)
421 E. Airport Freeway, Irving, Texas 75062
(Address of principal executive office)
(214)-255-5533
(Issuer's telephone number)
____________________________________________________________
(Former name, former address and former fiscal year,
if changed since last year)
Check whether issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: At June 30, 1997,
3,590,000 shares of common stock, $0.01 par value, were outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes No X
<PAGE>
ALLIANCE HEALTH, INC.
INDEX
PAGE NUMBER
PART I FINANCIAL INFORMATION
Balance Sheets - June 30, 1998 and
September 30, 1997 1
Statements of Operations - Three Months and
Nine Months Ended June 30, 1998 2
Statement of Cash Flow - Nine Months Ended
June 30, 1998 and 1997 3
Notes to Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of
Operation 5-6
PART II OTHER INFORMATION
Item 5. Exhibits and Reports on Form 8-K 7
SIGNATURES 8
<PAGE>
ALLIANCE HEALTH, INC.
PART I - FINANCIAL INFORMATION
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
Jun 30, 1998 Sep 30, 1997
Unaudited Audited
<S> <C> <C>
Current assets:
Cash $ 435,454 $ 940,716
Accounts receivable-affiliate 54,710 178,348
Other assets 0 15,528
Total Current Assets 490,164 1,134,592
Property & equipment 2,315,981 1,234,422
Less accumulated depreciation (513,543) (341,683)
_________ _________
1,802,438 892,739
_________ _________
$2,292,602 $2,027,331
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Trade $ 0 $ 68,166
Affiliate 0 1,592
Income taxes payable 51,751 287,231
________ _________
Total current liabilities 51,751 356,989
Deferred Income Taxes 114,236 0
Stockholders' equity:
Common stock-par value of $0.01
per share; authorized 20,000,000,
issued 3,590,000 shares 35,900 35,900
Additional paid-in capital 831,166 831,166
Retained earnings 1,259,549 803,276
_________ _________
Total stockholders' equity 2,126,615 1,670,342
_________ _________
Total Liabilities and Equity $2,292,602 $2,027,331
</TABLE>
The accompanying notes are an integral part of these financial
statements
-1-
<PAGE>
ALLIANCE HEALTH, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Restated Restated
Three Months Ended Nine Months Ended
Jun 30, Jun 30, Jun 30, Jun 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUES: $ 635,500 $ 533,600 $1,808,800 $1,459,900
________ __________ __________ ________
EXPENSES:
Advertising 111,783 164,575 413,981 394,918
Salaries & employee
Benefits 111,226 88,686 306,487 218,805
Depreciation 75,174 42,300 171,861 126,901
General & administrative 56,249 100,259 260,485 220,941
_________ ________ _________ _________
354,432 395,820 1,152,814 961,565
Operating income 281,068 137,780 655,986 498,335
Other Income 18,900 8,394 35,336 61,578
Income before taxes 299,968 146,174 691,322 559,913
Income Taxes $ 86,050 $ 55,500 $ 235,050 $ 213,000
Net Income $ 213,918 $ 90,674 $ 456,272 $ 346,913
Net income per
common share $ .05 $ .03 $ .13 $ .10
Weighted average number of
shares outstanding 3,590,000 3,590,000 3,590,000 3,590,000
</TABLE>
The accompanying notes are an integral part of the financial
statements.
-2-
<PAGE>
ALLIANCE HEALTH, INC.
STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
Nine Months Ended
Jun 30 Jun 30
1998 1997
<S> <C> <C>
(Unaudited) (Unaudited)
Cash flows from operating
activities:
Net income $ 456,272 $ 346,913
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation 171,862 126,901
Accounts Receivable 129,441 (82,890)
Other Assets 1,788 (10,732)
Accounts Payable (75,604) 66,924
Income Taxes (112,462) 135,130
Net cash provided by
operating activities 571,297 582,246
Cash flows from investing activities:
Purchase of equipment (1,076,559) 0
Net increase (decrease) in cash (505,262) 582,246
Cash at beginning of period 940,716 364,958
Cash at end of period $ 435,454 $ 947,204
</TABLE>
The accompanying notes are an integral part of these financial
statements.
-3-
<PAGE>
ALLIANCE HEALTH, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-QSB of Regulation S-B. They do not include all information and
footnotes required by generally accepted accounting principles for
complete financial statements. However, except as disclosed herein,
there has been no material change in the information disclosed in
the notes to the financial statements for the year ended September
30, 1997 included in the Company's Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission. The interim
unaudited financial statements should be read in conjunction with
those financial statements included in the Form 10-KSB. In the
opinion of management, all adjustments considered necessary for a
fair presentation, consisting solely of normal recurring
adjustments, have been made. Operating results for the three month
and nine month periods ended June 30, 1998 are not necessarily
indicative of the results that may be expected for the year ending
September 30, 1998.
All of the Company's income was for services to S. J.
Kechejian, M.D., P.A., Metroplex Specialties, P.A., Metro Pharmacy,
Inc. And Aldine Medical Associates, companies owned by the Company's
major stockholder.
Note 2. Organization
Alliance Health, Inc. (the "Company") was incorporated in
Delaware on September 4, 1987. Effective May 12, 1995, the Company
acquired the advertising division (the "Division") of K Clinics,
P.A. ("K Clinics") from S. J. Kechejian, M.D. for 1,200,000 shares
of the Company's stock. The acquisition has been accounted for in
a manner similar to the pooling-of-interests method due to Dr.
Kechejian's control of the respective companies.
Note 3. Restatement
The statements of income for the three and nine months ended
June 30, 1997 have been restated to reflect an income tax provision.
-4-
<PAGE>
ALLIANCE HEALTH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF INTERIM FINANCIAL INFORMATION
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial
condition and operating results for the period included in the
accompanying financial statements.
Results of Operation and Financial Condition
For the nine months ending June 30, 1998 and 1997, the Company
had net income of $456,272 and $346,913 respectively. Revenues in
1998 consisted of $703,800 from Metroplex Specialties for lease of
the Company's MRI, $1,105,000 for advertising from S. J. Kechejian,
M.D., P.A., Metroplex Specialties, P.A. and Metro Pharmacy, Inc. and
bank interest in the amount of $35,336. The MRI income generated from
Metroplex Specialties is on a per scan basis and is expected to
continue at roughly $70,000 to $75,000 per month during the next
period. The advertising income generated from Metroplex Specialties,
P.A., is an ongoing arrangement with the Company billed at $67,500
during the quarter; the advertising income generated from S. J.
Kechejian, M.D., P.A., is an ongoing arrangement with the Company
billed at $300,000 during the quarter; the advertising income
generated from Aldine Medical Associates is an arrangement with the
company billed at $2,500 during the quarter; and the advertising
income generated from Metro Pharmacy, Inc., is an ongoing arrangement
with the Company billed at $22,500 during the quarter. The quarter's
revenue constitutes a 19% increase over the same quarter in 1997.
The expenses during the nine months ended June 30, 1998
included advertising, salaries and employee benefits, depreciation
and other general and administrative costs in the amount of
$1,152,814. This is roughly a 20% increase in expenses over the same
period last year due to new production consulting and additional
advertising on TV, radio and billboards. Advertising increased by
5% primarily due to general cost increases. The increase in salaries
and benefits is due to the hiring of the Chief Operating Officer in
February, 1997 and increases in benefit cost for health insurance,
etc. Administrative costs increased by 18% as compared to 1997.
Several factors attributed to this including an increase in equipment
maintenance for the MRI (previously under warranty) and general taxes
for various corporate requirements and sales tax on the MRI.
5
<PAGE>
The Company has negotiated a Management Service Agreement
with Aldine Medical Associates ("Aldine"). As part of the start
up costs for the facility, the Company will loan Aldine the funds
necessary for operating costs as needed. Aldine currently owes
$48,864, and the Company is not expected to loan Aldine further
money for the present location in Tyler, Texas. Aldine and
Alliance Health have negotiated a new management service fee to
be effective July, 1998. Aldine will be opening additional sites
and with this the new management service fee will be $8.00 per
patient visit for all clinic patients and $24.00 for specialty,
radiologic and physical therapy patients. Specialty patients are
at a higher fee due to the tremendous increase in administrative
services such as billing, collecting and pre-authorizations
required.
Liquidity and Capital Resources
The Company had total assets of $2,292,602 at June 30, 1998.
Advertising income is expected to continue at approximately
$100,000 per month and may increase if S. J. Kechejian, M.D., P.A.
or Metroplex Specialties, P.A. opens additional facilities. The
Company is continuing to market the advertising package to other
medical providers.
The Company has purchased a new Hitachi MRI for a total cost
of $710,000, which has been installed at 1218 S. Main St., Fort
Worth, Texas. Metroplex Specialties will lease the equipment for
$300 per scan performed. The new MRI lease is expected to reduce
income generated by the current MRI lease to some degree. Total
income generated by the leases has increased by 33% in this
quarter as compared to the quarter ended March, 1998.
The Company is working on creating standardized protocols for
all processes to aid in expansion of Company interests. A building
purchased in Longview, Texas for $156,017 is to be partially leased
to Aldine Medical Associates which will open a medical clinic
specializing in soft tissue injuries in July, 1998. The property
will house the clinic and in August a physical therapy and CT imaging
center. The Longview location, in conjunction with the Tyler
location, will create an East Texas division to serve a large
population in the East Texas area. The Tyler clinic is currently in
a leased facility, and the Company has purchased a facility with
enough space to house both a physical therapy center and imaging
center in Tyler for $145,000.
The Company plans to research available sites in the Marshall
area to complete the East Texas Division. A detailed business plan
is currently being produced which will detail the board's plan to
expand the East Texas concept to other strategic geographic centers
in Texas.
-6-
<PAGE>
ALLIANCE HEALTH, INC.
PART II - OTHER INFORMATION
Item 5. Exhibits and Reports on Form 8-K
None.
-7-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
DATED: July 15, 1998 By: Sarkis J. Kechejian, M.D.
Sarkis J. Kechejian, M.D.
President, Director and
Treasurer
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1996
<PERIOD-START> OCT-01-1997 OCT-01-1996
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 435,454 946,513
<SECURITIES> 0 0
<RECEIVABLES> 54,710 198,751
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 490,164 1,145,264
<PP&E> 2,315,981 1,111,421
<DEPRECIATION> (513,543) (299,382)
<TOTAL-ASSETS> 2,292,602 1,957,303
<CURRENT-LIABILITIES> 165,987 161,104
<BONDS> 0 0
0 0
0 0
<COMMON> 35,900 35,900
<OTHER-SE> 2,090,715 1,760,299
<TOTAL-LIABILITY-AND-EQUITY> 2,292,602 1,957,303
<SALES> 0 0
<TOTAL-REVENUES> 635,500 533,600
<CGS> 0 0
<TOTAL-COSTS> 335,532 387,426
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 299,968 146,174
<INCOME-TAX> 86,050 55,500
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 213,918 90,674
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
