<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, 1999
[ ] 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)
(972)-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 December 31, 1998,
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, 1999 and
September 30, 1998 1
Statements of Income - Three Months
and Nine Months Ended June 30, 1999 and 1998 2
Statements of Cash Flows - Nine Months Ended
June 30, 1999 and 1998 3
Notes to Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 5-6
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 7
SIGNATURES 8
<PAGE>
ALLIANCE HEALTH, INC.
PART I - FINANCIAL INFORMATION
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
Jun 30, 1999 Sep 30, 1998
Unaudited Audited
____________ ____________
<S> <C> <C>
Current assets:
Cash $ 659,874 $ 739,596
Accounts receivable-affiliate 222,597 64,413
Other assets 19,014 12,134
________ ________
Total current assets 901,485 816,143
Property & equipment 3,545,721 2,451,752
Less accumulated depreciation (901,364) (591,577)
_________ _________
2,644,357 1,860,175
_________ _________
Total Assets $3,545,842 $2,676,318
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Trade $ 26,516 $ 52,825
Affiliate 249 21,116
Income taxes payable 355,098 249,889
________ _________
Total current liabilities 381,863 323,830
Deferred income taxes 34,532 34,532
Stockholders' equity:
Preferred stock, $.01 par, 100,000
shares authorized, none issued
Common stock, $0.01 par, 20,000,000
shares authorized and issued,
3,590,000 shares outstanding 35,900 35,900
Paid-in capital 831,166 831,166
Retained earnings 2,262,381 1,450,890
_________ _________
Total stockholders' equity 3,129,447 2,317,956
_________ _________
$3,545,842 $2,676,318
</TABLE>
The accompanying notes are an integral part of these financial
statements.
-1-
<PAGE>
ALLIANCE HEALTH, INC.
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Jun 30, 1999 Jun 30, 1998 Jun 30, 1999 Jun 30, 1998
____________ ____________ ____________ ____________
<S> <C> <C> <C> <C>
REVENUES $1,046,918 $ 635,500 $2,984,950 $1,808,800
EXPENSES
Advertising 225,084 111,783 570,318 413,981
Salaries & Employee
Benefits 96,398 111,226 326,373 306,487
Depreciation 118,414 75,174 309,788 171,861
General & Administrative 187,304 56,249 462,736 260,485
_________ ________ _________ ________
627,200 354,432 1,669,215 1,152,814
Operating income 419,718 281,068 1,315,735 655,986
Other Income 10,192 18,900 27,715 35,336
_________ ________ _________ _________
Income before taxes 429,910 299,968 1,343,450 691,322
Taxes 173,415 86,050 531,960 235,050
_________ ________ _________ ________
Net income $ 256,495 $213,918 $ 811,490 $ 456,272
Net income per
common share $ .07 $ .06 $ .23 $ .13
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 these financial statements.
-2-
<PAGE>
ALLIANCE HEALTH, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
Jun 30, 1999 Jun 30, 1998
____________ ____________
<S> <C> <C>
Cash flows from operating
activities:
Net income $ 811,490 $ 456,272
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 309,788 171,862
Accounts receivable (169,109) 129,441
Other assets (11,514) 1,788
Accounts payable (43,750) (75,604)
Income taxes 105,208 (112,462)
________ _______
Net cash provided by
operating activities 1,002,113 571,297
_________ _______
Cash flows from investing activities:
Purchase of equipment (1,081,835) (1,076,559)
_________ _________
Net (decrease) in cash (79,722) (505,262)
Cash at beginning of period 739,596 940,716
________ ________
Cash at end of period $ 659,874 $435,454
</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, 1998 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 nine month period
ended June 30, 1999 are not necessarily indicative of the results that may
be expected for the year ending September 30, 1999.
All of the Company's income was for leases or services rendered to S.
J. Kechejian, M.D., P.A., Metroplex Specialties, P.A., Aldine Medical
Associates, and Metro Pharmacy, Inc., companies owned by the 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, Associated ("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.
-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 ended June 30, 1999 and 1998, the Company had net
income of $811,490 and $456,272, respectively. Revenues in 1999 consisted
of $1,107,900 from Metroplex Specialties for lease of the Company's MRI,
$1,577,500 for advertising fees and rent and other income in the amount of
$299,550. The MRI income generated from Metroplex Specialties is on a per
scan basis and is expected to continue at roughly $125,000 to $175,000
per month during the next period. The MRP-7000-U Permanent Magnet "Cat
Scanner" became operational at the Longview, Texas facility in January,
1999. This equipment is leased to Aldine at $125 per scan and has
generated $9,750 in revenue to date.
Advertising income generated during the nine months ended June 30,
1999 is from an ongoing arrangement with the following companies: S. J.
Kechejian, M.D., P.A. billed at $1,172,500, Metroplex Specialties billed
at $247,500, Metro Pharmacy billed at $67,500 and the advertising income
generated from Aldine Medical Associates billed at $90,000. Advertising
income increased significantly due to several new facilities that opened
and an increase in the amount of advertising being paid by the PT/OT
Centers in S. J. Kechejian, M.D., P.A. The combined nine months revenue
constitutes a 65% increase over the same period in 1998.
The expenses during the six months ended June 30, 1999 included
advertising, salaries and employee benefits, depreciation and other
general and administrative costs in the amount of $1,669,215. This is
roughly a 45% increase in expenses over the same period last year.
Expenses associated with the CAT Scanner, the Mobile MRI, increased
depreciation, accrued taxes and other expenses associated with the MRI
equipment, such as maintenance, are the primary factors in the increased
expenses.
A Management Service Agreement with Aldine Medical Associates
("Aldine") was negotiated and finalized in July, 1998. As part of the
start up costs for the facility, the Company loaned Aldine the funds
necessary for operating costs as needed at ten percent (10%) interest.
Aldine currently owes $94,090 on the start up loan and the company has
loaned additional funds for operation in the amount of $128,506. Aldine
pays management service fees on a per patient visit and these fees vary
depending on services given. The Company is currently contracting with K
Clinic to perform the medical billing and administrative functions at the
rate of $24 per patient visit for PT/OT, $18 per patient for CAT Scan, and
$6 per visit for clinic patients.
-5-
<PAGE>
Assessment of Y2K issues has been implemented over the past year.
The Company is compliant in all critical areas of both inhouse and out
sourced software and hardware. The Company has upgraded its computer
system and does not expect any material replacement costs. The only
equipment that is not Y2K compliant is the CAT Scanner being leased to
Aldine Medical Associates in Longview, Texas. At this time the cost to
upgrade this equipment is not known. Considerable time has also been
allocated to making sure other areas are Y2K compliant such as banking
relationships, vendors and non IT equipment. On July 27, 1999, the
Company successfully transmitted a Y2K test file to the SEC through Edgar
Link.
Liquidity and Capital Resources
The Company had total assets of $3,545,842 at June 30, 1999.
Advertising income is expected to continue at approximately $170,000 per
month and may increase if S. J. Kechejian, M.D., P.A., Aldine Medical
Associates or Metroplex Specialties, P.A. opens additional facilities.
The Company has purchased a mobile Hitachi MRI for a total cost of
$825,000 for the equipment and $68,000 in sales tax. The mobile unit was
operational in May, 1999 in Longview, Texas. The Company expects to
complete negotiations for additional locations later this year. A tractor
was purchased in June, 1999 for $97,787 to move the Mobile MRI to each
location.
The Company has standardized protocols for most management and
administrative processes which will help ensure future expansion of
Company interests are organized and more profitable.
The East Texas division, which presently includes two clinics, a
physical therapy center and a MRP-7000-U Permanent Magnet cat scan imaging
is the test "pod" for the standardized protocol. A second physical
therapy center is projected to open in July, 1999 in a facility owned by
the Company in Tyler, Texas. The Company is using this "pod" to refine
current protocol and develop new protocol as needed.
-6-
<PAGE>
ALLIANCE HEALTH, INC.
PART II - OTHER INFORMATION
Item 6. 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: August 5, 1999 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-30-1998 SEP-30-1997
<PERIOD-START> OCT-01-1998 OCT-01-1997
<PERIOD-END> JUN-30-1999 JUN-30-1998
<CASH> 659,874 435,454
<SECURITIES> 0 0
<RECEIVABLES> 241,611 54,710
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 901,485 490,164
<PP&E> 3,545,721 2,315,981
<DEPRECIATION> (901,364) (513,543)
<TOTAL-ASSETS> 3,545,842 2,292,602
<CURRENT-LIABILITIES> 416,395 165,987
<BONDS> 0 0
0 0
0 0
<COMMON> 35,900 35,900
<OTHER-SE> 3,093,547 2,090,715
<TOTAL-LIABILITY-AND-EQUITY> 3,545,842 2,292,602
<SALES> 0 0
<TOTAL-REVENUES> 3,012,665 1,844,136
<CGS> 0 0
<TOTAL-COSTS> 1,669,215 1,152,814
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 1,343,450 691,322
<INCOME-TAX> 531,960 235,050
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 811,490 456,272
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
