<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 December 31, 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)
(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
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ALLIANCE HEALTH, INC.
INDEX
PAGE NUMBER
PART I FINANCIAL INFORMATION
Balance Sheets - December 31, 1998 and
September 30, 1998 1
Statements of Operations - Three Months
Ended December 31, 1998 and
December 31, 1997 2
Statements of Cash Flow - Three Months Ended
December 31, 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>
Dec 31, 1998 Sep 30, 1998
Unaudited Audited
<S> <C> <C>
Current assets:
Cash $1,019,267 $ 739,596
Accounts receivable-affiliate 183,611 64,413
Other assets 5,864 12,134
________ ________
Total current assets 1,208,742 816,143
Property, equipment & leasehold
improvements 2,485,536 2,451,752
Less accumulated depreciation (676,083) (591,577)
_________ _________
1,809,453 1,860,175
$3,018,195 $2,676,318
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Trade -0- 52,825
Accrued liabilities 22,917 21,116
Income taxes payable 317,087 249,889
________ _________
Total current liabilities 340,004 323,830
Deferred income taxes 34,532 34,532
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 1,776,593 1,450,890
_________ _________
Total stockholders' equity 2,643,659 2,317,956
_________ _________
$3,018,195 $2,676,318
</TABLE>
The accompanying notes are an integral part of these financial
statements
-1-
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ALLIANCE HEALTH, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
Dec 31, Dec 31,
1998 1997
(Unaudited) (Unaudited)
<S> <C> <C>
REVENUES $ 927,771 $ 545,100
EXPENSES:
Advertising 126,792 133,505
Salaries & employees
Benefits 105,998 96,800
Depreciation 84,506 42,300
General & administrative 93,926 74,876
________ ________
411,222 347,481
Operating income 516,549 197,619
Other income 8,653 8,237
Income before taxes 525,202 205,856
Income taxes 199,500 (78,500)
Net income 325,702 127,356
Net income per
common share $ .09 $ .04
Weighted average number of
shares outstanding 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>
Three Months Ended
Dec 31 Dec 31
1998 1997
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating
activities:
Net income $ 325,702 $ 127,356
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation 84,507 42,300
Accounts Receivable (119,198) 71,224
Other Assets 6,270 (77,205)
Accounts Payable (52,825) (75,008)
Accrued Liabilities 1,801 (174,161)
Income Taxes 67,198 78,500
Net cash provided by (used in)
operating activities 313,455 (6,994)
Cash flows from investing activities:
Equipment & Leasehold Improvements (33,784) (152,500)
Net increase (decrease) in cash 279,671 (159,494)
Cash at beginning of period 739,596 940,716
Cash at end of period $1,019,267 $ 781,222
</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 three month period ended December 31, 1998 are not
necessarily indicative of the results that may be expected for the year
ending September 30, 1999.
All of the Company's advertising income was for services rendered to S.
J. Kechejian, M.D., P.A., Metroplex Specialties, P.A., Metro Pharmacy, Inc.
and Aldine Medical Associates, 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, 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.
-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 quarter ended December 31, 1998 and 1997, the Company had net
income of $325,702 and $127,356 respectively. Revenues consisted of $335,400
from Metroplex Specialties for lease of the Company's MRIs, $542,500 for
advertising fees, bank interest in the amount of $8,653 and rent and other
income in the amount of $49,871. The MRI income generated from Metroplex
Specialties is on a per scan basis and is expected to continue at roughly
$80,000 to $85,000 per month during the next period. The advertising income
generated from S. J. Kechejian, M.D., P.A., is an ongoing arrangement with
the Company billed at $407,500 during the quarter; the advertising income
generated from Metroplex Specialties, P.A., is an ongoing arrangement with
the Company billed at $82,500 during the quarter; the advertising income
generated from Metro Pharmacy, Inc., is an ongoing arrangement with the
Company billed at $22,500 during the quarter and the advertising income
generated from Aldine Medical Associates is an ongoing arrangement with the
company billed at $30,000 during the quarter. The quarter's revenue
constitutes a 70% increase over the same quarter in 1997.
The expenses during the quarter ended December 31, 1998 included
advertising, salaries and employee benefits, depreciation and other general
and administrative costs in the amount of $411,222. This is roughly an 18%
increase in expenses over the same quarter last year primarily due to
increased depreciation expense and other expenses associated with the MRI
equipment.
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 loaned Aldine the funds necessary for operating costs
as needed at ten percent (10%) interest. Aldine currently owes $183,611,
which loan has been extended for one year. It is not expected that the
Company will have to loan Aldine further money for operational purposes.
Aldine also pays a management service fee at a rate of $24 per patient visit
for Longview PT/OT and $8.00 per patient visit for Longview and Tyler
clinics. The management service fee for the Longview PT/OT Center is being
raised beginning January 1999 to $32 per patient visit.
The Company purchased a MRP-7000-U Permanent Magnet in September 1998
for $45,869. This equipment is installed at the Longview facility and Aldine
will pay a lease fee of $125 per scan.
-5-
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Liquidity and Capital Resources
The Company had total assets of $3,018,195 at December 31, 1998.
Advertising income is expected to continue at approximately $247,500 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 is researching the viability of a Hitachi Mobile MRI. The
purchase price of the purposed MRI is $825,000 and the Company expects to
make a decision in February, 1999.
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 protocal. The Company is using this
"pod" to refine current protocals and develop new protocols as needed.
-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: February 11, 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> 3-MOS 3-MOS
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1997
<PERIOD-START> OCT-01-1998 OCT-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 1,019,267 781,222
<SECURITIES> 0 0
<RECEIVABLES> 189,475 117,075
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,208,742 898,297
<PP&E> 2,485,536 1,466,922
<DEPRECIATION> (676,083) (383,983)
<TOTAL-ASSETS> 3,018,195 1,981,236
<CURRENT-LIABILITIES> 374,536 183,538
<BONDS> 0 0
0 0
0 0
<COMMON> 35,900 35,900
<OTHER-SE> 2,607,759 1,761,798
<TOTAL-LIABILITY-AND-EQUITY> 3,018,195 1,981,236
<SALES> 0 0
<TOTAL-REVENUES> 936,424 553,337
<CGS> 0 0
<TOTAL-COSTS> 411,222 347,481
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 199,500 78,500
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 325,702 127,356
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
