<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 March 31, 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 - March 31, 1999 and
September 30, 1998 1
Statements of Income - Three Months
and Six Months Ended March 31, 1999 and 1998 2
Statements of Cash Flows - Six Months Ended
March 31, 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>
Mar 31, 1999 Sep 30, 1998
Unaudited Audited
<S> <C> <C>
Current assets:
Cash $ 710,650 $ 739,596
Accounts receivable-affiliate 139,408 64,413
Other assets 0 12,134
________ ________
Total current assets 850,058 816,143
Property & equipment 3,313,536 2,451,752
Less accumulated depreciation (782,949) (591,577)
_________ _________
2,530,587 1,860,175
_________ _________
Total Assets $3,380,645 $2,676,318
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Trade $ 114,229 $ 52,825
Affiliate 24,717 21,116
Income taxes payable 334,215 249,889
________ _________
Total current liabilities 473,161 323,830
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 2,005,886 1,450,890
_________ _________
Total stockholders' equity 2,872,952 2,317,956
_________ _________
$3,380,645 $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 Six Months Ended
Mar 31, 1999 Mar 31, 1998 Mar 31, 1999 Mar 31, 1998
____________ ____________ ____________ ____________
<S> <C> <C> <C> <C>
REVENUES $1,010,261 $ 628,200 $1,938,032 $1,173,300
EXPENSES
Advertising 218,443 168,693 345,234 302,198
Salaries & Employee
Benefits 123,978 81,450 229,975 178,250
Depreciation 106,867 54,387 191,374 96,687
General & Administrative 181,505 146,371 275,432 221,247
_________ ________ _________ ________
630,793 450,901 1,042,015 798,382
Operating income 379,468 177,299 896,017 374,918
Other Income 8,870 8,199 17,523 16,436
_________ ________ _________ _________
Income before taxes 388,338 185,498 913,540 391,354
Taxes 159,045 70,500 358,545 149,000
_________ ________ _________ ________
Net income $ 229,293 $114,998 $ 554,995 $ 242,354
Net income per
common share $ .06 $ .03 $ .15 $ .07
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>
Six Months Ended
Mar 31, 1999 Mar 31, 1998
<S> <C> <C>
Cash flows from operating
activities:
Net income $ 554,995 $ 242,354
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 191,374 96,686
Accounts receivable (85,920) 122,209
Other assets 7,500 15,528
Accounts payable 68,430 (69,758)
Income taxes 84,326 (141,783)
________ _______
Net cash provided by
operating activities 820,705 265,236
________ _______
Cash flows from investing activities:
Purchase of equipment (849,651) (852,017)
________ ________
Net (decrease) in cash (28,946) (586,781)
Cash at beginning of period 739,596 940,716
________ ________
Cash at end of period $ 710,650 $353,935
</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 six month period ended March 31, 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. 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, 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 signifi-
cant 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 six months ended March 31, 1999 and 1998, the Company had net
income of $554,995 and $242,354 respectively. Revenues in 1999 consisted of
$681,900 from Metroplex Specialties for lease of the Company's MRI,
$1,060,000 for advertising fees, bank interest in the amount of $17,523 and
rent and other income in the amount of $190,632. 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 MRP-7000-U
Permanent Magnet "Cat Scanner" became operational at Longview, Texas facility
in January, 1999. This equipment is leased to Aldine at $125 per scan and has
generated $5,500 in revenue to date.
The advertising income generated during the six months ended March 31, 1999
is from an ongoing arrangement with the following companies: S. J. Kechejian,
M.D., P.A. billed at $790,000, Metroplex Specialties billed at $165,000, Metro
Pharmacy billed at $45,000 and the advertising income generated from Aldine
Medical Associates billed at $60,000. Advertising income increased significant-
ly 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 six months revenue constitutes a 65% increase over the same period in
1998.
The expenses during the six months ended March 31, 1999 included
advertising, salaries and employee benefits, depreciation and other general and
administrative costs in the amount of $1,042,015. This is roughly a 31%
increase in expenses over the same period last year. Expenses associated with
the CAT Scanner at Longview, increased depreciation, accrued taxes and other
expenses associated with the MRI equipment, such as maintenance, are the primary
factors in the increased expenses.
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 $139,408, and it is not
expected that the Company will have to loan Aldine further money for operational
purposes. Aldine also pays varying management service fees on a per patient
visit. 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>
Liquidity and Capital Resources
The Company had total assets of $3,380,645 at March 31, 1999. Advertising
income is expected to continue at approximately $180,000 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 should be
operational by May 1, 1999 in Longview, Texas. The Company expects to complete
negotiations for additional locations later this year.
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. 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: May 4, 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> 6-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1997
<PERIOD-START> OCT-01-1998 OCT-01-1997
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 710,650 353,935
<SECURITIES> 0 0
<RECEIVABLES> 139,408 56,139
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 850,058 410,074
<PP&E> 3,313,536 2,086,439
<DEPRECIATION> (782,949) (438,369)
<TOTAL-ASSETS> 3,380,645 2,058,144
<CURRENT-LIABILITIES> 507,693 145,448
<BONDS> 0 0
0 0
0 0
<COMMON> 35,900 35,900
<OTHER-SE> 2,837,052 1,876,796
<TOTAL-LIABILITY-AND-EQUITY> 3,380,645 2,058,144
<SALES> 0 0
<TOTAL-REVENUES> 1,955,555 1,189,736
<CGS> 0 0
<TOTAL-COSTS> 1,042,015 798,382
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 358,545 149,000
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 554,995 242,354
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
