<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, 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, 1999,
14,360,000 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 - December 31, 1999 and
September 30, 1999 1
Statements of Operations - Three Months
Ended December 31, 1999 and 1998 2
Statements of Cash Flow - Three Months Ended
December 31, 1999 and 1998 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, 1999 Sep 30, 1999
Unaudited Audited
<S> <C> <C>
Current assets:
Cash $1,171,445 $ 592,548
Accounts receivable-affiliate 64,130 178,360
Other assets 9,742 45,587
Income tax receivable - 121,320
_________ _________
Total current assets 1,245,317 937,815
_________ _________
_________ _________
Property, equipment & leasehold
improvements 3,824,721 3,824,721
Less accumulated depreciation (1,154,831) (1,027,307)
_________ _________
2,669,890 2,797,414
_________ _________
$3,915,207 $3,735,229
_________ _________
_________ _________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 227,197 $ 226,350
Accrued liabilities 270 57,956
Income taxes payable 14,772 -
________ _________
Total current liabilities 242,239 284,306
________ _________
Deferred income taxes 69,502 69,502
Stockholders' equity:
Preferred stock, $.01 par, 100,000
shares authorized, none issued - -
Common stock-par value of $0.0025
per share; authorized 20,000,000,
issued 14,360,000 shares 35,900 35,900
Additional paid-in capital 831,166 831,166
Retained earnings 2,736,400 2,514,355
_________ _________
Total stockholders' equity 3,603,466 3,381,421
_________ _________
$3,915,207 $3,735,229
_________ _________
_________ _________
</TABLE>
The accompanying notes are an integral part of these financial
statements
-1-
<PAGE>
ALLIANCE HEALTH, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
Dec 31, Dec 31,
1999 1998
(Unaudited) (Unaudited)
<S> <C> <C>
REVENUES $ 986,667 $ 927,771
EXPENSES:
Advertising 173,564 126,792
Salaries & employees
Benefits 192,382 105,998
Depreciation 127,524 84,506
General & administrative 149,612 93,926
________ ________
643,082 411,222
________ ________
Operating income 343,585 516,549
Other income 14,551 8,653
Income before taxes 358,136 525,202
Income taxes 136,092 199,500
________ ________
Net income 222,044 325,702
________ ________
________ ________
Net income per
common share $ .015 $ .022
________ ________
________ ________
Weighted average number of
shares outstanding 14,360,000 14,360,000
__________ __________
__________ __________
</TABLE>
The accompanying notes are an integral part of the financial
statements.
-2-
<PAGE>
ALLIANCE HEALTH, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
Dec 31 Dec 31
1999 1998
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating
activities:
Net income $ 222,044 $ 325,702
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation 127,524 84,507
Changes in assets and liabilities:
Accounts receivable 114,231 (119,198)
Other assets 35,845 6,270
Accounts payable 847 (52,825)
Accrued liabilities (57,686) 1,801
Income taxes 136,092 67,198
Net cash provided by
operating activities 578,897 313,455
Cash flows from investing activities:
Equipment & leasehold improvements - (33,784)
Net increase in cash 578,897 279,671
Cash at beginning of period 592,548 739,596
Cash at end of period $1,171,445 $1,019,267
</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, 1999 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, 1999 are not
necessarily indicative of the results that may be expected for the year
ending September 30, 2000.
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 of K Clinics, P.A. ("K Clinic") 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. Stock Split
The Company announced a 4-1 split of its common shares, effective
December 24, 1999. All share and per share amounts in the accompanying
financial statements have been retroactively adjusted to reflect the effects
of the split.
-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, 1999 and 1998, the Company had net
income of $222,044 and $325,702 respectively. Revenues consisted of $376,500
from Metroplex Specialties for lease of the Company's MRIs, $532,500 for
advertising fees, bank interest in the amount of $14,551 and rent and other
income in the amount of $75,292. 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 GE 9800 CAT
Scanner generated $2,375 in revenue for the quarter ended December 31, 1999.
Advertising income generated during the quarter ended December 31, 1999
is from an ongoing arrangement with the following companies: S. J. Kechejian,
M.D., P.A. billed at $382,500, Metroplex Specialties billed at $82,500, Metro
Pharmacy billed at $22,500 and Aldine Medical Associates billed at $45,000.
The combined quarter revenue constitutes a 6% increase over the same period
in 1998.
The expenses during the quarter ended December 31, 1999 included
advertising, salaries and employee benefits, depreciation and other general
and administrative costs in the amount of $643,082. This is a 56% increase
in expenses over the same period last year. Advertising expenses account for
36% of the increase. The primary reason for this is an increase in the
number of billboards being contracted for, the cost of addition television
and radio spots and increased commercial production costs. The other 20% is
allocated to general administrative expenses primarily associated with the
mobile MRI, such as insurance, maintenance and depreciation. There was also
an increase in salaries, computer related expenses and interest on the note
for purchasing the building at 238 W. Tenth St., Dallas, Texas.
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 has paid the
start up loan and the company has loaned additional funds for operating in
the amount of $64,881. 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 $12.00 per patient visit for PT/OT
and CAT Scan and $6.00 per visit for clinic patients.
Y2K issues had been addressed and all hardware and software was
compliant. The Company has experienced no problems, inhouse or with outside
vendors and business associations, in the year 2000.
-5-
<PAGE>
Liquidity and Capital Resources
The Company had total assets of $3,915,207 at December 31, 1999.
Advertising income is expected to continue at approximately $175,000 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 and on July 30, 1999 in Mesquite,
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 management and
administrative processes which will help ensure future expansion. The Board
of Directors has appointed a committee to analyze the feasibility of
purchasing K Clinics, Associated for stock and/or money. This committee is
to report the finding at the next Board of Directors meeting.
The East Texas division, which presently includes two clinics, 2
physical therapy centers, a mobile MRI magnet and a CAT scanner, is the test
group for the standardized protocol. The Longview Clinic and PT/OT Center
and the Tyler PT/OT Center are housed in facilities leased from Alliance
Health, Inc.
-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, 2000 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-30-1999 SEP-30-1998
<PERIOD-START> OCT-01-1999 OCT-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 1,171,445 1,019,267
<SECURITIES> 0 0
<RECEIVABLES> 73,872 189,475
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,245,317 1,208,742
<PP&E> 3,824,721 2,485,536
<DEPRECIATION> 1,154,831 676,083
<TOTAL-ASSETS> 3,915,207 3,018,195
<CURRENT-LIABILITIES> 311,741 374,536
<BONDS> 0 0
0 0
0 0
<COMMON> 35,900 35,900
<OTHER-SE> 3,567,566 2,607,759
<TOTAL-LIABILITY-AND-EQUITY> 3,915,207 3,018,195
<SALES> 0 0
<TOTAL-REVENUES> 1,001,218 936,424
<CGS> 0 0
<TOTAL-COSTS> 643,082 411,222
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 136,092 199,500
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 222,044 325,702
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
