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, 2000
[ ] 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, 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
Report of Independent Public Accountants 1
Balance Sheets - March 31, 2000 and
September 30, 1999 2
Statements of Income - Three Months
and Six Months Ended March 31, 2000 and 1999 3
Statements of Cash Flows - Six Months Ended
March 31, 2000 and 1999 4
Notes to Financial Statements 5
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6-7
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Alliance Health, Inc.
We have reviewed the accompanying balance sheets of Alliance Health, Inc. as of
March 31, 2000, and the related statements of income for the three month and
six month periods then ended and the statement of cash flows for the three month
and six month periods then ended. These financial statements are the responsibi-
lity of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of analytical procedures applied to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of Alliance Health, Inc. as of September 30, 1999,
and the related statements of income and cash flows for the year then ended
(not presented separately herein), and in our report dated November 10, 1999 we
expressed an unqualified opinion on those financial statements. In our opinion,
the information set forth in the accompanying balance hsset as of September 30,
1999 is fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.
Jackson & Rhodes P.C.
Dallas, Texas
May 5, 2000
<PAGE>
ALLIANCE HEALTH, INC.
PART I - FINANCIAL INFORMATION
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
Mar 31, 2000 Sep 30, 1999
Unaudited Audited
<S> <C> <C>
Current assets:
Cash $1,711,764 $ 592,547
Accounts receivable-affiliate 43,119 177,961
Other assets 3,897 45,587
Income Tax Receivable 0 121,320
--------- ----------
Total current assets 1,758,780 937,415
Property & equipment 3,824,721 3,824,721
Less accumulated depreciation (1,282,355) (1,027,307)
--------- ---------
2,542,366 2,797,414
--------- ---------
Total Assets $4,301,146 $3,734,829
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable-trade 1,278 $ 57,558
Accrued liabilities 22,927 26,350
Current portion of long-term debt 4,528 4,035
Income taxes payable 138,322 0
-------- ---------
Total current liabilities 167,055 87,943
-------- ---------
Long term debt, less current maturities 193,336 195,965
Deferred income taxes 69,502 69,502
-------- ----------
Total Liabilities 429,893 353,410
-------- ----------
Stockholders' equity:
Preferred stock, $.01 par, 100,000
shares authorized, none issued
Common stock, $0.01 par, 20,000,000
shares authorized, 14,360,000 shares
issued and outstanding 143,600 143,600
Additional paid-in capital 723,466 723,466
Retained earnings 3,004,187 2,514,353
--------- ---------
Total stockholders' equity 3,871,253 3,381,419
--------- ---------
Total Liabilities and Equity $4,301,146 $3,734,829
========= =========
</TABLE>
The accompanying notes are an integral part of these financial
statements
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<PAGE>
ALLIANCE HEALTH, INC.
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Mar 31, 2000 Mar 31, 1999 Mar 31, 2000 Mar 31, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $1,092,189 $1,010,261 $2,078,856 $1,938,032
--------- --------- --------- ---------
EXPENSES
Advertising 266,032 218,443 439,596 345,234
Salaries & Employee
Benefits 106,183 123,978 245,865 229,975
Depreciation 127,524 106,867 255,048 191,374
General & Administrative 179,301 181,505 381,613 275,432
--------- -------- --------- --------
679,040 630,793 1,322,122 1,042,015
--------- -------- --------- ---------
Operating income 413,149 379,468 756,734 896,017
Other Income 18,766 8,870 33,317 17,523
--------- -------- --------- ---------
Income before taxes 431,915 388,338 790,051 913,540
Taxes 164,127 159,045 300,219 358,545
--------- -------- --------- --------
Net income $ 267,788 $229,293 $ 489,832 $ 554,995
======== ======= ======== ========
Net income per
common share $ 0.02 $ 0.02 $ 0.03 $ 0.04
========= ======= ======== ========
Weighted average number of
shares outstanding 14,360,000 14,360,000 14,360,000 14,360,000
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
ALLIANCE HEALTH, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
Mar 31, 2000 Mar 31, 1999
-----------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 489,832 $ 554,995
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 255,048 191,374
Accounts receivable 135,241 (85,920)
Other assets 41,691 7,500
Accounts payable and accrued
liabilities (62,238) 68,430
Income taxes 259,642 84,326
--------- -------
Net cash provided by
operating activities 1,119,216 820,705
--------- -------
Cash flows from investing activities:
Purchase of equipment 0 (849,651)
--------- --------
Net increase (decrease) in cash 1,119,216 (28,946)
Cash at beginning of period 592,548 739,596
--------- --------
Cash at end of period $1,711,764 $710,650
========= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<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 six month period ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year ending
September 30, 2000.
All of the Company's income was for leases or 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.
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.
-5-
<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 six months ended March 31, 2000 and 1999, the Company had net
income of $489,832 and $554,995 respectively. Revenues consisted of $1,097,500
for advertising fees, rent and other income in the amount of $183,456 and
$794,400 from Metroplex Specialties for lease of the Company's MRI. 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.
Advertising income generated during the six months ended March 31, 2000,
is from an ongoing arrangement with the following companies: S. J. Kechejian,
M.D., P.A. billed at $780,000, Metroplex Specialties billed at $157,500, Metro
Pharmacy billed at $45,000 and Aldine Medical Associates billed at $105,000 The
combined six months revenue constitutes a 7.26% increase over the same period in
1999.
The expenses during the six months ended March 31, 2000, included
advertising, salaries and employee benefits, depreciation and other general and
administrative costs in the amount of $1,322,122. This is a 27% increase in
expenses over the same period last year. The primary reason for this is an
increase in the number of billboards being contracted for, the cost of
additional television and radio spots and increased commercial production costs
and general administrative expenses primarily associated with the mobile MRI,
such as insurance, maintenance and depreciation.
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, $43,870
of which is owed at March 31, 2000. The Company expects the balance of this loan
to be paid by September 30, 2000. Aldine pays management service fees on a per
patient visit and these fees vary depending on services given. The Company is
currently subcontracting with K Clinic to perform the medical billing and
administrative functions at the rate of 75% of fees charged to the medical
facility.
-6-
<PAGE>
Liquidity and Capital Resources
The Company had total assets of $4,301,146 at March 31, 2000. Advertis-
ing income is expected to continue at approximately $165,000 per month and may
increase if S. J. Kechejian, M.D., P.A., Aldine Medical Associates or Metroplex
Specialties, P.A. opens additional facilities or adds new medical services.
The Company 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 in July, 1999 in Mesquite, Texas. A tractor was
purchased in June, 1999 for $97,787 to move the mobile MRI.
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 the
management and administrative systems of K Clinics, Associated for stock and/or
cash. The Board has requested a business plan be drawn up for expansion in
2000-2001 and be presented at the next Board of Directors meeting.
The East Texas Division, which presently includes two clinics, 2
physical therapy centers, a CAT scanner and availability of the mobile MRI, 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.
-7-
<PAGE>
ALLIANCE HEALTH, INC.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
None.
-8-
<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 10, 2000 By: Sarkis J. Kechejian, M.D.
Sarkis J. Kechejian, M.D.
President, Director and
Treasurer
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1999 SEP-30-1999
<PERIOD-START> OCT-01-1999 OCT-01-1998
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 1,711,764 710,650
<SECURITIES> 0 0
<RECEIVABLES> 47,016 139,408
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,758,780 850,058
<PP&E> 3,824,721 3,313,536
<DEPRECIATION> (1,282,355) (782,949)
<TOTAL-ASSETS> 4,301,146 3,380,645
<CURRENT-LIABILITIES> 429,893 507,693
<BONDS> 0 0
143,600 143,600
0 0
<COMMON> 0 0
<OTHER-SE> 3,727,653 2,729,352
<TOTAL-LIABILITY-AND-EQUITY> 4,301,146 3,380,645
<SALES> 0 0
<TOTAL-REVENUES> 2,112,173 1,955,555
<CGS> 0 0
<TOTAL-COSTS> 1,322,122 1,042,015
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 300,219 358,545
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 489,832 554,995
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
