<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, 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 March 31, 2000,
14,360,000 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
Report of Independent Public Accountants 1
Balance Sheets - June 30, 2000 and
September 30, 1999 2
Statements of Income - Three Months
and Nine Months Ended June 30, 2000 and 1999 3
Statements of Cash Flows - Nine Months Ended
June 30, 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
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Alliance Health, Inc.
We have reviewed the accompanying balance sheets of Alliance Health, Inc.
as of June 30, 2000, and the related statements of income for the three
month and nine month periods then ended and statement of cash flows for the
nine month periods then ended. These financial statements are the
responsibility 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 sheet
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
July 19, 2000
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ALLIANCE HEALTH, INC.
PART I - FINANCIAL INFORMATION
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
Jun 30, 2000 Sep 30, 1999
Unaudited Audited
------------ ------------
<S> <C> <C>
Current assets:
Cash $2,045,003 $ 592,547
Accounts receivable-affiliate 22,208 177,961
Other assets 36,564 45,587
Income Tax Receivable 0 121,320
--------- ---------
Total current assets 2,103,775 937,415
Property & equipment 3,846,859 3,824,721
Less accumulated depreciation (1,410,406) (1,027,307)
_________ _________
2,436,453 2,797,414
_________ _________
Total Assets $4,540,228 $3,734,829
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable-affiliate $ 23,826 $ 57,558
Accrued liabilities 26,327 26,350
Current portion of long-term debt 4,616 4,035
Income taxes payable 104,988 0
________ _________
Total current liabilities 159,757 87,943
-------- ---------
Long term debt, less current maturities 192,148 195,965
Deferred income taxes 69,502 69,502
-------- ---------
Total Liabilities 421,407 353,410
-------- ---------
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 3,251,755 2,514,353
_________ _________
Total stockholders' equity 4,118,821 3,381,419
_________ _________
Total Liabilities and Equity $4,540,228 $3,734,829
========== ==========
</TABLE>
See accompanying notes and accountant's report.
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ALLIANCE HEALTH, INC.
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Jun 30, 2000 Jun 30, 1999 Jun 30,2000 Jun 30, 1999
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
REVENUES $1,184,097 $1,046,918 $3,262,953 $2,984,950
EXPENSES:
Advertising 250,397 225,084 689,993 570,318
Salaries & Employee
Benefits 147,585 96,398 393,450 326,373
Depreciation 128,051 118,414 383,099 309,788
General & Administration 283,816 187,304 665,429 462,736
------- ------- --------- ---------
809,849 627,200 2,131,971 1,669,215
Operating income 374,248 419,718 1,130,982 1,315,735
Other Income 25,056 10,192 58,373 27,715
------- ------- --------- ---------
Income before taxes 399,304 429,910 1,189,355 1,343,450
Taxes 151,736 173,415 451,955 531,960
------- ------- --------- ---------
Net income $ 247,568 $ 256,495 $ 737,400 $ 811,490
========== ========== ========== ==========
Net income per
common share $ 0.02 $ 0.02 $ 0.05 $ 0.06
========== ========== ========== ==========
Weighted average number
of shares outstanding 14,360,000 14,360,000 14,360,000 14,360,000
========== ========== ========== ==========
</TABLE>
See accompanying notes and accountant's report.
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ALLIANCE HEALTH, INC.
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Nine Months Ended
Jun 30, 2000 Jun 30, 1999
<S> <C> <C>
Cash flows from operating
activities:
Net income $ 737,400 $ 811,490
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation 383,099 309,788
Deferred income taxes 0 105,208
Changes in assets and liabilities:
Accounts receivable 156,152 (169,109)
Other assets 9,023 (11,514)
Federal income taxes payable 226,308 0
Accounts payable (33,732) (43,750)
Accrued liabilities (24) 0
Net cash provided by
operating activities $1,478,226 $1,002,113
---------- ----------
Cash flows from investing activities:
Purchase of equipment (22,135) (1,081,835)
__________ __________
Cash flows from financing activities:
Accounts receivable - affiliates (399) 0
Proceeds from long-term debt (3,236) 0
Net cash used by financing ---------- ----------
activities (3,635) 0
Net increase(decrease) in cash 1,452,456 (79,722)
Cash at beginning of period 592,547 739,596
__________ __________
Cash at end of period $2,045,003 $ 659,874
========== ==========
</TABLE>
See accompanying notes and accountant's report.
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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 nine month period ended June 30, 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.
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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, 2000 and 1999, the Company had net
income of $737,400 and $811,490 respectively. Revenues consisted of
$1,667,500 for advertising fees, rent and other income in the amount of
$333,653 and $1,261,800 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 nine months ended June 30,
2000, is from an ongoing arrangement with the following companies: S. J.
Kechejian, M.D., P.A. billed at $1,192,500, Metroplex Specialties billed at
$232,500, Metro Pharmacy billed at $67,500 and Aldine Medical Associates
billed at $165,000. The combined nine months revenue constitutes a 9.31%
increase over the same period in 1999. The increase in revenue is due to
additional locations in S. J. Kechejian, M.D., P.A. paying advertising
revenues.
The expenses during the nine months ended June 30, 2000, included
advertising, salaries and employee benefits, depreciation and other general
and administrative costs in the amount of $2,131,971. This is a 28%
increase in expenses over the same period last year. The primary reasons
for this are an increase in contributions and donations and a significant
increase in administrative costs. The Company is sponsoring nonprofit
organizations in an effort to build a positive image and for name
recognition of our client K Clinic. The Company initially paid
administrative costs to K Clinics, Associated in the amount of $2,749 (the
equivalent of one person). In January 1999, it was determined that a more
equitable arrangement, due to increased patients and additional services,
would be 75% of management fees received.
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,
$22,208 of which is owed at June 30, 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.
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Liquidity and Capital Resources
The Company had total assets of $4,540,228 at June 30, 2000.
Advertising 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 and include feasibility and cost analysis to expand in 2000-
2001, if the Board pursues the purchase of the management and administrative
systems of K Clinics, Associated. A property in Haltom City was put on
contract in May 2000 with an escrow deposit of $10,000. The Company closed
on the Haltom City property for $203,083 on July 12, 2000 and expects to
begin improvements on the building within 30 days.
Other properties for expansion are being researched and negotiations
are in progress for a contract on a property in Sherman, Texas.
The East Texas Division, which presently includes two clinics, two
physical therapy centers, a CAT scanner and availability of the mobile MRI,
has been the test group for the standardized protocol. The East Texas group
has proven to be successful with the inclusion of the Physical Therapy
Rehabilitation Centers. The Longview Clinic, PT/OT Center and the Tyler
PT/OT Center are housed in facilities leased from Alliance Health, Inc.
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ALLIANCE HEALTH, INC.
PART II - OTHER INFORMATION
None.
-8-
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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: July 24, 2000 By: Sarkis J. Kechejian, M.D.
Sarkis J. Kechejian, M.D.
President, Director and
Treasurer
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