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 September 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number:0-17821
ALLION HEALTHCARE, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2962027
- -------------------------------- -------------------
(State or other jurisdiction of (I.R.S Employer
incorporation or organization Identification No.)
33 Walt Whitman Road, Suite 200A Huntington Station, NY 11746
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code...(516) 547-6520
---------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 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
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Outstanding at
Class of Common Stock SEPTEMBER 30, 1999
--------------------- ------------------
$.01 par value 2,500,000
Transitional small business disclosure format (check one):
YES NO X
---- ----
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
Index
PART I. FINANCIAL INFORMATION Page
Financial Statements:
Consolidated Balance Sheet
September 30, 1999 (Unaudited) 3
Consolidated Statement of Operations
Three Months and Eight Months Ended
September 30, 1999 (Unaudited) 4
Consolidated Statement of Cash Flows
Three Months and Eight Months Ended
September 30, 1999 (Unaudited) 5
Notes to Consolidated Financial Statements 6-7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K 10
Signatures 11
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
-----------------------------------------
ASSETS Sept. 30,1999
------ -------------
CURRENT:
Cash and cash equivalents $ 11,071
Accounts receivable, net of allowance
for doubtful accounts of $ (34,002) 1,479,781
Inventories (Note 4) 100,884
Note receivable (Note 7) 312,922
Prepaid expenses and other current assets 32,084
----------
TOTAL CURRENT ASSETS 1,936,742
PROPERTY AND EQUIPMENT, at cost, $ 18,284
less accumulated depreciation and
amortization of ($ 2,438)
TOTAL PROPERTY AND EQUIPMENT 15,846
-----------
$ 1,952,588
===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
-----------------------------
CURRENT:
Revolving Credit Line Note payable to bank $ 1,798,386
Trade Accounts Payable 170,294
Interest Payable 32,750
Accrued expenses and other current liabilities 408,241
-----------
TOTAL CURRENT LIABILITIES 2,409,671
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; shares authorized
5,000,000; issued and outstanding 2,500,000 25,000
Additional paid-in capital 975,000
Purchase of warrants (Note 8) (500,000)
Accumulated deficit (957,083)
----------
TOTAL STOCKHOLDERS' EQUITY (457,083)
-----------
$ 1,952,588
===========
See accompanying notes to consolidated financial statements.
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
-----------------------------------------
Three months ended Eight months ended
Sept. 30, 1999 Sept. 30, 1999
-------------- --------------
NET SALES $ 1,882,711 $ 8,749,019
COST OF GOODS SOLD 1,579,431 6,085,517
----------- -----------
Gross profit 303,280 2,663,502
----------- -----------
OPERATING EXPENSES:
Selling, general and
administrative expenses 1,210,300 3,509,749
----------- -----------
Total operating expenses 1,210,300 3,509,749
----------- -----------
Loss from operations (907,020) (846,247)
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (119,923) (464,950)
Miscellaneous income -- 2,243
----------- -----------
Total other income (expense) (119,923) (462,707)
----------- -----------
INCOME FROM DISCONTINUED OPERATIONS 302,000 351,871
----------- -----------
NET LOSS $ (724,943) $ (957,083)
=========== ===========
NET LOSS PER CONTINUING OPERATIONS $ (.41) $ (.52)
=========== ===========
NET LOSS PER SHARE - BASIC $ (.29) $ (.38)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 2,500,000 2,500,000
=========== ===========
See accompanying notes to consolidated financial statement
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
-----------------------------------------
Three months ended Eight months ended
Sept. 30,1999 Sept. 30,1999
------------- -------------
OPERATING ACTIVITIES:
Net loss (724,943) (957,083)
Adjustments to reconcile net loss to
net cash provided by (used in) operating
activities:
Depreciation and amortization 2,239 42,696
Charge to accounts receivable 417,065 2,559,344
Provision for bad debt -- 58,000
Changes in operating assets and liabilities:
Accounts receivable 1,269,773 1,350,776
Inventory 45,575 150,200
Prepaid expenses and other assets (30,430) (32,084)
Accounts payable and accrued expenses 253,014 465,879
------------ ------------
Net cash provided by (used in) 1,232,293 3,637,728
operating activities
INVESTING ACTIVITIES:
Purchase of property and equipment (7,507) (18,284)
------------ ------------
Net cash provided by (used in)
investing activities (7,507) (18,284)
FINANCING ACTIVITIES:
Proceeds from sale of Common Stock -- 1,000,000
Proceeds from draws of Note Payable 1,995,000 7,915,000
Purchase of all outstanding warrants -- (500,000)
Repayment of Note Payable (3,259,426) (12,047,656)
Net cash provided by (used in)
financing activities (1,264,426) (3,632,656)
NET Change in Cash for Periods
Ended September 30, 1999 ( 39,640) (13,212)
CASH, BEGINNING OF PERIOD 50,711 24,283
------------ ------------
CASH, END OF PERIOD $ 11,071 $ 11,071
============ ============
See accompanying notes to consolidated financial statements.
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO INTERIM PERIODS IS
UNAUDITED)
-----------------------------------------
1. Basis of Presentation
---------------------
The consolidated financial statements of Allion Healthcare, Inc. and
Subsidiaries include the accounts of Allion Healthcare, Inc., its 100%
owned subsidiaries, Mail Order Meds of New York, Inc., The Care Group of
Texas, Inc., Careline of Houston, Inc., Mail Order Meds, Inc., and
Commonwealth Certified Home Care, Inc. All significant intercompany
balances and transactions have been eliminated.
2. Interim Periods
---------------
The financial statements for the three months ended September 30, 1999
are unaudited but, in the opinion of management, include all
adjustments, consisting of normal recurring accruals, necessary for fair
presentation of financial position and results of operations. Results
for the interim periods are not necessarily indicative of the results
for a full year.
3. Confirmation of Plan of Reorganization
--------------------------------------
The United States Bankruptcy Court for the Western District of Texas
entered an order confirming the Company's First Amended Plan of
Reorganization on February 1, 1999. In accordance with generally
accepted accounting principles, and court order, The Company was
required to adopt "fresh start" reporting, which valued all assets and
liabilities at their fair values as of the effective date. The financial
statements are not comparable with those prepared prior to confirmation
because they are, in effect, those of a new company.
4. Inventories
-----------
Inventories at September 30, 1999 were comprised of pharmaceuticals.
5. Issuance of Common Stock to Creditors
-------------------------------------
The Company's plan of reorganization requires the Company to issue a
total of 500,000 shares of its new Common Stock to creditors holding
allowed unsecured claims on a pro rata basis. The company is attempting
to complete legal review and compliance and will attempt to issue these
shares during the fourth quarter of 1999.
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO INTERIM PERIODS IS
UNAUDITED) (CONTINUED)
-----------------------------------------
6. Priority Claim
--------------
The Company has objected to the priority claim filed by United
Healthcare, Inc. The Company believes this claim is unsecured and
plans to vigorously defend its position.
7. Sale of Houston, Texas Operation
--------------------------------
On June 25, 1999, the Company sold certain assets of its Houston,Texas
office including all licenses, inventory and names related to its
operations in Houston, Texas. The Company will retain all accounts
receivable for services rendered prior to June 25, 1999. As a result,
the Company has discontinued all its operations in Houston, Texas as of
June 25, 1999. The proceeds of the sale were $2,820,805, including
$2,420,805 in cash and a note for $400,000. In addition, the Company has
taken a $2,092,408 charge to Accounts Receivable for its Houston
Operations.
8. Warrants
--------
On June 30, 1999, the Company repurchased all outstanding warrants to
purchase its common stock that had been issued. There had been a total
of 750,000 warrants issued to HCFP, Inc., in connection with its new
financing agreement. The Company repurchased these warrants for
$500,000.
9. Sale of Commonwealth Certified Home Care, Inc.
----------------------------------------------
The Company sold all of its records, specified contracts and licenses,
operating certificates and permits of Commonwealth relating to the
operation of a certified home health agency in exchange for $302,000.
The sale was consummated in August 1999 after receipt of required
approvals from the State of New York
10. Settlement of Claim with the IRS
------------------------------------
The United States Bankruptcy Court for the Western District of Texas
entered an order confirming the settlement of the IRS's claim against
the Company on September 28, 1999. The Company has agreed to pay
$130,000 over the next six years to satisfy the IRS's claim. The Company
will not carry forward any net operating losses or credits available
from pre-1999 periods, into post-1998 tax years. Also, the Company will
not carry back any net operating losses to pre-1999 tax years. The
Company will have no federal income tax liability from any periods prior
to January 1, 1999. In addition, the IRS will not conduct any further
audits of the Company for periods prior to January 1, 1999.
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
-----------------------------------------
This report contains certain forward looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act, which are
intended to be covered by the safe harbors created thereby. Although the Company
believes that the assumptions underlying the forward looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward looking statements
contained in this report will prove to be accurate. Factors that could cause
actual results to differ from the results specifically discussed in the forward
looking statements include, but are not limited to, the absence of anticipated
contracts, higher than historical costs incurred in performance of contracts or
in conducting other activities, future economic, competitive and market
conditions, the outcome of legal proceedings, as well as management business
decisions.
Results of Operations
- ---------------------
THREE MONTHS ENDED SEPTEMBER 30, 1999
- -------------------------------------
NET SALES: Net sales of the Company's mail order medications divisions were
$1,882,711 in the three months ended September 30, 1999.
GROSS PROFIT: Gross profit was 16.10% of sales in the three months ended
September 30, 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses were $1,210,300 in the three months ended September 30,
1999.
OTHER INCOME (EXPENSE): Other expense during the three months ended September
30, 1999 was ($119,923).
INCOME TAXES: There was no tax provision due to the fact that the Company had an
operating loss for the eight months ended September 30, 1999.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES: At September 30, 1999, the Company had a cash
balance of $11,071. Inventories at September 30, 1999 were $100,884. In
addition, the Company has a revolving credit facility in the amount of $4.0
million available to the Company for short-term borrowings. Borrowings under the
facility bear interest at Prime + two percent and are collateralized by a
perfected and primary security interest in all assets, accounts receivable,
trademarks, licenses, and values of any kind of the Company. At September 30,
1999, borrowings under this facility were $1,798,386.
The Company believes that its existing capital resources will enable it to
maintain its current and planned operations for at least 12 months from the date
hereof.
YEAR 2000 COMPLIANCE: The Company utilizes and is dependent upon data processing
systems and software to conduct its business. The data
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------------
processing systems and software include those developed and maintained by the
Company's third-party data processing vendors and software which is run on
in-house computer networks. During the first quarter of fiscal 1999, the Company
initiated a review and assessment of all hardware and software to confirm that
it will function properly in the year 2000.
With respect to internal systems, the results of that evaluation to date have
not revealed any year 2000 issues that, in the Company's opinion, cannot be
remedied in a timely manner; and therefore are not expected to create a material
risk of disruption of operations. With respect to outside vendors, those
vendors, which have responded, have indicated that their hardware or software is
or will be year 2000 compliant in time frames that meet regulatory requirements.
Evaluations of these issues is continuing and there can be no assurance that
additional issues, not presently known to the Company, will not be discovered
which could present a material risk of disruption to the Company's operations.
The Company has spent approximately $65,000 on system upgrades for Y2K
compliance this year. The Company anticipates that it may need to spend an
additional $25,000 on compliance issues for the remainder of this year.
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1-5: Are not applicable.
Item 6: : Exhibits and Reports on Form 8-K
--------------------------------
There were no reports on Form 8-K filed during the quarter
ended September 30, 1999.
Exhibit 27 - Financial Data Schedule
<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Quarterly Report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: November 15, 1999
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
----------------------------------------
(Registrant)
By: Michael P. Moran
----------------------------------------
Michael P. Moran
President, Chief Executive Officer
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 11,071
<SECURITIES> 0
<RECEIVABLES> 1,479,781
<ALLOWANCES> 34,002
<INVENTORY> 100,884
<CURRENT-ASSETS> 1,936,742
<PP&E> 18,284
<DEPRECIATION> 2,438
<TOTAL-ASSETS> 1,952,588
<CURRENT-LIABILITIES> 2,409,671
<BONDS> 0
0
0
<COMMON> 2,500,000
<OTHER-SE> (457,088)
<TOTAL-LIABILITY-AND-EQUITY> 1,952,588
<SALES> 1,882,711
<TOTAL-REVENUES> 1,882,711
<CGS> 1,579,431
<TOTAL-COSTS> 1,579,431
<OTHER-EXPENSES> 1,210,300
<LOSS-PROVISION> (907,020)
<INTEREST-EXPENSE> 119,923
<INCOME-PRETAX> (724,943)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 302,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (724,943)
<EPS-BASIC> (.29)
<EPS-DILUTED> (.29)
</TABLE>
