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, 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 JUNE 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
June 30, 1999 (Unaudited) 3
Consolidated Statement of Operations
Three Months and Five Months Ended
June 30, 1999 (Unaudited) 4
Consolidated Statement of Cash Flows
Three Months and Five Months Ended
June 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 June 30,1999
------ ------------
CURRENT:
Cash and cash equivalents $ 50,711
Accounts receivable, net of allowance
for doubtful accounts of $( 58,000) 3,079,541
Inventories (Note 4) 146,459
Note receivable (Note 7) 400,000
Prepaid expenses and other current assets 1,454
----------
TOTAL CURRENT ASSETS 3,678,165
PROPERTY AND EQUIPMENT, at cost, $ 6,387
less accumulated depreciation and
amortization of ($ 199)
Total Property and Equipment 6,188
OTHER 200
$ 3,684,553
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT:
Revolving Credit Line Note payable to bank $ 3,062,812
Trade Accounts Payable 116,218
Interest Payable 59,198
Accrued expenses and other current liabilities 178,465
------------
TOTAL CURRENT LIABILITIES 3,416,693
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)
Retained earnings (232,140)
-------------
TOTAL STOCKHOLDERS' EQUITY 267,860
$ 3,684,553
See accompanying notes to consolidated financial statements.
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
============================
Three months ended Five months ended
June 30, 1999 June 30, 1999
------------- -------------
NET SALES $4,170,879 $6,866,308
COST OF GOODS SOLD 2,770,167 4,506,086
--------- ---------
Gross profit 1,400,712 2,360,222
--------- ---------
OPERATING EXPENSES:
Selling, general and
administrative expenses 1,411,287 2,299,449
--------- ---------
Total operating expenses 1,411,287 2,299,449
--------- ---------
Income (Loss) from operations (10,575) 60,773
---------- ---------
OTHER INCOME (EXPENSE):
Interest expense (223,978) (345,027)
Miscellaneous income 258 2,243
-------- --------
Total other income (expense) (223,720) (342,784)
--------- ---------
INCOME FROM DISCONTINUED OPERATIONS 49,871 49,871
--------- -------
NET LOSS $ (184,424) $ (232,140)
========== ==========
NET LOSS PER CONTINUING OPERATIONS $ (.09) $ (.11)
========== ==========
NET LOSS PER SHARE - BASIC $ (.07) $ (.09)
========== ==========
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 Five months ended
June 30,1999 June 30,1999
------------ ------------
OPERATING ACTIVITIES:
Net loss (184,424) (232,140)
Adjustments to reconcile net loss to
net cash provided by(used in)operating
activities:
Depreciation and amortization 13,579 40,457
Charge to accounts receivable 2,142,279 2,142,279
Provision for bad debt 35,000 58,000
Changes in operating assets and liabilities:
Accounts receivable 463,442 81,003
Inventory 146,403 104,625
Prepaid expenses and other assets 2,093 (1,654)
Accounts payable and accrued expenses (3,769) 212,865
----------- -----------
Net cash provided by (used in) 2,614,603 2,405,435
operating activities
INVESTING ACTIVITIES:
Purchase of property and equipment (10,777) (10,777)
----------- -----------
Net cash provided by (used in)
investing activities (10,777) (10,777)
FINANCING ACTIVITIES:
Proceeds from sale of Common Stock -- 1,000,000
Proceeds from draws of Note Payable 3,935,000 5,920,000
Purchase of all outstanding warrants ( 500,000) (500,000)
Repayment of Note Payable (6,167,870) 8,788,230)
Net cash provided by (used in)
financing activities (2,732,870) (2,368,230)
NET Change in Cash for Periods
ended June 30, 1999 (129,044) 26,428
CASH, BEGINNING OF PERIOD 179,755 24,283
----------- -----------
CASH, END OF PERIOD $ 50,711 $ 50,711
=========== ===========
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 June 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 June 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 anticipates
that it will have completed legal review and compliance to issue these
shares in September 1999.
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO INTERIM PERIODS IS
UNAUDITED) (CONTINUED)
==================================================
6. Taxes and Priority Claims
-------------------------
The Company has objected to priority claims filed by United Healthcare,
Inc. and the IRS. The Company believes these claims are unsecured
claims 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.
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
- ---------------------
THREE MONTHS ENDED JUNE 30, 1999
- --------------------------------
NET SALES: Net sales of the Company's home health care and mail order
medications divisions were $4,170,879 in the three months ended June 30, 1999.
GROSS PROFIT: Gross profit was 33.58% of sales in the three months ended June
30, 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses were $1,411,287 in the three months ended June 30, 1999.
There were approximately $170,000 in expenses related to the Houston sale.
OTHER INCOME (EXPENSE): Other expense during the three months ended June 30,
1999 was ($223,720).
INCOME TAXES: There was no tax provision due to the fact that the Company had an
operating loss for the three months ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES: At June 30, 1999, the Company had a cash
balance of $50,711. Inventories at June 30, 1999 were $146,459. 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 + 2% 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 June 30, 1999 borrowings under this
facility were $3,062,812.
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 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 been contacted, have indicated that their hardware or
software is or will be year 2000
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
---------------------------------------------------------
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.
Forward Looking Statements: 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.
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6: : Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibts
27.1 Financial Data Schedule
(b) There were no reports on Form 8-K filed during the
quarter ended June 30, 1999.
<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: August 15, 1999
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
------------------------------------------
(Registrant)
By: /s/Michael P. Moran
--------------------------------------
Michael P. Moran
President, Chief Executive Officer
and Chief Financial Officer
<PAGE>
EXHIBITS
Exhibit
Number Description of Document
------ -----------------------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 50,711
<SECURITIES> 0
<RECEIVABLES> 3,079,541
<ALLOWANCES> 58,000
<INVENTORY> 146,459
<CURRENT-ASSETS> 3,678,165
<PP&E> 6,387
<DEPRECIATION> 199
<TOTAL-ASSETS> 3,684,553
<CURRENT-LIABILITIES> 3,416,693
<BONDS> 0
0
0
<COMMON> 2,500,000
<OTHER-SE> 267,860
<TOTAL-LIABILITY-AND-EQUITY> 3,684,553
<SALES> 4,170,879
<TOTAL-REVENUES> 4,170,879
<CGS> 2,770,167
<TOTAL-COSTS> 2,811,999
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (184,242)
<INTEREST-EXPENSE> 223,978
<INCOME-PRETAX> (184,424)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 49,871
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (184,424)
<EPS-BASIC> (.09)
<EPS-DILUTED> (.09)
</TABLE>
