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
--------------
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.
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(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 (631) 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 MARCH 31, 2000
--------------------- --------------
$.01 par value 3,096,813
Transitional small business disclosure format (check one):
YES NO X
--- --
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
Financial Statements:
Condensed Consolidated Balance Sheet as of
March 31, 2000 (Unaudited) 3
Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 2000 and
Two Months Ended March 31, 1999 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 2000 and
Two Months Ended March 31, 1999 (Unaudited) 5
Notes to Condensed Consolidated Financial
Statements 6-8
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 9
Signatures 9
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS March 31,2000
------ -------------
CURRENT:
Cash and cash equivalents $ 764,979
Accounts receivable, net 929,544
Inventories 95,094
Note receivable 302,264
Prepaid expenses and other
current assets 52,128
---------
Total current assets 2,144,009
PROPERTY AND EQUIPMENT, net 26,682
OTHER ASSETS 20,219
----------
$ 2,190,910
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT:
Accounts payable $ 237,340
Accrued expenses and other
current liabilities 593,381
Revolving credit line -
Note payable 1,500,000
----------
Total current liabilities 2,330,721
STOCKHOLDERS' DEFICIT:
Preferred stock,$.01 par value; shares
authorized 5,000,000; issued and
outstanding 512,500 5,125
Common stock, $.01 par value; shares
authorized 20,000,000; issued and
outstanding 3,096,813 30,000
Additional paid-in capital 2,116,975
Unearned compensation (25,500)
Accumulated deficit (2,266,411)
------------
TOTAL STOCKHOLDERS' DEFICIT (139,811)
------------
$ 2,190,910
============
See notes to condensed consolidated financial statements.
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended Two months ended
March 31, 2000 March 31, 1999
-------------- --------------
NET SALES $ 2,120,492 $ 1,114,462
COST OF GOODS SOLD 1,704,515 826,258
----------- -----------
Gross profit 415,977 288,204
OPERATING EXPENSES:
Selling, general and
administrative expenses 616,707 634,131
----------- -----------
Operating loss (200,730) (345,927)
----------- -----------
OTHER:
Interest expense (192,070) (131,244)
Other income, net 36,540 --
----------- -----------
Total other income (expense) (155,530) (131,244)
----------- -----------
LOSS BEFORE INCOME TAXES (356,260) (477,171)
PROVISION FOR INCOME TAXES 915 --
----------- -----------
LOSS FROM CONTINUING OPERATIONS (357,175) (477,171)
----------- -----------
INCOME FROM DISCONTINUED OPERATIONS
NET OF TAX PROVISION OF $37,000
AND $47,000, RESPECTIVELY 107,371 139,213
----------- -----------
NET LOSS $ (249,804) $ (337,958)
=========== ===========
BASIC AND DILUTED INCOME (LOSS) PER
COMMON SHARE
Continuing operations $ (.12) $ (.19)
Discontinued operations .04 .05
----------- -----------
Net loss $ (.08) $ (.14)
=========== ===========
BASIC AND DILUTED WEIGHTED AVERAGE
OF COMMON SHARES OUTSTANDING 3,096,813 2,500,000
=========== ===========
See notes to condensed consolidated financial statements
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three months ended Two months ended
March 31,2000 March 31,1999
------------- -------------
OPERATING ACTIVITIES:
Net loss (249,804) (337,958)
Adjustments to reconcile net loss to
net cash provided by(used in)operating
activities:
Income from discontinued operations 107,371 139,213
Non-cash compensation 7,500 --
Depreciation and amortization 1,245 111
Provision for doubtful accounts 80,820 264,109
Changes in operating assets and liabilities:
Accounts receivable 127,105 (277,735)
Inventory (376) (41,778)
Prepaid expenses and other assets 125,465 61,906
Accounts payable and accrued expenses 27,130 (61,922)
----------- -----------
Net cash provided by (used in)
operating activities 226,456 (254,054)
----------- -----------
INVESTING ACTIVITIES:
Note receivable 24,129 --
Purchase of property and equipment (9,402) --
----------- -----------
Net cash provided by investing activities 14,727 --
----------- -----------
FINANCING ACTIVITIES:
Proceeds from sale of Preferred Stock 1,025,000 --
Proceeds from exercise of stock
options and warrants 17,100 --
Proceeds from sale of Common Stock -- 1,000,000
Proceeds from draws of line of credit 1,720,000 1,985,000
Repayment of line of credit (2,555,175) (2,689,473)
----------- -----------
Net cash provided by
financing activities 206,925 295,527
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 448,108 41,473
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 316,871 --
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 764,979 $ 41,473
=========== ===========
See notes to condensed consolidated financial statements.
<PAGE>
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
---------------------
The consolidated financial statements of Allion Healthcare, Inc.
and Subsidiaries (the "Company") include the accounts of the Company and its
three wholly owned subsidiaries; MOMSPharmacy.com, Mail Order Meds, Inc. and
Mail Order Meds of New York, Inc. All significant inter-company balances and
transactions have been eliminated in consolidation.
2. Inventories
-----------
Inventories at March 31, 2000 were comprised of pharmaceuticals.
3. Note Payable
------------
The Company has a promissory note in the amount of $1,500,000 that
is due and payable on March 31, 2001. The note bears interest at 8.5% annually
and the Company is required to make monthly interest payments. The note was
guaranteed by a Director of the Company, in exchange for 375,000 warrants to
purchase common stock of the Company at a price of $1.00 per share.
4. Interim Periods
---------------
The financial statements for the three months ended March 31, 2000
and the two months ended March 31, 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. These consolidated financial statements should be read in
conjunction with the Company's December 31, 1999 consolidated financial
statements and notes thereto.
5. 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.
6. Discontinued Operations
-----------------------
On June 25, 1999, the Company sold certain assets of its Houston,
<PAGE>
Texas operation including all licenses, inventory customer lists and names. 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 payable on June 30, 2000. The Company has recorded
$2,683,000 in bad debt expense representing all accounts receivable from Houston
uncollected as of December 31, 1999. In addition, the Company sold all of its
records, specified contracts and licenses, operating certificates and permits of
Commonwealth Certified Home Care, Inc., a certified home health agency, for
$302,000. The sale was consummated in August 1999 in accordance with the
confirmation order from the Bankruptcy Court. Accordingly, results from the
Houston, Texas and Commonwealth Certified Home Care operations are shown as
discontinued operations with the prior year restated.
7. Settlement of Claim with the I.R.S.
-----------------------------------
The United States Bankruptcy Court entered an order confirming the
settlement of the I.R.S. claim against the Company on September 29, 1999. The
Company has agreed to pay $130,000 over the next six years to satisfy the I.R.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 I.R.S. will not conduct any further audits of the Company
for periods prior to January 1, 1999, provided that the terms of the Bankruptcy
Court's confirmation order of February 1, 1999 apply.
8. Issuance of Common Stock to Creditors
-------------------------------------
The holders of approximately $7,844,000 of trade and other
miscellaneous claims received a total of 500,000 shares of common stock, issued
on a pro-rata basis. The stock certificates were distributed in February 2000.
9. Warrants
--------
On June 30, 1999 the Company purchased 750,0000 warrants
previously issued to a lender in connection with its financing agreement for
$500,000. In 1999, the Company recorded the payment as prepaid interest and has
amortized the entire balance as of March 31, 2000.
10. Issuance of Preferred Stock
---------------------------
During the quarter ended March 31, 2000, the Company issued
512,500 shares of Series A Convertible Preferred Stock in exchange for
$1,025,000. These securities were issued pursuant to Rule 506 under Section
4(2), 4(6) of the Securities Act.
<PAGE>
11. Settlement of Lawsuit
---------------------
On January 4, 2000, the Company settled a pending lawsuit whereby
the Company will receive $121,580. The payments began in January 2000.
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 MARCH 31, 2000 COMPARED TO THE TWO MONTHS ENDED MARCH 31,
- --------------------------------------------------------------------------------
1999
- ----
NET SALES: Net sales of the Company's mail order medications divisions were
$2,120,492 for the three months ended March 31, 2000 and $1,114,462 for the two
months ended March 31,1999. Monthly average net sales of specialty prescription
medication increased by 27% during the first quarter of 2000 as compared to
February and March, 1999.
GROSS PROFIT: Gross profit was 19.62% of sales for the three months ended March
31, 2000 and 25.86% for the two months ended March 31, 1999. The decrease was
reflective of a change in prescription therapy and payor mix, as well as
prescription reimbursement pricing pressure.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses were $611,707 for the three months ended March 31, 2000
and $634,131 for the two months ended March 31, 2000. The decrease in selling
general and administrative expenses is attributable to a reduction in
administrative personnel.
OTHER INCOME (EXPENSE): Other income (expense) during the three months ended
March 31, 2000 was ($155,530) and ($131,244) for the two months ended March 31,
1999. For the three months ended March 31, 2000, other income (expense) is
comprised of interest expense and the net gain from the Company's settlement of
a lawsuit.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES: At March 31, 2000 and March 31, 1999 the
Company had cash balances of $764,979 and $41,473 respectively. Inventories at
March 31, 2000 and March 31, 1999 were $95,094 and $233,950 respectively. 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 March 31, 2000 and March 31,
1999, the borrowings under this facility were $0 and $4,569,654.
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.
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
--------------------------------
There were no reports on Form 8-K filed during the quarter
ended March 31, 2000.
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: May 15, 2000
ALLION HEALTHCARE, INC. AND SUBSIDIARIES
-----------------------------------------
(Registrant)
By: /s/ Michael P. Moran
-------------------------
Michael P. Moran, Director,
President, Chief Executive Officer,
Chief Financial Officer, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 764,979
<SECURITIES> 0
<RECEIVABLES> 1,169,513
<ALLOWANCES> 239,969
<INVENTORY> 95,094
<CURRENT-ASSETS> 2,144,009
<PP&E> 30,061
<DEPRECIATION> 3,379
<TOTAL-ASSETS> 2,190,910
<CURRENT-LIABILITIES> 2,330,721
<BONDS> 0
0
5,125
<COMMON> 30,000
<OTHER-SE> (174,936)
<TOTAL-LIABILITY-AND-EQUITY> 2,190,910
<SALES> 2,120,492
<TOTAL-REVENUES> 2,120,492
<CGS> 1,704,515
<TOTAL-COSTS> 1,704,515
<OTHER-EXPENSES> 616,707
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 192,070
<INCOME-PRETAX> (356,260)
<INCOME-TAX> 915
<INCOME-CONTINUING> (357,175)
<DISCONTINUED> 107,371
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> (.08)
<EPS-DILUTED> (.08)
</TABLE>
