-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OE2kLZVwBQ169sy1HD4J9QRrGMYxJR2/ODP1phgM4CKUaADSurF47Y/+/8n7UPFF 1sbMWK8bTMfp3Pidzx13EA== 0000909012-02-000621.txt : 20020814 0000909012-02-000621.hdr.sgml : 20020814 20020814182510 ACCESSION NUMBER: 0000909012-02-000621 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLION HEALTHCARE INC CENTRAL INDEX KEY: 0000847935 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 112962027 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-17821 FILM NUMBER: 02738461 BUSINESS ADDRESS: STREET 1: 33 WALT WHITMAN ROAD SUITE 200A CITY: HUNGINTON STATION STATE: NY ZIP: 11746 BUSINESS PHONE: 5165476520 MAIL ADDRESS: STREET 1: 33 WALT WHITMAN ROAD SUITE 200A CITY: HUNGINTON STATION STATE: NY ZIP: 11746 FORMER COMPANY: FORMER CONFORMED NAME: CARE GROUP INC DATE OF NAME CHANGE: 19920703 10QSB 1 t24572.txt 6/30/02 - QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 000-17821 ALLION HEALTHCARE, INC. (Exact name of registrant as specified in its charter) DELAWARE 11-2962027 -------- ---------- (State or other jurisdiction (I.R.S.Employer Identification No.) of incorporation) 33 WALT WHITMAN ROAD, SUITE 200A HUNTINGTON STATION, NEW YORK 11746 - ------------------------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (631) 547-6520 Check 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 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 ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. As of June 30, 2002, the total number of outstanding shares of the Registrant's common stock was 3,100,000. Transitional small business disclosure format (check one): YES __ NO X ---- TABLE OF CONTENTS PAGE ---- PART I. FINANCIAL INFORMATION Item 1: Financial Statements: Condensed Consolidated Balance Sheet as of June 30, 2002 (Unaudited) ..............................................3 Condensed Consolidated Statements of Operations for the Six Months Ended June 30, 2002 and 2001 (Unaudited)...........4 Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2002 and 2001 (Unaudited)...........5 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001 (Unaudited) .................6 Notes to Condensed Consolidated Financial Statements..........7 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations........................................8-11 PART II. OTHER INFORMATION Item 4: Submission of Matters to a Vote of Security Holders...11 Item 6: Exhibits and Reports on Form 8-K .....................11 Signatures....................................................13 2 ALLION HEALTHCARE, INC. PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) ASSETS JUNE 30, 2002 - ------ ------------- CURRENT ASSETS: Cash and cash equivalents $ 621,014 Accounts receivable, (net of allowance for doubtful accounts of $276,605) 2,092,959 Inventories 591,519 Prepaid expenses and other current assets 48,678 --------- Total current assets 3,354,170 Property and equipment, net 253,169 Intangible assets, net 744,000 Deferred financing costs 456,391 Other assets 46,229 ---------- Total assets $ 4,853,959 ========== LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable and accrued expenses $ 2,648,334 Accrued deferred financing costs 440,512 Note payable 1,500,000 Current portion of capital lease obligation 41,625 Current portion of long-term debt 14,980 ---------- Total current liabilities 4,645,451 LONG TERM LIABILITIES: Capital lease obligation 137,264 Other 114,714 ---------- Total long term liabilities 251,978 STOCKHOLDERS' DEFICIT: Preferred stock,$.01 par value; shares authorized 20,000,000; issued and outstanding 1,179,168 11,791 Common stock, $.01 par value; shares authorized 80,000,000; issued and outstanding 3,100,000 31,000 Additional paid-in capital 4,133,213 Accumulated deficit (4,219,474) ------------ Total stockholders' deficit (43,470) ------------ Total liabilities and stockholders' deficit $ 4,853,959 ==========
See notes to condensed consolidated financial statements. 4
ALLION HEALTHCARE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Six months ended June 30, 2002 2001 ----------- ---------- Net sales $ 12,153,994 $ 5,595,938 Cost of goods sold 10,374,300 4,699,418 ------------ ----------- Gross profit 1,779,694 896,520 Operating expenses: Selling, general and administrative expenses 2,061,504 1,365,541 ------------ ----------- Operating loss (281,810) (469,021) Interest expense (46,381) (59,364) ------------ ----------- Loss before income taxes (328,191) (528,385) Provision for income taxes 10,451 8,096 ------------ ----------- Net loss $ (338,642) $ (536,481) ============ =========== Basic and diluted loss per common share Net loss $ (.11) $ (.17) ============ =========== Basic and diluted weighted average of common shares outstanding 3,100,000 3,100,000 ============ ===========
See notes to condensed consolidated financial statements. 5
ALLION HEALTHCARE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three months ended June 30, 2002 2001 ---------- ---------- Net sales $ 6,223,676 $ 2,910,982 Cost of goods sold 5,331,654 2,490,148 ----------- ----------- Gross profit 892,022 420,834 Operating expenses: Selling, general and administrative expenses 1,102,445 717,754 ----------- ----------- Operating loss (210,423) (296,920) Interest expense (20,902) (27,418) ----------- ----------- Loss before income taxes (231,325) (324,338) Provision for income taxes 3,800 842 ----------- ----------- Net loss $ (235,125) $ (325,180) =========== =========== Basic and diluted loss per common share Net loss $ (.08) $ (.10) =========== =========== Basic and diluted weighted average of common shares outstanding 3,100,000 3,100,000 =========== ===========
See notes to condensed consolidated financial statements. 6
ALLION HEALTHCARE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six months ended June 30, 2002 2001 ----------- ---------- OPERATING ACTIVITIES: Net loss $ (338,642) $ (536,481) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Non-cash compensation - 10,000 Depreciation and amortization 174,649 6,168 Provision for doubtful accounts 23,852 34,536 Changes in operating assets and liabilities: Accounts receivable (255,176) 49,395 Inventories (332,491) (10,176) Prepaid expenses and other current assets ( 51,453) (133,043) Accounts payable and accrued expenses 866,054 98,818 --------- ---------- Net cash provided by (used in) operating activities 86,793 (480,783) --------- ---------- INVESTING ACTIVITIES: Purchase of property and equipment (17,545) ( 13,741) ---------- ---------- Net cash used in investing activities (17,545) ( 13,741) ---------- ---------- FINANCING ACTIVITIES: Net proceeds from sale of Preferred Stock - 987,902 Proceeds from draws of line of credit 1,450,000 - Repayment of line of credit (2,443,936) - Repayment of long-term debt ( 13,758) - ---------- ---------- Net cash provided by (used in) financing activities (1,007,694) 987,902 ---------- ---------- Net (decrease) increase in cash and cash equivalents (938,446) 493,378 Cash and cash equivalents, beginning of period 1,559,460 727,981 ---------- ---------- Cash and cash equivalents, end of period $ 621,014 $1,221,359 ============ ===========
Supplemental disclosure of non-cash financing activities: Equipment acquired under capital lease obligations amounted to $185,000 in 2002. Deferred financing costs were incurred for ongoing financing activities in the amount of $440,512 in 2002. See notes to condensed consolidated financial statements. 7 ALLION HEALTHCARE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2002 NOTE A BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Article 2 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The operating results for the six months ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. For further information, refer to the consolidated financial statements and footnotes thereto included in Allion Healthcare, Inc.'s (the "Company") Annual Report on Form 10-KSB for the year ended December 31, 2001. NOTE B DEFERRED FINANCING COSTS Costs associated with the Company's currently planned equity financing have been deferred and will be charged to equity upon the successful closing of the equity financing or written off to expense if the equity financing is not successful. NOTE C ACQUISITIONS AND INTANGIBLE ASSETS On July 27, 2001, the Company acquired certain assets of the Specialty Care Pharmacy Division of Prescripticare, L.L.C. ("SCPD"). The results of operations attributable to SCPD have been included in the Company's financial statements since July 27, 2001. The purchase price for SCPD was $1,411,000. The Company has not paid the final $10,000 due to Prescripticare, L.L.C. due to a dispute concerning accounts payable at the time of the acquisition. On September 14, 2001, the Company sold certain assets of SCPD not related to the Company's core business to New Geri Care of Brooklyn, L.L.C. The sales price for such assets was $475,000, which included a one-time consulting fee, plus the fair market value of certain inventory. The Company is involved in a dispute with New Geri Care of Brooklyn, L.L.C. regarding the payment for the inventory. 8 The following pro forma results were developed assuming the acquisition of SCPD and sale of certain assets occurred January 1, 2001. Three Months Ended Six Months Ended June 30, June 30, 2001 2001 ------------------ ------------------ Revenue $ 5,360,985 $ 10,186,719 Net loss $ (310,205) $ (596,540) Loss per share $ (.10) $ (.19) Other intangible assets as of June 30, 2002 and December 31, 2001 are as follows: JUNE 30, 2002 DECEMBER 31, 2001 -------------------- ------------------------- ACCUMULATED ACCUMULATED COST AMORTIZATION COST AMORTIZATION ---- ------------ ---- ------------ Other intangible assets: Customer lists $ 865,000 $ (157,750) $ 865,000 $ ( 71,250) Other 45,000 ( 8,250) 45,000 ( 3,750) ---------------------- ---------------------- Total $ 910,000 $ (166,000) $ 910,000 $ ( 75,000) ========= =========== ========= =========== Amortization of other intangible assets for the six months ended June 30, 2002 was approximately $ 91,000. The annual amortization expense on these assets for the years 2002 through 2005 will be approximately $ 182,000 per year. The annual amortization expense for 2006 will be approximately $ 106,000. ALLION HEALTHCARE, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our condensed consolidated financial statements and notes thereto included elsewhere in this Report. This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The forward-looking statements included herein and any expectations based on such forward-looking statements are subject to risks and uncertainties and other important factors, including, without limitation, the Company's cash constraints, the Company's limited operating history, the ability of the Company to market its customized packaging system and the acceptance of such system by healthcare providers and patients, the ability of the Company to manage its growth with a limited management team, the ability of the Company to integrate acquisitions, and the other risks and uncertainties described from time to time in the Company's public announcements and SEC filings, including without limitation the Company's Quarterly and Annual Reports on Forms 10-QSB and 10-KSB, respectively. 9 RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2002 AND 2001 NET SALES Net sales for the six months ended June 30, 2002 increased to $12,153,994 from $5,595,938 for the six months ended June 30, 2001, an increase of 117.19%. This increase is attributable primarily to the Company's acquisition of the Specialty Care Pharmacy Division of Prescripticare, L.L.C. in July 2001. GROSS PROFIT Gross profit was $1,779,694 and $896,520 for the six months ended June 30, 2002 and 2001, respectively, and represents 14.64% and 16.02% of net sales, respectively. The decrease in gross margin reflects a change in the prescription therapy and payor mix, as well as prescription reimbursement pricing pressure. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses were $2,061,504 and $1,365,541 for the six months ended June 30, 2002 and 2001, respectively, and represent 16.96% and 24.40% of net sales, respectively. The increase in selling, general and administrative expenses in absolute dollars is attributable to an increase in clinical, administrative and sales personnel. The decrease in selling, general and administrative expenses expressed as a percentage of net sales is attributable to the increase in net sales. OPERATING LOSS Operating losses were $281,810 and $469,021 for the six months ended June 30, 2002 and 2001, respectively and represents 2.31% and 8.38% of net sales, respectively. This improvement is attributable to the increase in net sales and was offset by an increase in selling, general and administrative expenses. INTEREST EXPENSE Interest expense was $46,381 and $59,364 for the six months ended June 30, 2002 and 2001, respectively. The Company repaid amounts outstanding under its revolving credit line during 2001 resulting in a decrease in interest expense in the six months ended June 30, 2002. PROVISION FOR INCOME TAXES The Company recorded a provision for income taxes of $10,451 and $8,096 for the six months ended June 30, 2002 and 2001, respectively. The provision for income taxes relates primarily to franchise tax payments and accruals. NET LOSS The Company recorded net losses of $338,642 and $536,481 for the six months ended June 30, 2002 and 2001, respectively. This improvement is attributable to the increase in net sales, the decrease in interest expense, and was offset by an increase in selling, general and administrative expenses. 10 THREE MONTHS ENDED JUNE 30, 2002 AND 2001 NET SALES Net sales for the three months ended June 30, 2002 increased to $6,223,676 from $2,910,982 for the six months ended June 30, 2001, which is an increase of $3,312,694 and represents an increase of 113.79%. This increase is attributable primarily to the Company's acquisition of the Specialty Care Pharmacy Division of Prescripticare, L.L.C. in July 2001. GROSS PROFIT Gross profit was $892,022 and $420,834 for the three months ended June 30, 2002 and 2001, respectively, and represents 14.33% and 14.45% of net sales, respectively. The decrease in gross margin reflects a change in the prescription therapy and payor mix, as well as prescription reimbursement pricing pressure. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses were $1,102,445 and $717,754 for the three months ended June 30, 2002 and 2001, respectively, and represent 17.71% and 24.65% of net sales, respectively. The increase in selling, general and administrative expenses in absolute dollars is attributable to an increase in clinical, administrative and sales personnel. The decrease in selling, general and administrative expenses expressed, as a percentage of net sales is attributable to the increase in net sales. OPERATING LOSS Operating losses were $210,423 and $296,920 for the three months ended June 30, 2002 and 2001, respectively and represents 3.38% and 10.19% of net sales, respectively. This improvement is attributable to the increase in net sales and was offset by an increase in selling, general and administrative expenses. INTEREST EXPENSE Interest expense was $20,902 and $27,418 for the three months ended June 30, 2002 and 2001, respectively. The Company repaid amounts outstanding under its revolving credit line during 2001 resulting in a decrease in interest expense in the three months ended June 30, 2002. PROVISION FOR INCOME TAXES The Company recorded a provision for income taxes of $3,800 and $842 for the three months ended June 30, 2002 and 2001, respectively. The provision for income taxes relates primarily to franchise tax payments. 11 NET LOSS The Company recorded net losses of $235,145 and $325,180 for the three months ended June 30, 2002 and 2001, respectively. This improvement is attributable to the increase in net sales, the decrease in interest expense, and was offset by an increase in selling, general and administrative expenses. LIQUIDITY AND CAPITAL RESOURCES The Company purchases the medications it needs to fill prescriptions from wholesalers who require that almost all purchases are made in cash. The Company is reimbursed by third party payors, on average, within 30 days after a prescription is filled and a claim is submitted in the appropriate format. Accordingly, the Company needs significant cash resources to operate. At June 30, 2002, the Company's cash balance was $621,014. In addition, the Company has a revolving credit facility in the amount of $4.0 million available for short-term borrowings, with an expiration date of April 21, 2003. Borrowings under the facility bear interest at prime rate plus two percent and are collateralized by a perfected and primary security interest in all assets, accounts receivable, trademarks, and licenses of the Company. At June 30, 2002, borrowings under this facility were $0. The Company had secured a loan from a bank for $1,500,000 that bears interest at 4.75% per annum, with the full principal payable in March of 2003. If the Company does not have sufficient available cash to repay the loan, it will need to extend the term of this loan for an additional year. In the past, the lender has been willing to extend the term, but there can be no assurance that the lender will continue to do so. The Company is currently planning to secure equity financing, and has deferred the related costs incurred of approximately $ 440,000. However, there can be no assurance that it will be able to secure any financing on terms acceptable to the Company. ALLION HEALTHCARE, INC. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not Applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On June 24, 2002, the Company held its annual meeting of stockholders, at which the stockholders voted for: 12 1. the election of three directors; 2. to ratify an increase in the Company's authorized capital stock approved in May 2000; 3. to approve amendments to the Company's Certificate of Incorporation to (a) increase the authorized shares of Common Stock to 80,000,000 shares, (b) increase the authorized shares of Preferred Stock to 15,000,000 shares, and (c) delete Article VIII of the Company's Certificate of Incorporation which limits the Company's ability to act by written consent; 4. to approve the Company's 2002 Stock Option Plan; and 5. to ratify the selection of BDO Seidman, LLP as the Company's independent accountants. The nominees for election to the Company's Board of Directors received the following votes: FOR WITHHOLD --- -------- John Pappajohn 3,060,291 1,218,877 Dr. Derace Schaffer 3,060,291 1,218,877 Michael P. Moran 3,060,291 1,218,877 With respect to the ratification of a prior increase in the authorized capital stock of the Company, 1,881,123 votes were cast in favor of the proposal, 0 votes were cast against the proposal and there were 1,218,877 abstentions and broker non-votes. With respect to the proposal to amend the Company's Certificate of Incorporation, 3,060,291 votes were cast in favor of the proposal, 0 votes were cast against the proposal and there were 1,218,877 abstentions and broker non-votes. With respect to the proposal to approve the Company's 2002 Stock Option Plan, 3,060,291 votes were cast in favor of the proposal, 0 votes were cast against the proposal and there were 1,218,877 abstentions and broker non-votes. With respect to the proposal to ratify the selection of BDO Seidman, LLP to serve as the Company's independent public accountants, 3,060,291 votes were cast in favor of the proposal, 0 votes were cast against the proposal, and there were 1,218,877 abstention and no broker non-votes. 13 ITEM 5. OTHER INFORMATION. Not Applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are included herein: None. (b) Reports on Form 8-K: Current report on Form 8-K, filed on May 21, 2002. SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALLION HEALTHCARE, INC. Date: August 14, 2002 By: /S/ MICHAEL P. MORAN ------------------------- Michael P. Moran Director, President, Chief Executive Officer, and Secretary By: /S/ BROUGHAN E. GOREY -------------------------------- Broughan E. Gorey Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----