Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Mar. 31, 2020 | May 01, 2020 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | ALLIED HEALTHCARE PRODUCTS INC | |
Entity Central Index Key | 0000874710 | |
Current Fiscal Year End Date | --06-30 | |
Entity Filer Category | Non-accelerated Filer | |
Trading Symbol | AHPI | |
Entity Common Stock, Shares Outstanding | 4,013,537 | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes |
STATEMENT OF OPERATIONS
STATEMENT OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | |
STATEMENT OF OPERATIONS | ||||
Net sales | $ 8,097,215 | $ 8,316,027 | $ 23,382,636 | $ 23,691,922 |
Cost of sales | 6,511,688 | 6,765,552 | 19,190,237 | 20,057,379 |
Gross profit | 1,585,527 | 1,550,475 | 4,192,399 | 3,634,543 |
Selling, general and administrative expenses | 1,890,296 | 1,903,408 | 6,617,016 | 5,975,580 |
Loss from operations | (304,769) | (352,933) | (2,424,617) | (2,341,037) |
Other (income) expenses: | ||||
Interest expense | 25,754 | 18,590 | 51,542 | 44,548 |
Interest income | (48) | (47) | (100) | (107) |
Legal settlement | 0 | (750,000) | 0 | (750,000) |
Other, net | 9 | 45 | 32 | 45 |
Nonoperating Income (Expense) | 25,715 | (731,412) | 51,474 | (705,514) |
Income (loss) before income taxes | (330,484) | 378,479 | (2,476,091) | (1,635,523) |
Provision for income taxes | 0 | 0 | 0 | 0 |
Net income (loss) | $ (330,484) | $ 378,479 | $ (2,476,091) | $ (1,635,523) |
Basic income (loss) per share | $ (0.08) | $ 0.09 | $ (0.62) | $ (0.41) |
Diluted income (loss) per share | $ (0.08) | $ 0.09 | $ (0.62) | $ (0.41) |
Weighted average shares outstanding - basic | 4,013,537 | 4,013,537 | 4,013,537 | 4,013,537 |
Weighted average shares outstanding - diluted | 4,013,537 | 4,013,537 | 4,013,537 | 4,013,537 |
BALANCE SHEET
BALANCE SHEET - USD ($) | Mar. 31, 2020 | Jun. 30, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 1,155,099 | $ 195,454 |
Accounts receivable, net of allowances of $170,000 | 3,644,766 | 3,165,289 |
Inventories, net | 6,821,211 | 7,333,095 |
Income tax receivable | 18,453 | 12,178 |
Other current assets | 312,002 | 244,908 |
Total current assets | 11,951,531 | 10,950,924 |
Property, plant and equipment, net | 3,585,970 | 4,001,081 |
Deferred income taxes | 501,891 | 501,891 |
Total assets | 16,039,392 | 15,453,896 |
Current liabilities: | ||
Accounts payable | 1,690,963 | 1,469,232 |
Customer deposits | 2,737,635 | 562,905 |
Other accrued liabilities | 2,194,647 | 1,531,407 |
Total current liabilities | 6,623,245 | 3,563,544 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Preferred stock | 0 | 0 |
Common stock; $0.01 par value; 30,000,000 shares authorized; 5,213,902 shares issued at March 31, 2020 and June 30, 2019; 4,013,537 shares outstanding at March 31, 2020 and June 30, 2019 | 52,139 | 52,139 |
Additional paid-in capital | 48,493,203 | 48,491,317 |
Accumulated deficit | (18,148,407) | (15,672,316) |
Less treasury stock, at cost; 1,200,365 shares at March 31, 2020 and June 30, 2019, respectively | (20,980,788) | (20,980,788) |
Total stockholders' equity | 9,416,147 | 11,890,352 |
Total liabilities and stockholders' equity | 16,039,392 | 15,453,896 |
Series A Preferred Stock | ||
Stockholders' equity: | ||
Preferred stock | $ 0 | $ 0 |
BALANCE SHEET (Parenthetical)
BALANCE SHEET (Parenthetical) - USD ($) | Mar. 31, 2020 | Jun. 30, 2019 |
Allowances for accounts receivable (in dollars) | $ 170,000 | $ 170,000 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 1,500,000 | 1,500,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 30,000,000 | 30,000,000 |
Common stock, shares issued | 5,213,902 | 5,213,902 |
Common stock, shares outstanding | 4,013,537 | 4,013,537 |
Treasury stock, at cost | 1,200,365 | 1,200,365 |
Series A Preferred Stock | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 200,000 | 200,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
STATEMENT OF CHANGES IN STOCKHO
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY - USD ($) | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Total |
Balance at Beginning of period at Jun. 30, 2018 | $ 52,139 | $ 48,488,220 | $ (13,562,631) | $ (20,980,788) | $ 13,996,940 |
Stock based compensation | 0 | 2,305 | 0 | 0 | 2,305 |
Net income (loss) | 0 | 0 | (1,635,523) | 0 | (1,635,523) |
Balance at End of period at Mar. 31, 2019 | 52,139 | 48,490,525 | (15,198,154) | (20,980,788) | 12,363,722 |
Balance at Beginning of period at Dec. 31, 2018 | 52,139 | 48,489,734 | (15,576,633) | (20,980,788) | 11,984,452 |
Stock based compensation | 0 | 791 | 0 | 0 | 791 |
Net income (loss) | 0 | 0 | 378,479 | 0 | 378,479 |
Balance at End of period at Mar. 31, 2019 | 52,139 | 48,490,525 | (15,198,154) | (20,980,788) | 12,363,722 |
Balance at Beginning of period at Jun. 30, 2019 | 52,139 | 48,491,317 | (15,672,316) | (20,980,788) | 11,890,352 |
Stock based compensation | 0 | 1,886 | 0 | 0 | 1,886 |
Net income (loss) | 0 | 0 | (2,476,091) | 0 | (2,476,091) |
Balance at End of period at Mar. 31, 2020 | 52,139 | 48,493,203 | (18,148,407) | (20,980,788) | 9,416,147 |
Balance at Beginning of period at Dec. 31, 2019 | 52,139 | 48,492,674 | (17,817,923) | (20,980,788) | 9,746,102 |
Stock based compensation | 0 | 529 | 0 | 0 | 529 |
Net income (loss) | 0 | 0 | (330,484) | 0 | (330,484) |
Balance at End of period at Mar. 31, 2020 | $ 52,139 | $ 48,493,203 | $ (18,148,407) | $ (20,980,788) | $ 9,416,147 |
STATEMENT OF CASH FLOWS
STATEMENT OF CASH FLOWS - USD ($) | 9 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash flows from operating activities: | ||
Net loss | $ (2,476,091) | $ (1,635,523) |
Adjustments to reconcile net loss to net cash provided (used in) by operating activities: | ||
Depreciation and amortization | 462,274 | 635,868 |
Stock based compensation | 1,886 | 2,305 |
Provision for doubtful accounts and sales returns and allowances | 21,623 | 20,178 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (501,100) | 303,444 |
Inventories | 511,884 | (62,904) |
Income tax receivable | (6,275) | (8,120) |
Other current assets | (67,094) | (39,666) |
Accounts payable | 221,731 | 359,851 |
Customer Deposits | 2,174,731 | 68,970 |
Other accrued liabilities | 663,239 | (55,440) |
Net cash provided by (used in) operating activities | 1,006,808 | (411,037) |
Cash flows from investing activities: | ||
Capital expenditures | (47,163) | 0 |
Net cash used in investing activities | (47,163) | 0 |
Cash flows from financing activities: | ||
Borrowings under revolving credit agreement | 24,224,054 | 24,375,484 |
Payments under revolving credit agreement | (24,224,054) | (23,964,749) |
Net cash provided by financing activities | 0 | 410,735 |
Net increase (decrease) in cash and cash equivalents | 959,645 | (302) |
Cash and cash equivalents at beginning of period | 195,454 | 136,112 |
Cash and cash equivalents at end of period | $ 1,155,099 | $ 135,810 |
Summary of Significant Accounti
Summary of Significant Accounting and Reporting Policies | 9 Months Ended |
Mar. 31, 2020 | |
Summary of Significant Accounting and Reporting Policies | |
Summary of Significant Accounting and Reporting Policies | 1. Summary of Significant Accounting and Reporting Policies Basis of Presentation The accompanying unaudited financial statements of Allied Healthcare Products, Inc. (the “Company”) have been prepared in accordance with the instructions for Form 10‑Q and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair presentation, have been included. Operating results for any quarter are not necessarily indicative of the results for any other quarter or for the full year. These statements should be read in conjunction with the financial statements and notes to the financial statements thereto included in the Company’s Annual Report on Form 10‑K for the year ended June 30, 2019. Adoption of new lease standard In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The new standard was effective for Allied on July 1, 2019. The Company adopted the new standard on its effective date and used the effective date as our date of initial application. Consequently, financial information recorded and the disclosures required under the new standard are not provided for dates and periods before July 1, 2019. Additionally, the Company determined that as of the effective date of the standard, it had no material impact on the financial statements or disclosures of the Company. The new standard provides a number of optional practical expedients in transition. We elected the package of practical expedients which does not require us to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. Leasing activities are not significant to Allied’s business and there is no significant change in the Company’s leasing activities upon adoption. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases with terms of less than 12 months. Environmental Remediation The Company is subject to federal and state requirements for protection of the environment, including the remediation of contaminated sites. The Company’s policy is to accrue and charge to current expense identified exposures related to environmental remediation sites when it is probable that a liability has been incurred and the amount can be reasonably estimated. The amount of the liability is based on the best estimate or the low end of a range of reasonably possible exposure for investigation, cleanup, and monitoring costs to be incurred. Estimated remediation costs are not discounted to present value. On January 30, 2020, the Company filed a Citizen Participation Plan with the New York Department of Environmental Conservation under its Brownfield Cleanup Program. The plan was filed with respect to the Company’s property in Stuyvesant Falls, New York. The plan recognizes that the soil and groundwater at the Stuyvesant Falls facility is impacted by chemical compounds exceeding regulatory standards. The Company has applied to the Brownfield Cleanup Program. Pursuant to the plan, the Company will conduct, at its expense, investigation and remediation at the site with oversight by the Department of Environmental Conservation. The Company’s best estimate of the expected cost to remediate the site is $0.9 million. This amount was recorded as an expense in the three months ended December 31, 2019 and is reflected in other accrued liabilities and selling, general and administrative expenses in the Company’s financial statements. As of March 31, 2020, the Company has paid approximately $79,000 in remediation expenses which have been charged to the initial reserve. Fair Value of Financial Instruments The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and the revolving credit facility. The carrying amounts for cash and cash equivalents, accounts receivable and accounts payable approximate their fair value due to the short maturity of these instruments. The carrying amount of the revolving credit facility approximates fair value due to the debt having a variable interest rate. Risk and Uncertainties, Going Concern, Liquidity and Management’s Plan A novel strain of coronavirus (“COVID-19”) was first identified in Wuhan, China in December 2019. On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic. To date, COVID-19 has surfaced in nearly all regions around the world and resulted in business slowdowns or shutdowns in affected areas. Despite our efforts to manage and remedy and manage the effects of this pandemic, the significance depends on factors beyond our control, including the duration and severity of the outbreak as well as third-party actions taken to contain the spread and mitigate public health efforts. For the Company this creates additional economic uncertainty. Risks for the Company include disruption in operations if a significant percentage of our workforce is unable to work due to illness, forced curtailment of business operations and business travel by governmental authorities, and failure of others in our supply chain and distribution channel to meet their obligations to us, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties. The Company believes the combination of cash on hand at March 31, 2020, cash flows from operations, additional borrowings on the credit facility (Note 6), and additional liquidity provided by the Paycheck Protection Program loan (Note 8) will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued. To the extent these measures do not provide sufficient liquidity, the Company will consider additional borrowings through the sale leaseback of its corporate headquarters and delaying certain expenditures until sufficient capital becomes available. Historically, the Company has experienced, and continues to experience, net losses and net losses from operations. Additionally, the Company expects to incur significant environmental costs that are planned to be expended over the next year (Note 1). The Company’s liquidity needs will be largely determined by the success of the Company executing management’s plan. |
Revenues
Revenues | 9 Months Ended |
Mar. 31, 2020 | |
Revenues | |
Revenues | 2. Revenues The Company’s revenues are derived primarily from the sales of respiratory products, medical gas equipment and emergency medical products. The products are generally sold directly to distributors, customers affiliated with buying groups, individual customers and construction contractors, throughout the world. The Company recognizes revenue from product sales upon the transfer of control, which is generally upon shipment or delivery, depending on the delivery terms set forth in the customer contract. Payment terms between Allied and its customers vary by the type of customer, country of sale, and the products offered. The term between invoicing and the payment due date is not significant. For certain customers or product orders, Allied may require advance payments. These contract liabilities are reflected as customer deposits on the Company's balance sheet. Management exercises judgment in estimating variable consideration. Provisions for early payment discounts, rebates and returns and other adjustments are provided for in the period the related sales are recorded. Historical data is readily available and reliable and is used for estimating the amount of the reduction in gross sales. The Company provides rebates to wholesalers. Rebate amounts are based upon purchases using contractual amount for each product sold. Factors used in the rebate calculations include the identification of which products have been sold subject to a rebate and the customer or price terms that apply. Using known contractual allowances, the Company estimates the amount of the rebate that will be paid and records the liability as a reduction of gross sales when it records the sale of the product. Settlement of the rebate generally occurs in the month following the sale. The Company regularly analyzes the historical rebate trends and makes adjustments to reserves for changes in trends and terms of rebate programs. Historically, adjustments to prior years’ rebate accruals have not been material to net income. Other allowances charged against gross sales include cash discounts and returns, which are not significant. Cash discounts are known within 15 to 30 days of sale, and therefore can be reliably estimated. Returns can be reliably estimated because the Company’s historical returns are low, and because sales return terms and other sales terms have remained relatively unchanged for several periods. Product warranties are also not significant. The Company does not allocate transaction price as the Company has only one performance obligation and its contracts do not span multiple periods. The Company operates in one segment consisting of the manufacturing, marketing and distribution of a variety of respiratory products used in the health care industry to hospitals, hospital equipment dealers, hospital construction contractors, home health care dealers and emergency medical product dealers. The Company’s product lines include respiratory care products, medical gas equipment and emergency medical products. The Company does not have any one single customer that represents more than 10 percent of total sales. Sales by region, and by product, are as follows: Sales by Region Three Months Ended Nine Months Ended March 31, March 31, 2020 2019 2020 2019 Domestic United States $ 6,142,406 $ 6,128,063 $ 17,338,254 $ 17,819,577 Europe 148,255 327,357 545,372 707,296 Canada 186,032 212,219 555,410 585,542 Latin America 782,650 515,753 2,345,441 1,642,390 Middle East 205,633 236,834 429,590 382,845 Far East 632,239 892,044 2,167,995 2,534,292 Other International — 3,757 574 19,980 $ 8,097,215 $ 8,316,027 $ 23,382,636 $ 23,691,922 Sales by Product Three Months Ended Nine Months Ended March 31, March 31, 2020 2019 2020 2019 Respiratory care products $ 2,289,920 $ 2,292,547 $ 6,507,371 $ 6,707,384 Medical gas equipment 3,848,923 4,371,944 11,453,496 12,191,622 Emergency medical products 1,958,372 1,651,536 5,421,769 4,792,916 $ 8,097,215 $ 8,316,027 $ 23,382,636 $ 23,691,922 |
Inventories
Inventories | 9 Months Ended |
Mar. 31, 2020 | |
Inventories | |
Inventories | 3. Inventories Inventories are comprised as follows: March 31, 2020 June 30, 2019 Work-in progress $ 458,675 $ 288,828 Component parts 6,694,041 7,151,228 Finished goods 1,448,757 1,693,974 Reserve for obsolete and excess inventories (1,780,262) (1,800,935) $ 6,821,211 $ 7,333,095 |
Earnings per share
Earnings per share | 9 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share | |
Earnings Per Share | 4. Earnings per share Basic earnings per share are based on the weighted average number of shares of all common stock outstanding during the period. Diluted earnings per share are based on the sum of the weighted average number of shares of common stock and common stock equivalents outstanding during the period. The number of basic and diluted shares outstanding for the three and nine months ended March 31, 2020 and 2019 were 4,013,537. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies | |
Commitments and Contingencies | 5. Commitments and Contingencies Legal Claims The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. The Company has recognized costs and associated liabilities only for those investigations, claims and legal proceedings for which in its view it is probable that liabilities have been incurred and the related amounts are estimable. Environmental Remediation As more fully described in Note 1, the Company has filed a Citizen Participation Plan with the New York Department of Environmental Conservation under its Brownfield Cleanup Program with respect to the Company’s property in Stuyvesant Falls, New York. The Plan recognizes that the soil and groundwater at the Stuyvesant Falls facility is impacted by chemical compounds exceeding regulatory standards. Pursuant to the plan, the Company will conduct, at its expense, investigation and remediation at the site. The Company’s best estimate of the expected cost to remediate the site is $0.9 million. This amount was recorded as an expense in the three months ended December 31, 2019 and is reflected in other accrued liabilities and selling, general and administrative expenses in the Company’s financial statements. As of March 31, 2020, the Company has paid approximately $79,000 in remediation expenses which have been charged to the initial reserve. Employment Contract The Company has entered into an employment contract with its chief executive officer with annual renewals. The contract includes termination without cause and change of control provisions, under which the chief executive officer is entitled to receive specified severance payments generally equal to two times ending annual salary if the Company terminates his employment without cause or he voluntarily terminates his employment with “good reason.” “Good Reason” generally includes changes in the scope of his duties or location of employment but also includes (i) the Company’s written election not to renew the Employment Agreement and (ii) certain voluntary resignations by the chief executive officer following a “Change of Control” as defined in the Agreement. |
Financing
Financing | 9 Months Ended |
Mar. 31, 2020 | |
Financing | |
Financing | 6. Financing The Company is party to a Loan and Security Agreement with North Mill Capital, LLC (“North Mill”), as successor in interest to Summit Financial Resources, L.P., dated effective February 27, 2017, as amended April 16, 2018 and April 24, 2019 (as amended, the “Credit Agreement”). Pursuant to the Credit Agreement, the Company obtained a secured revolving credit facility (the “Credit Facility”). The Company’s obligations under the Credit Facility are secured by all of the Company’s personal property, both tangible and intangible, pursuant to the terms and subject to the conditions set forth in the Credit Agreement. Availability of funds under the Credit Agreement is based on the Company’s accounts receivable but will not exceed $2,000,000. At March 31, 2020 availability under the agreement was $2.0 million. The Credit Facility will be available, subject to its terms, on a revolving basis until it expires on February 27, 2021, at which time all amounts outstanding under the Credit Facility will be due and payable. Advances will bear interest at a rate equal to 2.00% in excess of the prime rate as reported in the Wall Street Journal. Interest is computed based on the actual number of days elapsed over a year of 360 days. In addition to interest, the Credit facility requires that the Company pay the lender a monthly administration fee in an amount equal to forty-seven hundredths percent (0.47%) of the average outstanding daily principal amount of loan advances for each calendar month, or portion thereof. Regardless of the amount borrowed under the Credit Facility, the Company will pay a minimum amount of .25% (25 basis points) per month on the maximum availability ($5,000 per month). In the event the Company prepays or terminates the Credit Facility prior to February 27, 2021, the Company will be obligated to pay an amount equal to the minimum monthly payment multiplied by the number of months remaining between February 27, 2021 and the date of such prepayment or termination. Under the Credit Agreement, advances are generally subject to customary borrowing conditions and to North Mill’s sole discretion to fund the advances. The Credit Agreement also contains covenants with which the Company must comply during the term of the Credit Facility. Among other things, such covenants require the Company to maintain insurance on the collateral, operate in the ordinary course and not engage in a change of control, dissolve or wind up the Company. The Credit Agreement also contains certain events of default including, without limitation: the failure to make payments when due; the material breach of representations or warranties contained in the Credit Agreement or other loan documents; cross-default with other indebtedness of the Company; the entry of judgments or fines that may have a material adverse effect on the Company; failure to comply with the observance or performance of covenants contained in the Credit Agreement or other loan documents; insolvency of the Company, appointment of a receiver, commencement of bankruptcy or other insolvency proceedings; dissolution of the Company; the attachment of any state or federal tax lien; attachment or levy upon or seizure of the Company’s property; or any change in the Company’s condition that may have a material adverse effect. After an event of default, and upon the continuation thereof, the principal amount of all loans made under the Credit Facility would bear interest at a rate per annum equal to 20.00% above the otherwise applicable interest rate (provided, that the interest rate may not exceed the highest rate permissible under law), and would have the option to accelerate maturity and payment of the Company’s obligations under the Credit Facility. At March 31, 2020, the Company had no indebtedness. The prime rate as reported in the Wall Street Journal was 3.25% on March 31, 2020. The Company was in compliance with all of the covenants associated with the Credit Facility at March 31, 2020. |
Income Taxes
Income Taxes | 9 Months Ended |
Mar. 31, 2020 | |
Income Taxes | |
Income Taxes | 7. Income Taxes The Company accounts for income taxes under ASC Topic 740: “Income Taxes.” Under ASC 740, the deferred tax provision is determined using the liability method, whereby deferred tax assets and liabilities are recognized based upon temporary differences between the financial statement and income tax bases of assets and liabilities using presently enacted tax rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. In the three and nine months ended March 31, 2020 the Company recorded the tax benefit of losses incurred in the amount of approximately $82,000 and $623,000, respectively. As the realization of the tax benefit of the net operating loss is not assured an additional valuation allowance of a like amount was recorded. Due to the reduction in the cumulative to date loss occurring in the three months ended March 31, 2019, the Company recorded a provision for income taxes of approximately $100,000 along with a reduction in the valuation allowance for a like amount. For the nine months ended March 31, 2019 the Company recorded the tax benefit of cumulative losses incurred to date in the amount of approximately $406,000. As the realization of the tax benefit of the net operating loss is not assured an additional valuation allowance of a like amount was recorded. The total valuation allowance recorded by the Company as of March 31, 2020 and 2019 was approximately $3,348,000 and $2,606,000, respectively. To the extent that the Company’s losses continue in future quarters, the tax benefit of those losses will be subject to a valuation allowance. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Mar. 31, 2020 | |
Subsequent Events | |
Subsequent Events | 8. Subsequent Events COVID-19 On January 30, 2020 the World Health Organization (“WHO’) announced a global health emergency because of a new strain of coronavirus originating in Wuhan China and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020 the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as the date of this report. As such, it is uncertain as the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, operations, suppliers, industry and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity. The Company is dependent on its workforce to deliver its products. As an essential supplier under state and local shelter in-place orders, the Company has continued to operate through the date of this report. However, required social distancing directives and additional shelter in-place directives could impact the Company’s ability to deploy its workforce. Disruptions to the supply chain may lead to a delayed receipt by the Company of necessary raw materials and component inventory. The Company cannot estimate the length or gravity of the impact of the COVID-9 outbreak on the Company’s results of future operations, financial position, or liquidity. CARES ACT LOAN On April 22, 2020, the Company entered into a loan agreement (the “SBA Loan”) with Jefferson Bank and Trust Company under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). The Company received total proceeds of $2.375 million from the SBA Loan. In accordance with the requirements of the CARES Act, the Company will use proceeds from the SBA Loan for payroll costs and other permitted uses. The SBA Loan is scheduled to mature on April 13, 2022 and has a 1.00% interest rate and is subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. All or a portion of the SBA Loan may be forgiven by the SBA upon application by the Company beginning 60 days but not later than 120 days after loan approval and upon documentation of expenditures in accordance with the SBA requirements. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the eight week period beginning on the loan origination date, subject to regulations and guidance provided by the United States Treasury. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee in excess of $100,000, prorated annually. Not more than 25% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. In the event the SBA Loan, or any portion thereof, is forgiven pursuant to the CARES Act, the amount forgiven is applied to outstanding principal. The Company intends to seek forgiveness of the SBA Loan to the maximum extent permitted but cannot guarantee whether or to what extent such forgiveness will be granted. Payments of unforgiven principal and interest are deferred until November 2020, at which point the Company is required to repay such amounts in 18 equal monthly payments. The SBA Loan is evidenced by a promissory note, which contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. The SBA Loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties. |
Summary of Significant Accoun_2
Summary of Significant Accounting and Reporting Policies (Policies) | 9 Months Ended |
Mar. 31, 2020 | |
Summary of Significant Accounting and Reporting Policies | |
Basis of Presentation | Basis of Presentation The accompanying unaudited financial statements of Allied Healthcare Products, Inc. (the “Company”) have been prepared in accordance with the instructions for Form 10‑Q and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair presentation, have been included. Operating results for any quarter are not necessarily indicative of the results for any other quarter or for the full year. These statements should be read in conjunction with the financial statements and notes to the financial statements thereto included in the Company’s Annual Report on Form 10‑K for the year ended June 30, 2019. |
Adoption of new lease standard | Adoption of new lease standard In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The new standard was effective for Allied on July 1, 2019. The Company adopted the new standard on its effective date and used the effective date as our date of initial application. Consequently, financial information recorded and the disclosures required under the new standard are not provided for dates and periods before July 1, 2019. Additionally, the Company determined that as of the effective date of the standard, it had no material impact on the financial statements or disclosures of the Company. The new standard provides a number of optional practical expedients in transition. We elected the package of practical expedients which does not require us to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. Leasing activities are not significant to Allied’s business and there is no significant change in the Company’s leasing activities upon adoption. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases with terms of less than 12 months. |
Environmental Remediation | Environmental Remediation The Company is subject to federal and state requirements for protection of the environment, including the remediation of contaminated sites. The Company’s policy is to accrue and charge to current expense identified exposures related to environmental remediation sites when it is probable that a liability has been incurred and the amount can be reasonably estimated. The amount of the liability is based on the best estimate or the low end of a range of reasonably possible exposure for investigation, cleanup, and monitoring costs to be incurred. Estimated remediation costs are not discounted to present value. On January 30, 2020, the Company filed a Citizen Participation Plan with the New York Department of Environmental Conservation under its Brownfield Cleanup Program. The plan was filed with respect to the Company’s property in Stuyvesant Falls, New York. The plan recognizes that the soil and groundwater at the Stuyvesant Falls facility is impacted by chemical compounds exceeding regulatory standards. The Company has applied to the Brownfield Cleanup Program. Pursuant to the plan, the Company will conduct, at its expense, investigation and remediation at the site with oversight by the Department of Environmental Conservation. The Company’s best estimate of the expected cost to remediate the site is $0.9 million. This amount was recorded as an expense in the three months ended December 31, 2019 and is reflected in other accrued liabilities and selling, general and administrative expenses in the Company’s financial statements. As of March 31, 2020, the Company has paid approximately $79,000 in remediation expenses which have been charged to the initial reserve. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and the revolving credit facility. The carrying amounts for cash and cash equivalents, accounts receivable and accounts payable approximate their fair value due to the short maturity of these instruments. The carrying amount of the revolving credit facility approximates fair value due to the debt having a variable interest rate. |
Risk and Uncertainties, Going Concern, Liquidity and Management's Plan | Risk and Uncertainties, Going Concern, Liquidity and Management’s Plan A novel strain of coronavirus (“COVID-19”) was first identified in Wuhan, China in December 2019. On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic. To date, COVID-19 has surfaced in nearly all regions around the world and resulted in business slowdowns or shutdowns in affected areas. Despite our efforts to manage and remedy and manage the effects of this pandemic, the significance depends on factors beyond our control, including the duration and severity of the outbreak as well as third-party actions taken to contain the spread and mitigate public health efforts. For the Company this creates additional economic uncertainty. Risks for the Company include disruption in operations if a significant percentage of our workforce is unable to work due to illness, forced curtailment of business operations and business travel by governmental authorities, and failure of others in our supply chain and distribution channel to meet their obligations to us, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties. The Company believes the combination of cash on hand at March 31, 2020, cash flows from operations, additional borrowings on the credit facility (Note 6), and additional liquidity provided by the Paycheck Protection Program loan (Note 8) will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these financial statements are issued. To the extent these measures do not provide sufficient liquidity, the Company will consider additional borrowings through the sale leaseback of its corporate headquarters and delaying certain expenditures until sufficient capital becomes available. Historically, the Company has experienced, and continues to experience, net losses and net losses from operations. Additionally, the Company expects to incur significant environmental costs that are planned to be expended over the next year (Note 1). The Company’s liquidity needs will be largely determined by the success of the Company executing management’s plan. |
Revenues (Tables)
Revenues (Tables) | 9 Months Ended |
Mar. 31, 2020 | |
Revenues | |
Schedule of Revenue from external customers by geographic areas | The Company does not have any one single customer that represents more than 10 percent of total sales. Sales by region, and by product, are as follows: Sales by Region Three Months Ended Nine Months Ended March 31, March 31, 2020 2019 2020 2019 Domestic United States $ 6,142,406 $ 6,128,063 $ 17,338,254 $ 17,819,577 Europe 148,255 327,357 545,372 707,296 Canada 186,032 212,219 555,410 585,542 Latin America 782,650 515,753 2,345,441 1,642,390 Middle East 205,633 236,834 429,590 382,845 Far East 632,239 892,044 2,167,995 2,534,292 Other International — 3,757 574 19,980 $ 8,097,215 $ 8,316,027 $ 23,382,636 $ 23,691,922 |
Schedule of Revenue from external customers by products and services | Sales by Product Three Months Ended Nine Months Ended March 31, March 31, 2020 2019 2020 2019 Respiratory care products $ 2,289,920 $ 2,292,547 $ 6,507,371 $ 6,707,384 Medical gas equipment 3,848,923 4,371,944 11,453,496 12,191,622 Emergency medical products 1,958,372 1,651,536 5,421,769 4,792,916 $ 8,097,215 $ 8,316,027 $ 23,382,636 $ 23,691,922 |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Mar. 31, 2020 | |
Inventories | |
Schedule of Inventories | Inventories are comprised as follows: March 31, 2020 June 30, 2019 Work-in progress $ 458,675 $ 288,828 Component parts 6,694,041 7,151,228 Finished goods 1,448,757 1,693,974 Reserve for obsolete and excess inventories (1,780,262) (1,800,935) $ 6,821,211 $ 7,333,095 |
Summary of Significant Accoun_3
Summary of Significant Accounting and Reporting Policies (Details) - USD ($) | 3 Months Ended | 9 Months Ended |
Dec. 31, 2019 | Mar. 31, 2020 | |
Summary of Significant Accounting and Reporting Policies | ||
Environmental Remediation Expense | $ 900,000 | |
Payment of environmental liabilities | $ 79,000 |
Revenues (Details)
Revenues (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | |
Revenues | $ 8,097,215 | $ 8,316,027 | $ 23,382,636 | $ 23,691,922 |
Domestic United States | ||||
Revenues | 6,142,406 | 6,128,063 | 17,338,254 | 17,819,577 |
Europe | ||||
Revenues | 148,255 | 327,357 | 545,372 | 707,296 |
Canada | ||||
Revenues | 186,032 | 212,219 | 555,410 | 585,542 |
Latin America | ||||
Revenues | 782,650 | 515,753 | 2,345,441 | 1,642,390 |
Middle East | ||||
Revenues | 205,633 | 236,834 | 429,590 | 382,845 |
Far East | ||||
Revenues | $ 632,239 | 892,044 | 2,167,995 | 2,534,292 |
Other International | ||||
Revenues | $ 3,757 | $ 574 | $ 19,980 |
Revenues (Revenue from External
Revenues (Revenue from External Customers) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | |
Revenues | $ 8,097,215 | $ 8,316,027 | $ 23,382,636 | $ 23,691,922 |
Respiratory care products | ||||
Revenues | 2,289,920 | 2,292,547 | 6,507,371 | 6,707,384 |
Medical gas equipment | ||||
Revenues | 3,848,923 | 4,371,944 | 11,453,496 | 12,191,622 |
Emergency medical products | ||||
Revenues | $ 1,958,372 | $ 1,651,536 | $ 5,421,769 | $ 4,792,916 |
Inventories (Details)
Inventories (Details) - USD ($) | Mar. 31, 2020 | Jun. 30, 2019 |
Inventories | ||
Work-in progress | $ 458,675 | $ 288,828 |
Component parts | 6,694,041 | 7,151,228 |
Finished goods | 1,448,757 | 1,693,974 |
Reserve for obsolete and excess inventories | (1,780,262) | (1,800,935) |
Inventories | $ 6,821,211 | $ 7,333,095 |
Earnings per share (Details)
Earnings per share (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | |
Earnings Per Share | ||||
Weighted Average Number of Shares Outstanding, Basic and Diluted | 4,013,537 | 4,013,537 | 4,013,537 | 4,013,537 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) | 3 Months Ended | 9 Months Ended |
Dec. 31, 2019 | Mar. 31, 2020 | |
Commitments and Contingencies | ||
Environmental Remediation Expense | $ 900,000 | |
Payments for Environmental Liabilities | $ 79,000 |
Financing (Details)
Financing (Details) - USD ($) | Feb. 27, 2017 | Mar. 31, 2020 |
Debt Instrument [Line Items] | ||
Debt Instrument, Interest Rate, Stated Percentage | 20.00% | |
Line of Credit Facility, Expiration Date | Feb. 27, 2021 | |
Line of Credit Facility, Frequency of Payment and Payment Terms | the Company will pay a minimum amount of .25% (25 basis points) per month on the maximum availability ($5,000 per month). | |
Line of Credit, Current | $ 0 | |
Summit Financial Resources Lp [Member] | Revolving Credit Facility [Member] | ||
Debt Instrument [Line Items] | ||
Line Of Credit Facility, Maximum Borrowing Capacity | $ 2,000,000 | |
Debt Instrument, Basis Spread on Variable Rate | 2.00% | |
Line of Credit Facility, Remaining Borrowing Capacity | $ 2,000,000 | |
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage | 0.47% | |
Summit Financial Resources Lp [Member] | Revolving Credit Facility [Member] | Prime Rate [Member] | ||
Debt Instrument [Line Items] | ||
Debt Instrument, Interest Rate, Effective Percentage | 3.25% |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | |
Income Taxes | ||||
Deferred Other Tax Expense (Benefit) | $ (82,000) | $ 100,000 | $ (623,000) | $ (406,000) |
Deferred tax assets valuation allowance | $ 3,348,000 | $ 2,606,000 |
Subsequent Events (Details)
Subsequent Events (Details) - Small Business Administration Loan - Subsequent Event | Apr. 22, 2020USD ($)installment |
Subsequent Event [Line Items] | |
Proceeds from Loans | $ 2,375,000 |
Debt instrument, Interest rate | 1.00% |
Number of installments | installment | 18 |
Description of loan forgiveness | loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the eight week period beginning on the loan origination date, subject to regulations and guidance provided by the United States Treasury. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee in excess of $100,000, prorated annually. Not more than 25% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. |
Prepayment penalties | $ 0 |
Maximum | |
Subsequent Event [Line Items] | |
Debt Instrument, Period | 120 days |
Minimum | |
Subsequent Event [Line Items] | |
Debt Instrument, Period | 60 days |