Document And Entity Information
Document And Entity Information - shares | 6 Months Ended | |
Dec. 31, 2021 | Jan. 31, 2022 | |
Document And Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Dec. 31, 2021 | |
Document Transition Report | false | |
Entity File Number | 0-19266 | |
Entity Registrant Name | ALLIED HEALTHCARE PRODUCTS, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 25-1370721 | |
Entity Address, Address Line One | 1720 Sublette Avenue | |
Entity Address, City or Town | St. Louis | |
Entity Address, State or Province | MO | |
Entity Address, Postal Zip Code | 63110 | |
City Area Code | 314 | |
Local Phone Number | 771-2400 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Title of 12(b) Security | Common Stock, $.01 | |
Trading Symbol | AHPI | |
Security Exchange Name | NASDAQ | |
Entity Common Stock, Shares Outstanding | 4,013,537 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q2 | |
Entity Central Index Key | 0000874710 | |
Current Fiscal Year End Date | --06-30 |
STATEMENT OF OPERATIONS
STATEMENT OF OPERATIONS - USD ($) | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | |
STATEMENT OF OPERATIONS | ||||
Net sales | $ 6,807,339 | $ 11,103,528 | $ 14,164,932 | $ 21,293,076 |
Cost of sales | 6,100,821 | 8,491,333 | 12,521,419 | 16,807,070 |
Gross profit | 706,518 | 2,612,195 | 1,643,513 | 4,486,006 |
Selling, general and administrative expenses | 1,836,094 | 1,878,307 | 3,725,226 | 3,887,405 |
Income (loss) from operations | (1,129,576) | 733,888 | (2,081,713) | 598,601 |
Other (income) expenses: | ||||
Interest expense | 42,042 | 33,452 | 73,775 | 51,703 |
Interest income | (8) | (42) | (13) | (199) |
Other, net | (9,648) | (9,508) | ||
Nonoperating income (expenses) | 32,386 | 33,410 | 64,254 | 51,504 |
Income (loss) before income taxes | (1,161,962) | 700,478 | (2,145,967) | 547,097 |
Net income (loss) | $ (1,161,962) | $ 700,478 | $ (2,145,967) | $ 547,097 |
Basic income (loss) per share | $ (0.29) | $ 0.17 | $ (0.53) | $ 0.14 |
Diluted income (loss) per share | $ (0.29) | $ 0.17 | $ (0.53) | $ 0.14 |
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 | 4,024,952 | 4,013,537 | 4,027,788 |
BALANCE SHEET
BALANCE SHEET - USD ($) | Dec. 31, 2021 | Jun. 30, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 183,043 | $ 726,223 |
Accounts receivable, net of allowances of $170,000 | 2,391,007 | 2,929,751 |
Inventories, net | 8,763,706 | 9,450,731 |
Income tax receivable | 18,173 | 9,800 |
Other current assets | 472,061 | 268,136 |
Total current assets | 11,827,990 | 13,384,641 |
Property, plant and equipment, net | 3,499,945 | 3,727,384 |
Operating lease assets | 10,760 | 13,078 |
Deferred income taxes | 577,088 | 577,088 |
Total assets | 15,915,783 | 17,702,191 |
Current liabilities: | ||
Current portion of operating lease liability | 5,065 | 4,777 |
Revolving credit facility | 3,364,111 | 2,077,440 |
Accounts payable | 1,356,556 | 1,898,747 |
Customer deposits | 944,734 | 575,930 |
Other accrued liabilities | 1,772,829 | 2,557,135 |
Total current liabilities | 7,443,295 | 7,114,029 |
Long-term operating lease liability | 5,695 | 8,301 |
Long-term environmental liability | 24,000 | |
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 December 31, 2021 and June 30, 2021; 4,013,537 shares outstanding at December 31, 2021 and June 30, 2021 | 52,139 | 52,139 |
Additional paid-in capital | 48,516,637 | 48,507,738 |
Accumulated deficit | (19,145,195) | (16,999,228) |
Less treasury stock, at cost; 1,200,365 shares at December 31, 2021 and June 30, 2021, respectively | (20,980,788) | (20,980,788) |
Total stockholders' equity | 8,442,793 | 10,579,861 |
Total liabilities and stockholders' equity | 15,915,783 | 17,702,191 |
Series A preferred stock | ||
Stockholders' equity: | ||
Preferred stock | $ 0 | $ 0 |
BALANCE SHEET (Parenthetical)
BALANCE SHEET (Parenthetical) - USD ($) | Dec. 31, 2021 | Jun. 30, 2021 |
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, 2020 | $ 52,139 | $ 48,493,732 | $ (18,686,416) | $ (20,980,788) | $ 8,878,667 |
Stock based compensation | 4,030 | 4,030 | |||
Net income (loss) | 547,097 | 547,097 | |||
Balance at End of period at Dec. 31, 2020 | 52,139 | 48,497,762 | (18,139,319) | (20,980,788) | 9,429,794 |
Balance at Beginning of period at Sep. 30, 2020 | 52,139 | 48,494,261 | (18,839,797) | (20,980,788) | 8,725,815 |
Stock based compensation | 0 | 3,501 | 0 | 0 | 3,501 |
Net income (loss) | 0 | 0 | 700,478 | 0 | 700,478 |
Balance at End of period at Dec. 31, 2020 | 52,139 | 48,497,762 | (18,139,319) | (20,980,788) | 9,429,794 |
Balance at Beginning of period at Jun. 30, 2021 | 52,139 | 48,507,738 | (16,999,228) | (20,980,788) | 10,579,861 |
Stock based compensation | 8,899 | 8,899 | |||
Net income (loss) | (2,145,967) | (2,145,967) | |||
Balance at End of period at Dec. 31, 2021 | 52,139 | 48,516,637 | (19,145,195) | (20,980,788) | 8,442,793 |
Balance at Beginning of period at Sep. 30, 2021 | 52,139 | 48,512,726 | (17,983,233) | (20,980,788) | 9,600,844 |
Stock based compensation | 0 | 3,911 | 0 | 0 | 3,911 |
Net income (loss) | 0 | 0 | (1,161,962) | 0 | (1,161,962) |
Balance at End of period at Dec. 31, 2021 | $ 52,139 | $ 48,516,637 | $ (19,145,195) | $ (20,980,788) | $ 8,442,793 |
STATEMENT OF CASH FLOWS
STATEMENT OF CASH FLOWS - USD ($) | 6 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Cash flows from operating activities: | ||
Net income (loss) | $ (2,145,967) | $ 547,097 |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Depreciation and amortization | 227,439 | 320,825 |
Stock based compensation | 8,899 | 4,030 |
Provision for doubtful accounts and sales returns and allowances | 1,071 | 16,397 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 537,673 | (609,609) |
Inventories | 687,025 | (1,291,566) |
Income tax receivable | (8,373) | (9,120) |
Other current assets | (203,925) | (101,181) |
Accounts payable | (542,191) | 120,268 |
Customer deposits | 368,804 | (2,176,161) |
Other accrued liabilities | (760,306) | (234,729) |
Net cash used in operating activities | (1,829,851) | (3,413,749) |
Cash flows from investing activities: | ||
Capital expenditures | (167,163) | |
Net cash used in investing activities | (167,163) | |
Cash flows from financing activities: | ||
Borrowings under revolving credit agreement | 16,310,049 | 21,098,996 |
Payments under revolving credit agreement | (15,023,378) | (18,989,656) |
Net cash provided by financing activities | 1,286,671 | 2,109,340 |
Net increase (decrease) in cash and cash equivalents | (543,180) | (1,471,572) |
Cash and cash equivalents at beginning of period | 726,223 | 2,600,083 |
Cash and cash equivalents at end of period | $ 183,043 | $ 1,128,511 |
Summary of Significant Accounti
Summary of Significant Accounting and Reporting Policies | 6 Months Ended |
Dec. 31, 2021 | |
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, 2021. 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. Recently Adopted Accounting Pronouncements The Company adopted ASU 2016-13: Financial Instruments - Credit Losses as of the beginning of the fiscal year 2022. This update introduces the current expected credit loss (CECL) model, which requires an entity to measure credit losses for certain financial instruments and financial assets, including trade receivables. Under this update, on initial recognition and at each reporting period, an entity is required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument. The adoption of this standard did not have a material impact on the Company’s financial statements. In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 was effective for the Company beginning in the first quarter of 2022. The adoption of this standard did not have a material impact on the Company’s financial statements and related disclosures. 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 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 December 31, 2021, cash flows from operations and additional borrowings on the credit facility (Note 6) 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 5) and faces several challenges, related to COVID-19, which are currently negatively impacting the Company. The Company has experienced increasing cost for both raw materials and components. The Company plans, where possible, to increase prices on certain products to maintain margins at acceptable levels offsetting these cost increases. Supply chain and staffing issues have led to higher levels of delayed shipments to customers. This delay in the fulfillment of customer orders has led to lower sales, earnings and liquidity. The Company is seeking to fill open positions, expedite needed components, and find new sources of components where necessary. To reduce expenses, several positions within the Company have been eliminated to reduce salary and benefit cost. To increase sales, the Company plans to continue to emphasize the benefits of its AHP300 ventilator to pursue opportunities in that market. The Company’s ability to generate sufficient liquidity will be largely determined by the success of management’s plans to address these challenges. |
Revenues
Revenues | 6 Months Ended |
Dec. 31, 2021 | |
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 satisfaction of its performance obligation which occurs on the transfer of control of the product, 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. The 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 adjusts 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. All taxes imposed on and concurrent with revenue producing transactions and collected by the Company are excluded from the measurement of transaction price. 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 Six months ended December 31, December 31, 2021 2020 2021 2020 Domestic United States $ 5,125,047 $ 6,797,291 $ 10,996,383 $ 12,900,780 Europe 111,763 2,078,512 183,824 3,447,073 Canada 139,230 512,592 295,020 880,533 Latin America 546,012 632,526 1,002,935 1,795,794 Middle East 136,166 511,256 272,551 1,017,982 Far East 749,121 571,086 1,414,219 1,249,683 Other International — 265 — 1,231 $ 6,807,339 $ 11,103,528 $ 14,164,932 $ 21,293,076 Sales by Product Three months ended Six months ended December 31, December 31, 2021 2020 2021 2020 Respiratory care products $ 2,049,817 $ 1,838,325 $ 3,933,528 $ 3,986,664 Medical gas equipment 3,251,096 4,354,549 6,959,634 8,313,070 Emergency medical products 1,506,426 4,910,654 3,271,770 8,993,342 $ 6,807,339 $ 11,103,528 $ 14,164,932 $ 21,293,076 |
Inventories
Inventories | 6 Months Ended |
Dec. 31, 2021 | |
Inventories | |
Inventories | 3. Inventories Inventories are comprised as follows: December 31, 2021 June 30, 2021 Work-in progress $ 697,605 $ 829,962 Component parts 8,781,839 8,994,457 Finished goods 1,458,411 1,800,461 Reserve for obsolete and excess inventories (2,174,149) (2,174,149) $ 8,763,706 $ 9,450,731 |
Earnings per share
Earnings per share | 6 Months Ended |
Dec. 31, 2021 | |
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 shares outstanding for the three and six months ended December 31, 2021 and 2020 were 4,013,537. The number of diluted shares outstanding for the three months ended December 31, 2021 and 2020 were 4,013,537 and 4,024,952 respectively. The number of diluted shares outstanding for the six months ended December 31, 2021 and 2020 were 4,013,537 and 4,027,788 respectively. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Dec. 31, 2021 | |
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 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. On October 13, 2020, the Company executed a Brownfield Cleanup Program Agreement with the Department of Environmental Conservation with respect to the property. Under the agreement, the Company has voluntarily agreed to conduct, at its expense, certain remedial investigations and remedial actions with respect to suspected soil and groundwater contamination at the site with oversight by the department. The Company’s best estimate of the expected cost to remediate the site is $1.1 million. This amount was recorded as an expense in the fiscal year ended June 30, 2020 and is reflected in other accrued liabilities and selling, general and administrative expenses in the Company’s financial statements. As of December 31, 2021, the Company has paid approximately $462,000 in remediation expenses which have been charged to the initial reserve. Liability for future environmental expenditures Balance - July 1, 2021 $ 976,720 Charges to income — Remedial and investigatory spending 319,162 Balance - December 31 , 2021 $ 657,558 December 31, 2021 June 30, 2021 Reflected in the Balance sheet as: Current, included in Other Liabilities $ 633,558 $ 976,720 Long-term environmental 24,000 — Total liability $ 657,558 $ 976,720 Employment Contract On April 20, 2021, the Company entered into an employment contract with its chief executive officer, Joseph F. Ondrus, Jr., which provides for an initial term of three years with annual renewals. The contract includes termination without cause and change of control provisions, under which the chief executive officer is entitled to continued payments of annual salary and benefits 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 | 6 Months Ended |
Dec. 31, 2021 | |
Financing | |
Financing | 6. Financing North Mill Loan 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, April 24, 2019, December 18, 2020 and October 7, 2021 (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 and inventory but will not exceed $4,000,000. At December 31, 2021 availability under the agreement was approximately $239,000. The Credit Facility will be available, subject to its terms, on a revolving basis until it expires on February 27, 2023, 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 ($10,000 per month). In the event the Company prepays or terminates the Credit Facility prior to February 27, 2022, 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, 2022 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. The Company was in compliance with all of the covenants associated with the Credit Facility at December 31, 2021. At December 31, 2021 the Company had $3.4 million indebtedness, including lease obligations, short-term debt, and long term debt. The prime rate as reported in the Wall Street Journal was 3.25% on December 31, 2021. |
Income Taxes
Income Taxes | 6 Months Ended |
Dec. 31, 2021 | |
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 six months ended December 31, 2021 the Company recorded the tax benefit of losses incurred in the amount of approximately $296,000 and $547,000, 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. As a result of the Consolidated Appropriations Act of 2021 signed by the President on December 27, 2020, approximately $2,400,000 of expenses incurred that were attributed to the Company’s PPP loan became deductible in the three months ended December 31, 2020. The deductibility of these expenses created a tax loss for the three and six months ended December 31, 2020. For the three and six months ended December 31, 2020 the Company recorded the tax benefit of losses incurred in the amount of approximately $410,000 and $449,000. 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 December 31, 2021 and 2020 was approximately $4,090,000 and $3,224,000, respectively. To the extent that the Company incurs losses in future quarters, the tax benefit of those losses will be subject to a valuation allowance. To the extent the Company has taxable income, the taxable income will be offset by net operating loss carryforwards. |
Summary of Significant Accoun_2
Summary of Significant Accounting and Reporting Policies (Policies) | 6 Months Ended |
Dec. 31, 2021 | |
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, 2021. |
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. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements The Company adopted ASU 2016-13: Financial Instruments - Credit Losses as of the beginning of the fiscal year 2022. This update introduces the current expected credit loss (CECL) model, which requires an entity to measure credit losses for certain financial instruments and financial assets, including trade receivables. Under this update, on initial recognition and at each reporting period, an entity is required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument. The adoption of this standard did not have a material impact on the Company’s financial statements. In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 was effective for the Company beginning in the first quarter of 2022. The adoption of this standard did not have a material impact on the Company’s financial statements and related disclosures. |
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 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 December 31, 2021, cash flows from operations and additional borrowings on the credit facility (Note 6) 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 5) and faces several challenges, related to COVID-19, which are currently negatively impacting the Company. The Company has experienced increasing cost for both raw materials and components. The Company plans, where possible, to increase prices on certain products to maintain margins at acceptable levels offsetting these cost increases. Supply chain and staffing issues have led to higher levels of delayed shipments to customers. This delay in the fulfillment of customer orders has led to lower sales, earnings and liquidity. The Company is seeking to fill open positions, expedite needed components, and find new sources of components where necessary. To reduce expenses, several positions within the Company have been eliminated to reduce salary and benefit cost. To increase sales, the Company plans to continue to emphasize the benefits of its AHP300 ventilator to pursue opportunities in that market. The Company’s ability to generate sufficient liquidity will be largely determined by the success of management’s plans to address these challenges. |
Revenues (Tables)
Revenues (Tables) | 6 Months Ended |
Dec. 31, 2021 | |
Revenues | |
Schedule of Revenue from external customers by geographic areas | Sales by Region Three months ended Six months ended December 31, December 31, 2021 2020 2021 2020 Domestic United States $ 5,125,047 $ 6,797,291 $ 10,996,383 $ 12,900,780 Europe 111,763 2,078,512 183,824 3,447,073 Canada 139,230 512,592 295,020 880,533 Latin America 546,012 632,526 1,002,935 1,795,794 Middle East 136,166 511,256 272,551 1,017,982 Far East 749,121 571,086 1,414,219 1,249,683 Other International — 265 — 1,231 $ 6,807,339 $ 11,103,528 $ 14,164,932 $ 21,293,076 |
Schedule of Revenue from external customers by products and services | Sales by Product Three months ended Six months ended December 31, December 31, 2021 2020 2021 2020 Respiratory care products $ 2,049,817 $ 1,838,325 $ 3,933,528 $ 3,986,664 Medical gas equipment 3,251,096 4,354,549 6,959,634 8,313,070 Emergency medical products 1,506,426 4,910,654 3,271,770 8,993,342 $ 6,807,339 $ 11,103,528 $ 14,164,932 $ 21,293,076 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Dec. 31, 2021 | |
Inventories | |
Schedule of Inventories | Inventories are comprised as follows: December 31, 2021 June 30, 2021 Work-in progress $ 697,605 $ 829,962 Component parts 8,781,839 8,994,457 Finished goods 1,458,411 1,800,461 Reserve for obsolete and excess inventories (2,174,149) (2,174,149) $ 8,763,706 $ 9,450,731 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 6 Months Ended |
Dec. 31, 2021 | |
Commitments and Contingencies | |
Schedule of liability for future environmental expenditures | Balance - July 1, 2021 $ 976,720 Charges to income — Remedial and investigatory spending 319,162 Balance - December 31 , 2021 $ 657,558 December 31, 2021 June 30, 2021 Reflected in the Balance sheet as: Current, included in Other Liabilities $ 633,558 $ 976,720 Long-term environmental 24,000 — Total liability $ 657,558 $ 976,720 |
Revenues - Sales by Region (Det
Revenues - Sales by Region (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | |
Net sales | $ 6,807,339 | $ 11,103,528 | $ 14,164,932 | $ 21,293,076 |
Domestic United States | ||||
Net sales | 5,125,047 | 6,797,291 | 10,996,383 | 12,900,780 |
Europe | ||||
Net sales | 111,763 | 2,078,512 | 183,824 | 3,447,073 |
Canada | ||||
Net sales | 139,230 | 512,592 | 295,020 | 880,533 |
Latin America | ||||
Net sales | 546,012 | 632,526 | 1,002,935 | 1,795,794 |
Middle East | ||||
Net sales | 136,166 | 511,256 | 272,551 | 1,017,982 |
Far East | ||||
Net sales | $ 749,121 | 571,086 | $ 1,414,219 | 1,249,683 |
Other International | ||||
Net sales | $ 265 | $ 1,231 |
Revenues - Sales by Product (De
Revenues - Sales by Product (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | |
Net sales | $ 6,807,339 | $ 11,103,528 | $ 14,164,932 | $ 21,293,076 |
Respiratory care products | ||||
Net sales | 2,049,817 | 1,838,325 | 3,933,528 | 3,986,664 |
Medical gas equipment | ||||
Net sales | 3,251,096 | 4,354,549 | 6,959,634 | 8,313,070 |
Emergency medical products | ||||
Net sales | $ 1,506,426 | $ 4,910,654 | $ 3,271,770 | $ 8,993,342 |
Revenues (Details)
Revenues (Details) | 6 Months Ended |
Dec. 31, 2021segmentitem | |
Number of operating segments | segment | 1 |
Number of performance obligation | item | 1 |
Minimum | |
Cash discount term | 15 days |
Maximum | |
Cash discount term | 30 days |
Inventories (Details)
Inventories (Details) - USD ($) | Dec. 31, 2021 | Jun. 30, 2021 |
Inventories | ||
Work-in progress | $ 697,605 | $ 829,962 |
Component parts | 8,781,839 | 8,994,457 |
Finished goods | 1,458,411 | 1,800,461 |
Reserve for obsolete and excess inventories | (2,174,149) | (2,174,149) |
Inventories | $ 8,763,706 | $ 9,450,731 |
Earnings per share (Details)
Earnings per share (Details) - shares | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | |
Earnings per share | ||||
Number of basic shares outstanding | 4,013,537 | 4,013,537 | 4,013,537 | 4,013,537 |
Number of diluted shares outstanding | 4,013,537 | 4,024,952 | 4,013,537 | 4,027,788 |
Commitments and Contingencies -
Commitments and Contingencies - Liability for future environmental expenditures (Details) - USD ($) | 6 Months Ended | |
Dec. 31, 2021 | Jun. 30, 2021 | |
Commitments and Contingencies | ||
Beginning Balance | $ 976,720 | |
Charges to income | 0 | |
Remedial and investigatory spending | 319,162 | |
Ending Balance | 657,558 | |
Current, included in Other Liabilities | 633,558 | $ 976,720 |
Long-term environmental | 24,000 | |
Total liability | $ 657,558 | $ 976,720 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) - USD ($) | Apr. 20, 2021 | Dec. 31, 2021 | Jun. 30, 2020 |
Commitments and Contingencies | |||
Environmental Remediation Expense | $ 1,100,000 | ||
Payments for Environmental Liabilities | $ 462,000 | ||
Employment contract renewal term | three years |
Financing (Details)
Financing (Details) - USD ($) | Feb. 27, 2017 | Dec. 31, 2021 |
Debt Instrument [Line Items] | ||
Debt Instrument, Interest Rate, Stated Percentage | 20.00% | |
Line of Credit Facility, Expiration Date | Feb. 27, 2023 | |
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 ($10,000 per month). | |
Total indebtedness | $ 3,400,000 | |
Summit Financial Resources Lp [Member] | Revolving Credit Facility [Member] | ||
Debt Instrument [Line Items] | ||
Line Of Credit Facility, Maximum Borrowing Capacity | $ 4,000,000 | |
Debt Instrument, Basis Spread on Variable Rate | 2.00% | |
Line of Credit Facility, Remaining Borrowing Capacity | $ 239,000 | |
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 | 6 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | |
Income Taxes | ||||
Operating Loss Carryforwards, Valuation Allowance | $ 4,090,000 | $ 3,224,000 | $ 4,090,000 | $ 3,224,000 |
Deferred Tax Assets Valuation Allowance Benefit Of Losses | 296,000 | $ 410,000 | 547,000 | $ 449,000 |
Deductible expenses attributed to PPP loan | $ 2,400,000 | $ 2,400,000 |