10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

x Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended September 30, 2020

¨ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from________ to ________

Commission File Number: 0-19266

ALLIED HEALTHCARE PRODUCTS, INC.

(Exact name of registrant as specified in its charter)

Delaware	25-1370721
(State or other jurisdiction of	(I.R.S. Employer
Incorporation or organization)	Identification No.)

1720 Sublette Avenue, St. Louis, Missouri 63110

(Address of principal executive offices, including zip code)

(314) 771-2400

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter periods that the registrant was required to file such reports, and (2) has been subject to such filing requirements for the past ninety days.  Yes   x    No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   x   No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨	Accelerated filer   ¨
Non-accelerated filer x	Smaller reporting company  x
Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes   ¨   No   x

 Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of each exchange on which registered
Common Stock, $.01	AHPI	The NASDAQ Stock Market LLC

The number of shares of common stock outstanding at November 2, 2020 is 4,013,537 shares.

INDEX

			Page Number
Part I –	Financial Information
	Item 1.	Financial Statements	3
		Statement of Operations - Three months ended September 30, 2020 and 2019 (Unaudited)	3
		Balance Sheet - September 30, 2020 (Unaudited) and June 30, 2020	4 - 5
		Statement of Changes in Stockholder’s Equity - Three months ended September 30, 2020 and 2019 (Unaudited)	6
		Statement of Cash Flows - Three months ended September 30, 2020 and 2019 (Unaudited)	7
		Notes to Financial Statements	8 - 14
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14 - 16
	Item 3.	Quantitative and Qualitative Disclosure about Market Risk	17
	Item 4.	Controls and Procedures	17
Part II -	Other Information
	Item 6.	Exhibits	18
		Signature	19

“SAFE HARBOR” STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Statements contained in this Report, which are not historical facts or information, are “forward-looking statements.” Words such as “believe,” “expect,” “intend,” “will,” “should,” and other expressions that indicate future events and trends identify such forward-looking statements. These forward-looking statements involve risks and uncertainties, which could cause the outcome and future results of operations, and financial condition to be materially different than stated or anticipated based on the forward-looking statements. Such risks and uncertainties include both general economic risks and uncertainties, risks and uncertainties affecting the demand for and economic factors affecting the delivery of health care services, both in the United States and in our overseas markets, impacts of the U.S. Affordable Care Act, our history of net losses and negative cash flows, the Covid-19 pandemic and other specific matters which relate directly to the Company’s operations and properties as discussed in the Company’s annual report on Form 10-K for the year ended June 30, 2020. The Company cautions that any forward-looking statements contained in this report reflect only the belief of the Company or its management at the time the statement was made. Although the Company believes such forward-looking statements are based upon reasonable assumptions, such assumptions may ultimately prove inaccurate or incomplete. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement was made.

2 

PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

ALLIED HEALTHCARE PRODUCTS, INC.

STATEMENT OF OPERATIONS

(UNAUDITED)

	Three months ended
	September 30,
	2020			2019
Net sales	$	10,189,548		$	7,975,637
Cost of sales		8,315,737			6,715,943
Gross profit		1,873,811			1,259,694
Selling, general and
administrative expenses		2,009,098			1,867,087
Loss from operations		(135,287	)		(607,393	)
Other (income) expenses:
Interest expense		18,250			6,752
Interest income		(156	)		(32	)
Other, net		-			10
		18,094			6,730
Loss before benefit from income taxes		(153,381	)		(614,123	)
Benefit from income taxes		-			-
Net loss	$	(153,381	)	$	(614,123	)
Basic and diluted loss per share	$	(0.04	)	$	(0.15	)
Weighted average shares
outstanding - basic and diluted		4,013,537			4,013,537

See accompanying Notes to Financial Statements.

3 

ALLIED HEALTHCARE PRODUCTS, INC.

BALANCE SHEET

ASSETS

	(Unaudited)
	September 30,		June 30,
	2020		2020
Current assets:
Cash and cash equivalents	$	5,876	$	2,600,083
Accounts receivable, net of allowances of $170,000		3,277,152		3,103,819
Inventories, net		11,255,918		8,928,688
Income tax receivable		12,278		12,178
Other current assets		335,953		229,805
Total current assets		14,887,177		14,874,573
Property, plant and equipment, net		4,142,322		4,139,693
Operating lease assets		16,264		17,326
Deferred income taxes		640,767		640,767
Total assets	$	19,686,530	$	19,672,359

See accompanying Notes to Financial Statements.

4 

ALLIED HEALTHCARE PRODUCTS, INC.

BALANCE SHEET

(CONTINUED)

LIABILITIES AND STOCKHOLDERS' EQUITY

	(Unaudited)
	September 30,			June 30,
	2020			2020
Current liabilities:
Current portion of Payroll Protection Program loan	$	1,440,678		$	1,042,655
Current portion of operating lease liability		4,375			4,249
Revolving credit facility		1,204,385			-
Accounts payable		3,484,335			2,940,006
Customer deposits		1,247,880			2,832,370
Other accrued liabilities		2,478,945			2,106,131
Total current liabilities		9,860,598			8,925,411
Long-term portion of Payroll Protection Program loan		934,181			1,332,204
Long-term operating lease liability		11,936			13,077
Long-term environmental liability		154,000			523,000
Commitments and contingencies
Stockholders' equity:
Preferred stock; $0.01 par value; 1,500,000 shares authorized; no shares issued and outstanding		-			-
Series A preferred stock; $0.01 par value; 200,000 shares authorized; no shares issued and outstanding		-			-
Common stock; $0.01 par value; 30,000,000 shares authorized; 5,213,902 shares issued at September 30, 2020 and June 30, 2020;  4,013,537 shares outstanding at September 30, 2020 and June 30, 2020		52,139			52,139
Additional paid-in capital		48,494,261			48,493,732
Accumulated deficit		(18,839,797	)		(18,686,416	)
Less treasury stock, at cost; 1,200,365 shares at September 30, 2020 and June 30, 2020		(20,980,788	)		(20,980,788	)
Total stockholders' equity		8,725,815			8,878,667
Total liabilities and stockholders' equity	$	19,686,530		$	19,672,359

See accompanying Notes to Financial Statements.

5 

ALLIED HEALTHCARE PRODUCTS, INC.

STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY

(UNAUDITED)

	Three Months Ended September 30, 2020
			Additional
	Common		Paid-in		Accumulated			Treasury
	Stock		Capital		Deficit			Stock			Total
Balance at June 30, 2020	$	52,139	$	48,493,732	$	(18,686,416	)	$	(20,980,788	)	$	8,878,667
Stock based compensation		-		529		-			-			529
Net loss		-		-		(153,381	)		-			(153,381	)
Balance at September 30, 2020	$	52,139	$	48,494,261	$	(18,839,797	)	$	(20,980,788	)	$	8,725,815

	Three Months Ended September 30, 2019
			Additional
	Common		Paid-in		Accumulated			Treasury
	Stock		Capital		Deficit			Stock			Total
Balance at June 30, 2019	$	52,139	$	48,491,317	$	(15,672,316	)	$	(20,980,788	)	$	11,890,352
Stock based compensation		-		793		-			-			793
Net loss		-		-		(614,123	)		-			(614,123	)
Balance at September 30, 2019	$	52,139	$	48,492,110	$	(16,286,439	)	$	(20,980,788	)	$	11,277,022

See accompanying Notes to Financial Statements.

6 

ALLIED HEALTHCARE PRODUCTS, INC.

STATEMENT OF CASH FLOWS

(UNAUDITED)

	Three months ended
	September 30,
	2020			2019
Cash flows from operating activities:
Net loss	$	(153,381	)	$	(614,123	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		164,534			180,785
Stock based compensation		529			793
Provision for doubtful accounts and sales returns and allowances		(630	)		3,000
Changes in operating assets and liabilities:
Accounts receivable		(172,703	)		(17,136	)
Inventories		(2,327,230	)		(19,951	)
Income tax receivable		(100	)		(100	)
Other current assets		(106,148	)		145,281
Accounts payable		544,329			100,449
Customer deposits		(1,584,490	)		(184,082	)
Other accrued liabilities		3,861			(311,933	)
Net cash used in operating activities		(3,631,429	)		(717,017	)
Cash flows from investing activities:
Capital expenditures		(167,163	)		(26,005	)
Net cash used in investing activities		(167,163	)		(26,005	)
Cash flows from financing activities:
Borrowings under revolving credit agreement		10,098,573			8,626,876
Payments under revolving credit agreement		(8,894,188	)		(7,776,872	)
Net cash provided by financing activities		1,204,385			850,004
Net increase (decrease) in cash and cash equivalents		(2,594,207	)		106,982
Cash and cash equivalents at beginning of period		2,600,083			195,454
Cash and cash equivalents at end of period	$	5,876		$	302,436

See accompanying Notes to Financial Statements.

7 

ALLIED HEALTHCARE PRODUCTS, INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

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, 2020.

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 Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which changes the way companies evaluate credit losses for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other specified instruments, entities will be required to use a new forward-looking “expected loss” model to evaluate impairment, potentially resulting in earlier recognition of allowances for losses. The new standard also requires enhanced disclosures, including the requirement to disclose the information used to track credit quality by year of origination for most financing receivables. The guidance must be applied using a cumulative-effect transition method. ASU 2016-13 is effective for fiscal years beginning after December 15, 2020, and for interim periods within those fiscal years (the fiscal year ending June 30, 2022 for the Company), with early adoption permitted. The Company is currently evaluating the impact that adopting this guidance may have on its financial statements.

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 September 30, 2020, additional borrowings on the credit facility (Note 6), reductions in inventory levels and future earnings 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 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). The Company’s liquidity needs will be largely determined by the success of the Company executing management’s plan.

8 

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 loss.

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.

9 

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
	September 30,
	2020		2019
Domestic United States	$	6,103,489	$	5,744,235
Europe		1,368,561		327,667
Canada		367,941		156,402
Latin America		1,163,268		754,992
Middle East		506,726		137,574
Far East		678,597		854,440
Other International		966		327
	$	10,189,548	$	7,975,637

10 

	Sales by Product
	Three months ended
	September 30,
	2020		2019
Respiratory care products	$	2,148,339	$	2,156,204
Medical gas equipment		3,958,521		3,780,565
Emergency medical products		4,082,688		2,038,868
	$	10,189,548	$	7,975,637

3. Inventories

Inventories are comprised as follows:

	September 30, 2020			June 30, 2020
Work-in progress	$	1,178,969		$	817,692
Component parts		9,870,241			8,299,972
Finished goods		2,055,842			1,660,158
Reserve for obsolete and excess
inventories		(1,849,134	)		(1,849,134	)
	$	11,255,918		$	8,928,688

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 months ended September 30, 2020 and 2019 were 4,013,537.

11 

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 party to a Brownfield Cleanup Program Agreement 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 agreement recognizes that the soil and groundwater at the Stuyvesant Falls facility is impacted by chemical compounds exceeding regulatory standards. Pursuant to the agreement, 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 $1.1 million. This amount was recorded as an expense during fiscal 2020 and is reflected in other accrued liabilities and selling, general and administrative expenses in the Company’s financial statements. As of September 30, 2020, the Company has paid approximately $98,000 in remediation expenses which have been charged to the initial reserve.

Liability for future environmental expenditures

Balance - July 1, 2020	$	1,037,000
Charges to income		-
Remedial and investigatory spending		15,806
Balance - September 30, 2020	$	1,021,194
	9/30/2020		6/30/2020
Reflected in the Balance sheet as:
Current, included in Other Liabilities	$	867,194	$	514,000
Long-term environmental		154,000		523,000
Total liability	$	1,021,194	$	1,037,000

Employment Contract

In March 2007, the Company entered into a three year employment contract with its chief executive officer. The contract is subject to automatic annual renewals after the initial term unless notification is given. The contract was amended and restated in December 2009 without extending its term. 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.

12 

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 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 and inventory but will not exceed $2,000,000. At September 30, 2020 availability under the agreement was $0.8 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.

The Company was in compliance with all of the covenants associated with the Credit Facility at September 30, 2020.

PPP Loan

On April 22, 2020, the Company entered into a Payroll Protection Program (PPP) 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 used 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 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 or at the Company’s election 24 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 40% 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%. The Company has submitted its application for forgiveness and is awaiting approval from the SBA. 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.

13 

Payments of unforgiven principal and interest are deferred until the date that SBA remits the Company’s loan forgiveness amount to the lender, 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.

At September 30, 2020 the Company had $3.6 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 September 30, 2020.

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 quarter ended September 30, 2020 the Company recorded the tax benefit of losses incurred during the current quarter in the amount of approximately $39,000.  As the realization of the tax benefit of the net operating loss is not assured an additional valuation allowance of approximately $39,000 was recorded.  In the quarter ended September 30, 2019 the Company recorded the tax benefit of losses incurred in the amount of approximately $154,000. As the realization of the tax benefit of the net operating loss is not assured an additional valuation allowance of approximately $154,000 was recorded. The total valuation allowance recorded by the Company as of September 30, 2020 and 2019 was approximately $2,814,000 and $2,890,000, 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.

Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations

Results of Operations

Covid-19 Outbreak

Due to the COVID-19 pandemic, in recent quarters the Company saw an unprecedented increase in demand and orders for its AHP300 ventilators, EPV200 ventilators, other respiratory care products, and other emergency medical devices. The Company has made capital investments, added employees, and increased inventory purchases in order to increase production of these ventilators and other products critical to the care of COVID-19 patients.

The Company’s ability to meet this demand has been impaired by supply chain challenges as demand for components critical for the production of these products has spiked as all manufacturers of ventilators and other critical medical equipment seek to increase production. At the same time, the COVID-19 pandemic could decrease demand for other products as hospitals reduce “non-essential procedures.” The economic effects on hospitals and providers could negatively impact the market for the Company’s construction products if hospitals cut back on construction and capital improvements. The duration and extent of this decreased demand is uncertain and depends on decisions by government health authorities, hospitals and providers in responding to and mitigating the COVID-19 outbreak.

The full economic impact of the COVID-19 pandemic continues to evolve as the date of this report. As such, the Company cannot predict with certainty the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, operations, suppliers, industry and workforce. Please see Part II, Item 1A, Risk Factors of our Annual Report on Form 10-K for more information.

Three months ended September 30, 2020 compared to three months ended September 30, 2019

Allied had net sales of $10.2 million for the three months ended September 30, 2020, up $2.2 million from net sales of $8.0 million in the prior year same quarter. Domestic sales were up 6.3% while international sales, which represented 40.1% of first quarter sales, were up 83.1% from the prior year same quarter. The increase in sales is the result of shipment of orders received in previous quarters. These orders are primarily for the AHP300 ventilator and other products used to increase capacity to treat COVID-19 patients.

Orders for the Company’s products for the three months ended September 30, 2020 of $7.8 million were $0.1 million or 1.3% higher than orders for the prior year same quarter of $7.7 million and $1.5 million or 16.3% lower than orders for the fourth quarter of fiscal year 2020. Domestic orders are down 3.4% over the prior year same quarter, while international orders, which represented 29.2% of first quarter orders, were 14.8% higher than orders for the prior year same quarter. International and construction sales and orders are subject to fluctuation in demand. Internationally, these fluctuations are at times due to political and economic uncertainty.

Gross profit for the three months ended September 30, 2020 was $1.9 million, or 18.6% of net sales, compared to $1.3 million, or 16.3% of net sales, for the three months ended September 30, 2019. Gross profit for the quarter was favorably impacted by the increase in sales volume. Manufacturing overhead spending decreased from the prior year by approximately $0.5 million as the Company increased its capacity to manufacture those products that have had higher demand related to the COVID-19 pandemic.

14 

Selling, general and administrative expenses for the three months ended September 30, 2020 were $2.0 million compared to $1.9 million for the three months ended September 30, 2019. Personnel cost, primarily salary and fringe benefits, increased by approximately $50,000 and legal expenses increased by approximately $100,000. The increased personnel costs reflect additions to headcount to increase our manufacturing capacity to fulfill increased orders for respiratory care products due to COVID-19.

Loss from operations was $0.1 million for the three months ended September 30, 2020 compared to loss from operations of $0.6 million for the three months ended September 30, 2019.

Allied had a loss before benefit from income taxes in the first quarter of fiscal 2021 of $153,381 compared to a loss before benefit from income taxes in the first quarter of fiscal 2020 of $614,123.  The Company’s tax provision net of valuation allowance reflects a tax benefit of $0 for the three months ended September 30, 2020 and 2019. In the quarter ended September 30, 2020 the tax benefit of losses in the amount of approximately $39,000 was fully offset by a valuation allowance of equivalent amount.   In the quarter ended September 30, 2019 the Company recorded the tax benefit of losses incurred in the amount of approximately $154,000 net of additions to the valuation allowance of like amount. To the extent that the Company’s losses continue in future quarters, the tax benefit of those losses will be fully offset by a valuation allowance.

Net loss for the first quarter of fiscal 2021 was $153,381 or $0.04 per basic and diluted share compared to net loss of $614,123 or $0.15 per basic and diluted share for the first quarter of fiscal 2019. The weighted average number of common shares outstanding, used in the calculation of basic and diluted earnings per share for the first quarters of fiscal 2021 and 2020. were 4,013,537.

Liquidity and Capital Resources

The Company’s primary sources of liquidity are its cash and cash equivalents, other items in working capital and borrowing availability under the Credit Agreement, discussed below.

The Company’s working capital was $5.0 million at September 30, 2020 compared to $5.9 million at June 30, 2020. Cash decreased by $2.6 million, accounts payable increased by $0.5 million and debt increased by $1.2 million. During the quarter, these decreases in working capital were offset by an increase in inventory by $2.3 million and a decrease in customer deposits by $1.6 million. The increase in inventory was part of the Company’s efforts to fulfill increased orders in prior periods for respiratory care products. Accounts payable and other accrued liabilities are subject to normal fluctuations in purchasing levels and the timing of payments within the quarter. Accounts receivable was $3.3 million at September 30, 2020 and as measured in days sales outstanding (“DSO”) was 31 DSO compared to a 35 DSO at June 30, 2020. The Company does adjust product forecast, order quantities and safety stock based on changes in demand patterns in order to manage inventory levels.

North Mill Loan Agreement

As of September 30, 2020, 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 and inventory but will not exceed $2,000,000. At September 30, 2020 availability under the agreement was $0.8 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 the 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.

15 

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 September 30, 2020. The Company intends to seek a renewal of the Credit Facility prior to its expiration. 

Reductions in availability, either due to continued losses, or changes by North Mill to the Company’s borrowing base, could have a material adverse impact on our liquidity and ability to meet our operating requirements. In such a case, the Company would need to access additional sources of liquidity if it does not return to profitability. If the Company were unable to reach such an agreement with North Mill to increase availability, the Company could also attempt to negotiate a larger credit facility with another lender. There is no assurance that the Company could secure either increased availability from North Mill or a new credit facility from a new lender, in which case the Company would have to use other assets to obtain liquidity, such as a sale-leaseback of some or all of its real estate.

PPP Loan

On April 22, 2020, the Company entered into a Payroll Protection Program (PPP) 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 used 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 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 or at the Company’s election 24 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 40% 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%. The Company has submitted its application for forgiveness and is awaiting approval from the SBA. 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.

At September 30, 2020 the Company had $3.6 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 September 30, 2020.

Litigation and Contingencies

The Company becomes, from time to time, a party to personal injury litigation arising out of incidents involving the use of its products. The Company believes that any potential judgments resulting from these claims over its self-insured retention will be covered by the Company’s product liability insurance. See Part II, Item 1 – Legal Proceedings, below, for more information concerning litigation.

Critical Accounting Policies

The impact and any associated risks related to the Company’s critical accounting policies on business operations are discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” where such policies affect the Company’s reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see the Company’s Annual Report on Form 10-K for the year ended June 30, 2020.

Recently Issued Accounting Guidance

See Note 1 – Summary of Significant Accounting and Reporting Policies for more information on recent accounting pronouncements and their impact, if any, on the Company’s financial statements. Management believes there have been no material changes to our critical accounting policies.

16 

Item 3. Quantitative and Qualitative Disclosure about Market Risk

At September 30, 2020, the Company had $3.6 million debt outstanding. The Credit Facility bears interest at a rate using the Prime Rate, as reported in the Wall Street Journal, as the basis, and therefore is subject to additional expense should there be an increase in market interest rates while borrowing on the revolving credit facility.

The Company had no holdings of derivative financial or commodity instruments at September 30, 2020. The Company has international sales; however these sales are denominated in U.S. dollars, mitigating foreign exchange rate fluctuation risk.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon their evaluation of those controls and procedures performed as of September 30, 2020, the Chief Executive Officer and Chief Financial Officer of the Company concluded that its disclosure controls and procedures were effective.

Changes in internal control over financial reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings.

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 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 fiscal 2020 and is reflected in other accrued liabilities and selling, general and administrative expenses in the Company’s financial statements. As of September 30, 2020, the Company has paid approximately $98,000 in remediation expenses which have been charged to the initial reserve.

17 

Item 6. Exhibits

(a) Exhibits:

31.1 Certification of Chief Executive Officer (filed herewith)

31.2 Certification of Chief Financial Officer (filed herewith)

32.1 Sarbanes-Oxley Certification of Chief Executive Officer (furnished herewith)*

32.2 Sarbanes-Oxley Certification of Chief Financial Officer (furnished herewith)*

101.INS XBRL Instance Document**

101.SCH XBRL Taxonomy Extension Schema Document**

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document**

101.DEF XBRL Taxonomy Extension Definition Linkbase Document**

101.LAB XBRL Taxonomy Extension Label Linkbase Document**

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document**

*Notwithstanding any incorporation of this Quarterly Report on Form 10-Q in any other filing by the Registrant, Exhibits furnished herewith and designated with an asterisk (*) shall not be deemed incorporated by reference to any other filing under the Securities Act of 1933 or the Securities Exchange Act of 1934 unless specifically otherwise set forth therein.

**Filed herewith as Exhibit 101 are the following materials formatted in XBRL: (i) Statement of Operations, (ii) Balance Sheet, (iii) Statement of Cash Flows and (iv) Notes to Financial Statements.

18 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ALLIED HEALTHCARE PRODUCTS, INC.

/s/ Daniel C. Dunn

Daniel C. Dunn

Chief Financial Officer

Date: November 16, 2020

19 

EX-31.1

Exhibit 31.1

CERTIFICATION

I, EARL R. REFSLAND, certify that:

1. I have reviewed this Form 10-Q of ALLIED HEALTHCARE PRODUCTS, INC.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 16, 2020

/s/ EARL R. REFSLAND

Earl. R. Refsland

President & Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, DANIEL C. DUNN, certify that:

1. I have reviewed this Form 10-Q of ALLIED HEALTHCARE PRODUCTS, INC.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 16, 2020

/s/ DANIEL C. DUNN

Daniel C. Dunn

Vice President, Chief Financial Officer & Secretary

EX-32.1

Exhibit 32.1

CERTIFICATION Pursuant to 18 U.S.C. § 1350

The undersigned officer of ALLIED HEALTHCARE PRODUCTS, INC. (the “Company”), hereby certifies, to such officer’s knowledge, that the Company’s Quarterly Report on Form 10-Q for the Company’s fiscal quarter ended September 30, 2020 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Earl R. Refsland

Earl R. Refsland

President & Chief Executive Officer

November 16, 2020

EX-32.2

Exhibit 32.2

CERTIFICATION Pursuant to 18 U.S.C. § 1350

The undersigned officer of ALLIED HEALTHCARE PRODUCTS, INC. (the “Company”), hereby certifies, to such officer’s knowledge, that the Company’s Quarterly Report on Form 10-Q for the Company’s fiscal quarter ended September 30, 2020 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Daniel C. Dunn

Daniel C. Dunn

Vice President, Chief Financial Officer & Secretary

November 16, 2020

XML

Document And Entity Information - shares	3 Months Ended
	Sep. 30, 2020	Nov. 02, 2020
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
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
Title of 12(b) Security	Common Stock
Security Exchange Name	NASDAQ

XML

STATEMENT OF OPERATIONS - USD ($)	3 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
STATEMENT OF OPERATIONS
Net sales	$ 10,189,548	$ 7,975,637
Cost of sales	8,315,737	6,715,943
Gross profit	1,873,811	1,259,694
Selling, general and administrative expenses	2,009,098	1,867,087
Loss from operations	(135,287)	(607,393)
Other (income) expenses:
Interest expense	18,250	6,752
Interest income	(156)	(32)
Other, net	0	10
Nonoperating Income (Expense)	18,094	6,730
Loss before benefit from income taxes	(153,381)	(614,123)
Benefit from income taxes	0	0
Net loss	$ (153,381)	$ (614,123)
Basic and diluted loss per share	$ (0.04)	$ (0.15)
outstanding - basic and diluted	4,013,537	4,013,537

XML

BALANCE SHEET - USD ($)	Sep. 30, 2020	Jun. 30, 2020
Current assets:
Cash and cash equivalents	$ 5,876	$ 2,600,083
Accounts receivable, net of allowances of $170,000	3,277,152	3,103,819
Inventories, net	11,255,918	8,928,688
Income tax receivable	12,278	12,178
Other current assets	335,953	229,805
Total current assets	14,887,177	14,874,573
Property, plant and equipment, net	4,142,322	4,139,693
Operating lease assets	16,264	17,326
Deferred income taxes	640,767	640,767
Total assets	19,686,530	19,672,359
Current liabilities:
Current portion of Payroll Protection Program loan	1,440,678	1,042,655
Current portion of operating lease liability	4,375	4,249
Revolving credit facility	1,204,385	0
Accounts payable	3,484,335	2,940,006
Customer deposits	1,247,880	2,832,370
Other accrued liabilities	2,478,945	2,106,131
Total current liabilities	9,860,598	8,925,411
Long-term portion of Payroll Protection Program loan	934,181	1,332,204
Long-term portion of Payroll Protection Program loan	11,936	13,077
Long-term environmental liability	154,000	523,000
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 September 30, 2020 and June 30, 2020; 4,013,537 shares outstanding at September 30, 2020 and June 30, 2020	52,139	52,139
Additional paid-in capital	48,494,261	48,493,732
Accumulated deficit	(18,839,797)	(18,686,416)
Less treasury stock, at cost; 1,200,365 shares at September 30, 2020 and June 30, 2020	(20,980,788)	(20,980,788)
Total stockholders' equity	8,725,815	8,878,667
Total liabilities and stockholders' equity	19,686,530	19,672,359
Series A Preferred Stock
Stockholders' equity:
Preferred stock	$ 0	$ 0

XML

BALANCE SHEET (Parenthetical) - USD ($)	Sep. 30, 2020	Jun. 30, 2020
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

XML

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, 2019	$ 52,139	$ 48,491,317	$ (15,672,316)	$ (20,980,788)	$ 11,890,352
Stock based compensation	0	793	0	0	793
Net loss	0	0	(614,123)	0	(614,123)
Balance at End of period at Sep. 30, 2019	52,139	48,492,110	(16,286,439)	(20,980,788)	11,277,022
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	0	529	0	0	529
Net loss	0	0	(153,381)	0	(153,381)
Balance at End of period at Sep. 30, 2020	$ 52,139	$ 48,494,261	$ (18,839,797)	$ (20,980,788)	$ 8,725,815

XML

STATEMENT OF CASH FLOWS - USD ($)	3 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities:
Net loss	$ (153,381)	$ (614,123)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	164,534	180,785
Stock based compensation	529	793
Provision for doubtful accounts and sales returns and allowances	(630)	3,000
Changes in operating assets and liabilities:
Accounts receivable	(172,703)	(17,136)
Inventories	(2,327,230)	(19,951)
Income tax receivable	(100)	(100)
Customer deposits	(1,584,490)	(184,082)
Other current assets	(106,148)	145,281
Accounts payable	544,329	100,449
Other accrued liabilities	3,861	(311,933)
Net cash used in operating activities	(3,631,429)	(717,017)
Cash flows from investing activities:
Capital expenditures	(167,163)	(26,005)
Net cash used in investing activities	(167,163)	(26,005)
Cash flows from financing activities:
Borrowings under revolving credit agreement	10,098,573	8,626,876
Payments under revolving credit agreement	(8,894,188)	(7,776,872)
Net cash provided by financing activities	1,204,385	850,004
Net increase (decrease) in cash and cash equivalents	(2,594,207)	106,982
Cash and cash equivalents at beginning of period	2,600,083	195,454
Cash and cash equivalents at end of period	$ 5,876	$ 302,436

XML

Summary of Significant Accounting and Reporting Policies

3 Months Ended

Sep. 30, 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, 2020.

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 Issued Accounting Pronouncements

              In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which changes the way companies evaluate credit losses for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other specified instruments, entities will be required to use a new forward-looking “expected loss” model to evaluate impairment, potentially resulting in earlier recognition of allowances for losses. The new standard also requires enhanced disclosures, including the requirement to disclose the information used to track credit quality by year of origination for most financing receivables. The guidance must be applied using a cumulative-effect transition method. ASU 2016-13 is effective for fiscal years beginning after December 15, 2020, and for interim periods within those fiscal years (the fiscal year ending June 30, 2022 for the Company), with early adoption permitted. The Company is currently evaluating the impact that adopting this guidance may have on its financial statements.

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 September 30, 2020, additional borrowings on the credit facility (Note 6), reductions in inventory levels and future earnings 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 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). The Company’s liquidity needs will be largely determined by the success of the Company executing management’s plan.

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Revenues

3 Months Ended

Sep. 30, 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 loss.

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
	September 30,
	2020		2019
Domestic United States	$	6,103,489	$	5,744,235
Europe		1,368,561		327,667
Canada		367,941		156,402
Latin America		1,163,268		754,992
Middle East		506,726		137,574
Far East		678,597		854,440
Other International		966		327
	$	10,189,548	$	7,975,637

	Sales by Product
	Three months ended
	September 30,
	2020		2019
Respiratory care products	$	2,148,339	$	2,156,204
Medical gas equipment		3,958,521		3,780,565
Emergency medical products		4,082,688		2,038,868
	$	10,189,548	$	7,975,637

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Inventories

3 Months Ended

Sep. 30, 2020

Inventories

Inventories

3. Inventories

Inventories are comprised as follows:

	September 30, 2020		June 30, 2020
Work-in progress	$	1,178,969	$	817,692
Component parts		9,870,241		8,299,972
Finished goods		2,055,842		1,660,158
Reserve for obsolete and excess inventories		(1,849,134)		(1,849,134)
	$	11,255,918	$	8,928,688

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Earnings per share

3 Months Ended

Sep. 30, 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 months ended September 30, 2020 and 2019 were 4,013,537.

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Commitments and Contingencies

3 Months Ended

Sep. 30, 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

The Company is party to a Brownfield Cleanup Program Agreement 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 agreement recognizes that the soil and groundwater at the Stuyvesant Falls facility is impacted by chemical compounds exceeding  regulatory standards. Pursuant to the agreement, 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 $1.1 million. This amount was recorded as an expense during fiscal 2020 and is reflected in other accrued liabilities and selling, general and administrative expenses in the Company’s financial statements. As of September 30, 2020, the Company has paid approximately $98,000 in remediation expenses which have been charged to the initial reserve.

Liability for future environmental expenditures

Balance - July 1, 2020	$	1,037,000
Charges to income		—
Remedial and investigatory spending		15,806
Balance - September 30, 2020	$	1,021,194
	9/30/2020		6/30/2020
Reflected in the Balance sheet as:
Current, included in Other Liabilities	$	867,194	$	514,000
Long-term environmental		154,000		523,000
Total liability	$	1,021,194	$	1,037,000

Employment Contract

In March 2007, the Company entered into a three year employment contract with its chief executive officer. The contract is subject to automatic annual renewals after the initial term unless notification is given. The contract was amended and restated in December 2009 without extending its term. 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.

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Financing

3 Months Ended

Sep. 30, 2020

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 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 and inventory but will not exceed $2,000,000. At September 30, 2020 availability under the agreement was $0.8 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.

The Company was in compliance with all of the covenants associated with the Credit Facility at September 30, 2020.

PPP Loan

On April 22, 2020, the Company entered into a Payroll Protection Program (PPP) 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 used 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 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 or at the Company’s election 24 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 40% 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%. The Company has submitted its application for forgiveness and is awaiting approval from the SBA. 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 the date that SBA remits the Company's loan forgiveness amount to the lender, 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.

At September 30, 2020 the Company had  $3.6 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 September 30, 2020.

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Income Taxes

3 Months Ended

Sep. 30, 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 quarter ended September 30, 2020 the Company recorded the tax benefit of losses incurred during the current quarter in the amount of approximately $39,000. As the realization of the tax benefit of the net operating loss is not assured an additional valuation allowance of approximately $39,000 was recorded. In the quarter ended September 30, 2019 the Company recorded the tax benefit of losses incurred in the amount of approximately $154,000. As the realization of the tax benefit of the net operating loss is not assured an additional valuation allowance of approximately $154,000 was recorded. The total valuation allowance recorded by the Company as of September 30, 2020 and 2019 was approximately $2,814,000 and $2,890,000, 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.

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Summary of Significant Accounting and Reporting Policies (Policies)

3 Months Ended

Sep. 30, 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, 2020.

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 Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

              In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which changes the way companies evaluate credit losses for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other specified instruments, entities will be required to use a new forward-looking “expected loss” model to evaluate impairment, potentially resulting in earlier recognition of allowances for losses. The new standard also requires enhanced disclosures, including the requirement to disclose the information used to track credit quality by year of origination for most financing receivables. The guidance must be applied using a cumulative-effect transition method. ASU 2016-13 is effective for fiscal years beginning after December 15, 2020, and for interim periods within those fiscal years (the fiscal year ending June 30, 2022 for the Company), with early adoption permitted. The Company is currently evaluating the impact that adopting this guidance may have on its financial statements.

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 September 30, 2020, additional borrowings on the credit facility (Note 6), reductions in inventory levels and future earnings 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 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). The Company’s liquidity needs will be largely determined by the success of the Company executing management’s plan.

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Revenues (Tables)

3 Months Ended

Sep. 30, 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
	September 30,
	2020		2019
Domestic United States	$	6,103,489	$	5,744,235
Europe		1,368,561		327,667
Canada		367,941		156,402
Latin America		1,163,268		754,992
Middle East		506,726		137,574
Far East		678,597		854,440
Other International		966		327
	$	10,189,548	$	7,975,637

Schedule of Revenue from external customers by products and services

	Sales by Product
	Three months ended
	September 30,
	2020		2019
Respiratory care products	$	2,148,339	$	2,156,204
Medical gas equipment		3,958,521		3,780,565
Emergency medical products		4,082,688		2,038,868
	$	10,189,548	$	7,975,637

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Inventories (Tables)

3 Months Ended

Sep. 30, 2020

Inventories

Schedule of Inventories

Inventories are comprised as follows:

	September 30, 2020		June 30, 2020
Work-in progress	$	1,178,969	$	817,692
Component parts		9,870,241		8,299,972
Finished goods		2,055,842		1,660,158
Reserve for obsolete and excess inventories		(1,849,134)		(1,849,134)
	$	11,255,918	$	8,928,688

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Commitments and Contingencies (Tables)

3 Months Ended

Sep. 30, 2020

Commitments and Contingencies

Schedule of liability for future environmental expenditures

Balance - July 1, 2020	$	1,037,000
Charges to income		—
Remedial and investigatory spending		15,806
Balance - September 30, 2020	$	1,021,194
	9/30/2020		6/30/2020
Reflected in the Balance sheet as:
Current, included in Other Liabilities	$	867,194	$	514,000
Long-term environmental		154,000		523,000
Total liability	$	1,021,194	$	1,037,000

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Revenues (Details) - USD ($)	3 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Net sales	$ 10,189,548	$ 7,975,637
Domestic United States
Net sales	6,103,489	5,744,235
Europe
Net sales	1,368,561	327,667
Canada
Net sales	367,941	156,402
Latin America
Net sales	1,163,268	754,992
Middle East
Net sales	506,726	137,574
Far East
Net sales	678,597	854,440
Other International
Net sales	$ 966	$ 327

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Revenues - Revenue from External Customers (Details) - USD ($)	3 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Net sales	$ 10,189,548	$ 7,975,637
Respiratory care products
Net sales	2,148,339	2,156,204
Medical gas equipment
Net sales	3,958,521	3,780,565
Emergency medical products
Net sales	$ 4,082,688	$ 2,038,868

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Inventories (Details) - USD ($)	Sep. 30, 2020	Jun. 30, 2020
Inventories
Work-in progress	$ 1,178,969	$ 817,692
Component parts	9,870,241	8,299,972
Finished goods	2,055,842	1,660,158
Reserve for obsolete and excess inventories	(1,849,134)	(1,849,134)
Inventories	$ 11,255,918	$ 8,928,688

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Earnings per share (Details) - shares	3 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Earnings Per Share
Weighted Average Number of Shares Outstanding, Basic and Diluted	4,013,537	4,013,537

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Commitments and Contingencies - Liability for future environmental expenditures (Details) - USD ($)	3 Months Ended	12 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Sep. 30, 2020	Jun. 30, 2020
Commitments and Contingencies
Beginning Balance	$ 1,037,000
Charges to income		$ 1,100,000
Remedial and investigatory spending	15,806
Ending Balance	1,021,194	1,037,000
Current, included in Other Liabilities			$ 867,194	$ 514,000
Long-term environmental			154,000	523,000
Total liability	$ 1,021,194	$ 1,037,000	$ 1,021,194	$ 1,037,000

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Commitments and Contingencies (Details) - USD ($)	3 Months Ended	12 Months Ended
	Sep. 30, 2020	Jun. 30, 2020
Commitments and Contingencies
Environmental Remediation Expense		$ 1,100,000
Payments for Environmental Liabilities	$ 98,000

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Financing (Details)			3 Months Ended
	Apr. 22, 2020 USD ($)	Feb. 27, 2017 USD ($)	Sep. 30, 2020 USD ($) installment	Jun. 30, 2020 USD ($)
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			$ 1,204,385	$ 0
Total indebtedness			3,600,000
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			$ 800,000
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%
Payroll Protection Program loan
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	1.00%
Loan proceeds	$ 2,375,000
Number of equal monthly payments | installment			18

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Income Taxes (Details) - USD ($)	3 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Income Taxes
Deferred Other Tax Expense (Benefit)	$ (39,000)	$ (154,000)
Operating Loss Carryforwards, Valuation Allowance	39,000	154,000
Deferred Tax Assets, Valuation Allowance	$ 2,814,000	$ 2,890,000