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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
October 1, 1997
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Date of Report (date of earliest event reported)
IN-HOUSE REHAB CORPORATION
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Exact Name of Registrant as Specified in its Charter
Colorado 0-22155 84-0987697
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State or Other Jurisdiction Commission File IRS Employer Identifi-
of Incorporation Number cation Number
325 West Main Street, Suite 1400B, Louisville, Kentucky 40202
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Address of Principal Executive Offices, Including Zip Code
(502) 568-8923
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Registrant's Telephone Number, Including Area Code
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ITEM 4. CHANGES IN THE REGISTRANT'S CERTIFYING ACCOUNTANT
On October 8, 1997, the Company filed a Current Report on Form 8-K (the
"Form 8-K") reporting the resignation of Coopers & Lybrand L.L.P. ("C&L") by
letter dated October 1, 1997. The Company furnished a copy of the Form 8-K to
C&L on the day it was filed with the Securities and Exchange Commission (the
"SEC") and requested C&L furnish the Company with a letter addressed to the
Commission, as required by Item 304(a)(3) of Regulation S-K. On October 14,
1997, C&L provided the Company with its response to the Form 8-K (the
"Response Letter"), wherein it disagrees with certain statements made by the
Company therein.
The Company's management continues to stand by the statements it made in
the Form 8-K. The Company did not want a change in accountants during an
audit and continued to work with C&L to satisfy them with respect to the
collectability of the Retirement Care Associates, Inc. receivables during
August and September, until C&L's resignation on October 1, 1997.
The Company has engaged the accounting firm of Strothman & Company PSC
to audit the Company's financial statements for the fiscal year ended May 31,
1997, and to reaudit the Company's financial statements for the fiscal year
ended May 31, 1996.
A copy of the Response Letter is attached hereto as Exhibit 16. The
foregoing description of the Response Letter is qualified in its entirety by
reference to the text thereof.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements: None
(b) Pro Forma Financial Information: None
(c) Exhibits:
16 Letter of Coopers & Lybrand L.L.P. required
by Item 304(a)(3) of Regulation S-B*
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* Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned duly authorized.
IN-HOUSE REHAB CORPORATION
Dated: October 16, 1997 By/s/ Robert J. Babine
Robert J. Babine, Chief Financial
Officer and Treasurer
COOPERS & LYBRAND
A PROFESSIONAL SERVICES FIRM
SUITE 1800, 500 WEST MAIN STREET
LOUISVILLE, KENTUCKY 40202-4264
TELEPHONE (502) 589-6100
FACSIMILE (502) 585-7775
October 14, 1997
Securities and Exchange Commission
450 5th Street NW
Washington, D C. 20549
Gentlemen:
We have read the statements made by In-House Rehab Corporation (the
"Registrant"), which we understand have been filed with the Commission,
pursuant to Item 4 of Form 8-K, as part of the Registrant's Form 8-K report
(the "Form 8-K") dated October 1, 1997 (copy attached). We have the following
comments regarding the disclosures made therein:
At the time of our resignation, there were two reportable events pursuant to
Regulation S-K, Item 304(a)(l)(v)(D). The reportable events were (1) our
conclusion that our report should be qualified as to the collectibility of
certain receivables from Retirement Care Associates ("RCA"), a significant
investor in the Registrant, and (2) our conclusion that our report should be
modified to express substantial doubt as to the ability of the Registrant to
continue as a going concern. Each of the reportable events is further
discussed below to clarify the statements made by the Registrant.
The Registrant states in the third paragraph of the Form 8-K that it was not
informed until August 1, 1997 that there were collectibility issues relating
to the receivables from RCA. We disagree with that statement. We informed the
Registrant early in July 1997, near the commencement of our audit, that the
collectibility of receivables from RCA (and others) would be a major audit
issue. In fact, RCA receivables had been a significant issue in our audit of
the Registrant's May 31, 1996 financial statements. As described in the first
two sentences of the fifth paragraph of the Form 8-K, repeated attempts were
made by the Registrant to provide us with sufficient competent evidential
matter to satisfy us with respect to the collectibility of the RCA
receivables. Also, as stated by the Registrant in the fifth sentence of the
fifth paragraph of the Form 8-K, we would not commit that a proposed letter of
credit from a third party would be sufficient to provide such sufficient
competent evidential matter. The letter of credit agreement was never
finalized, therefore, there was no evidence to examine, and we could not agree
to its sufficiency. Accordingly, at the time of our resignation we had not
received sufficient competent evidential matter, and we had concluded that our
report would have to be qualified.
We also had reached a conclusion that our report should be modified to express
substantial doubt as to the Registrant's ability to continue as a going,
concern. This conclusion was reached because (1) the Registrant was continuing
to extend significant amounts of trade credit to RCA, and we had not obtained
sufficient competent evidential matter to support the Registrant's ability to
collect such amounts; and, (2) the Registrant's failure to demonstrate that it
could obtain long-term financing to replace its existing line of credit that
was expiring in the near-term. Accordingly, we disagree with the Registrant's
statements made in the fourth sentence of the fifth paragraph of the Form 8-K
as to the reasons for our conclusion on this matter.
In the sixth paragraph of the Form 8-K, the Registrant states its belief that
we were unreasonable in our positions and that our unreasonableness related to
our "adverse relationship with RCA." This is baseless and totally without
merit. As indicated above, we addressed audit issues related to RCA
receivables long before any termination of our client relationship with RCA.
Our concern over the collectibility of the RCA receivables was based on the
historically, slow-paying nature of the receivables and public information
about the deteriorating financial condition of RCA. The reasons for our
conclusion on the going concern matter are stated above.
We do not have a basis to agree or disagree with the Registrant's statement in
the first sentence of the seventh paragraph of the Form 8-K that the Audit
Committee has been fully advised about all matters described in the Form 8-K.
Very truly yours,
/s/ Coopers & Lybrand, L.L.P.
Coopers & Lybrand L.L.P.
