<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 3, 1997
DG LIQUIDATION, INC.
(Exact Name of Registrant as Specified in its Charter)
New Jersey 2-96510-NY 11-2269958
(State of other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
350 Meadowland Parkway, Secaucus, New Jersey 07096
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number,
including area code, (201) 348-3700
<PAGE>
Item 2: ACQUISITION OR DISPOSITION OF ASSETS
(formerly Drug Guild Distributors, Inc.) (the "Company") consummated a
sale of substantially all of its assets pursuant to an asset purchase
agreement dated as of July 1, 1997 (the "Agreement"), by and among the
Company, Neuman Health Services, Inc. and Neuman Distributors, Inc.
(hereinafter collectively referred to as "Neuman") pursuant to which
Neuman acquired substantially all of the assets, business and goodwill
of the Company, including the exclusive right for use of the name "Drug
Guild." The Agreement specifically excludes any claims for tax refunds,
any claims the Company may have against its officers, employees and
third parties, certain insurance policies, certain motor vehicles, any
net operating loss carry forward and any other assets or claims of the
Company that do not involve its inventory or are not specified on the
Company's closing balance sheet.
Neuman has agreed to assume and to pay, perform or discharge certain
specified liabilities of the Company, including trade accounts payable, accrued
expenses as reflected on the closing balance sheet, the collective bargaining
agreement with Local 815, each of the Company's leases, all expenses incurred in
the ordinary course of business, the bank debt and long term notes. However,
Neuman did not assume severance or termination payments, worker compensation
claims, liability for any federal, state or income taxes, environmental claims,
undisclosed or contingent liabilities, penalties, fines that may be assessed by
the Drug Enforcement Administration or liabilities with respect to the preferred
stock of the Company.
The purchase price consists of cash and promissory notes and is equal to
$1,000,000 plus the net asset value of the Company, $18,684,000, which was
determined by subtracting the value of the assumed liabilities from the assets
being purchased by Neuman, as estimated by a Closing Balance Sheet prepared by
the Company as of May 31, 1997. An audit of such assets and liabilities as of
the Closing Date will be conducted by Neuman's auditors and, accordingly, the
purchase price will be subject to adjustment based on the Audited Balance Sheet
and subsequently subject to adjustment until the first anniversary of the
Closing Date for items effecting accounts payable, accrued expenses and accounts
receivable.
On the Closing Date, Neuman provided the Company with the following
consideration in addition to the assumption of liabilities described above:
(a) a cash payment of $4,000,000;
(b) the balance of the purchase price reflected by a four-year
promissory note, secured by a letter of credit, for $14,684,000, bearing
interest at a rate determined quarterly equal to the higher of 1% plus the
180-day Libor rate, or the rate specified for U.S. Treasury Notes with
maturities equal to the remaining term of the note, but no lower than the
Federal Rate as disseminated by the Internal Revenue Service from time to
time (the "Secured Note");
(c) an unsecured promissory note for $1,000,000 payable four years
after the closing without interest (the "Unsecured Note"); and
(d) an option in favor of the Company's shareholders to purchase,
under certain conditions, an aggregate amount of Neuman shares equal to 10%
of Neuman shares to be made available in a public offering in the event
Neuman files a registration statement with the Securities and
<PAGE>
Exchange Commission prior to the fourth anniversary of the closing date for
the purpose of an initial public offering of Neuman shares, at a purchase
price equal to 85% of the per share offering price.
The Secured Note is to be paid as follows:
(a) $2,000,000 during the first year in equal quarterly payments
together with interest on the amount being paid;
(b) the first year's interest on the balance of the Secured Note shall
be calculated based on the Adjusted Principal Amount and shall be paid
along with the first payment due after the Adjusted Principal Amount
(hereinafter defined) has been determined; and
(c) the remaining principal of the Secured Note shall be paid over the
following three years in 12 equal quarterly principal payments, with
interest on the unpaid balance.
At the end of the first year following the closing, provided Neuman is not
in default under the Secured Note, Neuman will have the right to reassign
uncollected accounts receivable and notes to the Company and have the principal
of the Secured Note reduced by an amount equal to the reassigned receivables and
notes, less certain credits to which the Company may be entitled (the "Adjusted
Principal Amount"). Neuman is prohibited from doing business with any customer
whose indebtedness has been reassigned for a period of two years. Neuman has
also agreed to various provisions preserving the payment terms of current
customers of the Company and providing employment offers to the Company's
current employees.
ITEM 5. OTHER EVENTS
On June 27, 1997, a Special Shareholders Meeting was held at which time the
Board of Directors of the Company was reduced to seven persons with five persons
constituting a quorum. The following persons were elected at the meeting to the
Company's Board of Directors for a term of one year or until their replacements
are elected and qualify:
Harold Blumenkrantz Paul Emanuel
Alfred Hertel Michael Katz
Gerald Koblin Howard Sternheim
Ernest Wyre
At a Board of Directors Meeting immediately following the Shareholders
Meeting, the following persons were elected as officers of the Company:
President Harold Blumenkrantz
Vice-President Michael Katz
Vice-President Howard Sternheim
Secretary/Treasurer Gerald Koblin
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(b) Pro Forma Financial Information
<PAGE>
DRUG GUILD DISTRIBUTORS
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
APRIL 30, 1997
In Thousands
On July 3, 1997, Drug Guild Distributors, Inc. (the "Company")
consummated a sale pursuant to an asset purchase agreement dated as of
July 1, 1997, by and among the Company, Neuman Health Services, Inc. and
Neuman Distributors, Inc. (collectively "Neuman") whereby Neuman
acquired substantially all of the Company's assets and assumed, among
other things, trade accounts payable, the bank debt and long term notes.
The purchase price was equal to $1,000 plus the Net Asset Value (NAV),
as defined, of the Company as of the closing date, which NAV amounted to
$18,684. Inventory which is valued at LIFO cost for financial reporting
purposes in valued based on latest cost in calculating NAV. The purchase
price is payable as follows: $4,000 in cash, a $1,000 non-interest
bearing unsecured promissory note payable in July 2001, and the balance,
of $14,684, by a secured interest bearing promissory note payable
quarterly over four years. On July 3, 1998, provided Neuman is not in
default under the secured note, Neuman will have the right to reassign
uncollected accounts receivable and notes receivable to the Company and
have the principal amount of the secured note reduced to the extent such
uncollected receivables exceed the allowance for doubtful accounts at
the closing date.
The following unaudited pro forma condensed balance sheet gives effect
to the transaction as if it had occurred on April 30, 1997. The
unaudited pro forma condensed balance sheet should be read in
conjunction with the Company's quarterly report on Form 10-Q for the
period ended April 30, 1997 and the audited historical financial
statements included in the Company's Form 10-K for the year ended July
31, 1996. Unaudited pro forma statements of operations for the year
ended July 31, 1996 and for the nine months ended April 30, 1997 are not
presented because the Company will not have any continuing operations
other than investment income subsequent to the transaction.
INSERT PRO FORMA
<PAGE>
<TABLE>
<CAPTION>
Assets Sold And
Liabilities Assumed Other
Historical (1) (2) and (3) Pro Forma
<S> <C> <C> <C> <C>
Assets:
Cash $ 230 ($230) $ 4,000 $ 4,000
Notes Receivable 15,493 15,493
Trade Receivables 67,297 (67,292) 5
Allowance For Doubtful Accounts (1,709) 1,709 0
Inventory 32,460 (32,460) 0
Other Current Assets 590 (260) 330
Equipment, net 3,280 (2,915) 365
Trade Receivables, non-current 4,004 (4,004) 0
Allowance for Doubtful Accounts (438) 438 0
Deferred Tax Benefit 1,359 0 (1,359) 0
Other assets 75 (19) 56
----------------------------------------------------------------------------------------
TOTAL $107,148 ($105,033) $18,134 $20,249
Liabilities:
Loan - Bank $49,349 ($49,349) $0
Notes Payable 375 (346) 29
Accounts Payable 40,513 (40,513) 0
Income Taxes Payable - Current 325 325
Income Taxes Payable - Deferred 596 596
Accrued Expenses 1,188 (984) 204
Notes Payable - non-current 72 (19) 53
Other 342 342
Deferred Compensation Payable 542 542
-----------------------------------------------------------------------------------------
TOTAL LIABILITIES 92,381 (91,211) 921 2,091
Redeemable Preferred Stock 2,105 2,105
Shareholders' Equity 12,662 (13,822) 17,213 16,053
------------------------------------------------------------------------------------------
TOTAL $107,148 ($105,033) $18,134 $20,249
</TABLE>
<PAGE>
Notes to pro forma balance sheet:
(1) To reflect the assets sold, $105,033, and liabilities assumed, $91,211, by
Neuman.
(2) To reflect (a) the proceeds of the sale of $19,493, based on the net asset
value, as defined, on April 30, 1997, consisting of $4,000 in cash, an
interest bearing secured note of $14,737, and an unsecured non-interest
bearing note of $1,000 recorded at a discounted value of $756, and, (b)
the gain on the sale of $5,671 computed as follows:
Proceeds from sale $19,493
Net assets sold 13,822
------
Gain on sale $ 5,671
------
(3) To provide for current and deferred taxes aggregating $2,280 on the gain on
sale.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amended Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: November 6, 1997
DG LIQUIDATION, INC.
By: /s/ Harold Blumenkrantz
---------------------------
Harold Blumenkrantz, President and
Chief Executive Officer
