SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 8-K/A
Amendment No. 2
AMENDMENT TO REPORT
FILED PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 9, 1998
-------------
ACCUHEALTH, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 0-17292 13-3176233
- -------------------- --------------- ----------------
(State or other Commission File (I.R.S. Employer
jurisdiction of Number Identification
incorporation or Number)
organization)
1575 Bronx River Avenue, Bronx, New York 10460
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(718) 518-9511
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
The undersigned registrant (the "Registrant") previously filed a Report
on Form 8-K, dated April 30, 1998 (the "8-K"), disclosing the consummation of
the Registrant's acquisition of Healix HealthCare, Inc. ("Healix") on April 9,
1998. The Registrant files this second amendment to the 8-K for the purpose of
amending the following item by filing revised financial statements for Healix
and the required pro forma financial information. This amendment replaces in
their entirety the financial statements and pro forma financial information
filed in the Registrant's Report on Form 8-K/A dated June 23, 1998.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
The financial statements of Healix Healthcare, Inc. and Subsidiaries
("Healix") are attached hereto beginning on page F-2.
(b) Pro Forma Financial Information
The pro forma financial information of Accuhealth, Inc. and Healix are
attached hereto beginning on Page F-27.
SIGNATURES
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 hereunto duly authorized.
ACCUHEALTH, INC
By: /s/ Glenn C. Davis
----------------------------
Chief Executive Officer,
President and Director
Dated June 24, 1998
<PAGE>
ACCUHEALTH, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Healix Healthcare, Inc. and Subsidiaries
<S> <C>
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets at September 30, 1997 and 1996 F-3 - F-4
Consolidated Statements of Operations for the
years ended September 30, 1997 and 1996 F-5
Consolidated Statements of Stockholders' Equity
for the years ended September 30, 1997 and 1996 F-6
Consolidated Statements of Cash Flows for the years ended
September 30, 1997 and 1996 F-7 - F-8
Notes to Consolidated Financial Statements F-9 - F-21
Healix Healthcare, Inc. and Subsidiaries (Unaudited)
Consolidated Balance Sheet at March 31, 1998 F-22
Consolidated Statements of Operations for the Six Months Ended
March 31, 1998 and 1997 F-23
Consolidated Statements of Stockholders' Deficit for the
Six Months Ended March 31, 1998 F-24
Consolidated Statements of Cash Flows for the Six Months Ended
March 31, 1998 and 1997 F-25
Notes to Unaudited Consolidated Financial Statements F-26
Accuhealth, Inc. Pro Forma Combined Financial Statements (Unaudited)
Introduction F-27
Pro Forma Combined Balance Sheet at December 31, 1997 F-28
Pro Forma Combined Statement of Operations for the Year
Ended March 31, 1997 F-29
Pro Forma Combined Statement of Operations for the Year
Ended March 31, 1996 F-30
Pro Forma Combined Statement of Operations for the Year
Ended March 31, 1995 F-31
Pro Forma Combined Statement of Operations for the Nine
Months Ended December 31, 1997 F-32
Pro Forma Combined Statement of Operations for the Nine
Months Ended December 31, 1996 F-33
Notes to Pro Forma Combined Financial Statements F-34
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To the Board of Directors and Stockholders of
Healix Healthcare, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Healix
Healthcare, Inc. and Subsidiaries as of September 30, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Healix Healthcare,
Inc. and Subsidiaries as of September 30, 1997 and 1996, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
Woodbury, New York
January 7, 1998
/s/ MARCUM & KLIEGMAN LLP
--------------------------
Marcum & Kliegman LLP
F-2
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1997 and 1996
ASSETS
------
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 215,404 $ 51,742
Accounts receivable, less allowance for doubtful accounts
of $153,813 and $43,790 in 1997 and 1996, respectively 3,408,978 2,568,350
Inventory, net 574,048 455,562
Prepaid expenses and taxes 125,396 59,478
Due from related organizations 4,193 12,127
Deferred costs 134,619 -0-
Deferred income taxes -0- 67,500
Income tax refund receivable -0- 67,440
Other current assets 2,850 4,119
---------- ----------
Total Current Assets 4,465,488 3,286,318
---------- ----------
PROPERTY AND EQUIPMENT, Net 262,453 310,011
- ---------------------- ---------- ----------
OTHER ASSETS
Organization and start-up costs, net 3,831 7,659
Security deposits 37,468 41,406
Goodwill, net 234,195 213,208
Deferred costs 35,379 90,416
---------- ----------
Total Other Assets 310,873 352,689
---------- ----------
TOTAL ASSETS $5,038,814 $3,949,018
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1997 and 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $2,254,834 $1,299,730
Lines of credit 247,586 713,713
Current maturities of capital lease obligations 35,187 15,982
Current maturities of long-term debt 454,714 429,751
Note payable, factor 717,745 -0-
Deferred income taxes payable 90,000 51,422
---------- ----------
Total Current Liabilities 3,800,066 2,510,598
---------- ----------
OTHER LIABILITIES
Capital lease obligations, net of current maturities 54,629 36,242
Long-term debt, net of current maturities 459,081 516,769
---------- ----------
Total Other Liabilities 513,710 553,011
---------- ----------
TOTAL LIABILITIES 4,313,776 3,063,609
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 10,000,000 shares
authorized, 2,010,003 and 1,905,003 shares issued and
outstanding in 1997 and 1996, respectively 2,009 1,905
Additional paid-in capital 632,092 521,796
Retained earnings 90,937 361,708
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 725,038 885,409
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,038,814 $3,949,018
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
SALES
Net patient service revenue $ 13,069,118 $ 8,324,245
------------ ------------
COST OF SALES
Inventory - Beginning 455,562 224,972
Purchases and other costs 6,483,792 4,195,999
------------ ------------
6,939,354 4,420,971
Less: Inventory - Ending 574,048 455,562
------------ ------------
TOTAL COST OF SALES 6,365,306 3,965,409
------------ ------------
GROSS PROFIT 6,703,812 4,358,836
OPERATING EXPENSES 6,745,492 4,577,225
------------ ------------
OPERATING LOSS (41,680) (218,389)
------------ ------------
OTHER INCOME (EXPENSE)
Interest expense (216,965) (133,766)
Interest income 1,350 5,510
Miscellaneous income 90,857 46,752
------------ ------------
TOTAL OTHER EXPENSE (124,758) (81,504)
------------ ------------
LOSS BEFORE PROVISION FOR TAXES AND
EQUITY IN LOSS FROM UNCONSOLIDATED
SUBSIDIARY AND EXTRAORDINARY ITEM (166,438) (299,893)
INCOME TAX (EXPENSE) BENEFIT (104,333) 111,745
EQUITY IN LOSS FROM UNCONSOLIDATED
SUBSIDIARY -0- (100,000)
------------ ------------
LOSS BEFORE EXTRAORDINARY ITEM (270,771) (288,148)
EXTRAORDINARY ITEM - forgiveness of debt, net of
applicable income tax of $13,204 in 1996 -0- 135,996
------------ ------------
NET LOSS $ (270,771) $ (152,152)
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
(Accumulated
Additional Deficit)
Common Stock Paid-In Retained Stockholders'
$.001 Par Value Capital Earnings Equity
---------------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
BALANCE - October 1, 1995
as originally reported $ 12,491 $ 451,709 $ 123,971 $ 588,171
Adjustment in connection with
pooling of interests 629 3,871 531,420 535,920
--------- --------- ---------- ---------
BALANCE - October 1, 1995
as restated 13,120 455,580 655,391 1,124,091
Issuance of common stock in
exchange for assets acquired 275 54,726 55,001
Recapitalization resulting from
stock purchase and exchange
agreement (11,490) 11,490
Net loss (152,152) (152,152)
Distributions to stockholders (141,531) (141,531)
--------- --------- ---------- ---------
BALANCE - September 30, 1996 1,905 521,796 361,708 885,409
Conversion of long-term debt
to common stock 74 77,926 78,000
Stock issuance 15 15,885 15,900
Issuance of common stock in
lieu of salary 15 16,485 16,500
Net loss (270,771) (270,771)
--------- --------- ---------- ---------
BALANCE - September 30, 1997 $ 2,009 $ 632,092 $ 90,937 $ 725,038
======== ========= ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (270,771) $ (152,152)
---------- ----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Deferred income taxes 106,078 2,722
Depreciation and amortization 213,317 71,848
Provision for bad debts 110,023 43,790
Increase in accounts receivable (950,651) (1,000,578)
Increase in inventory (142,521) (230,590)
Increase in prepaid expenses and taxes (65,918) (150,814)
Decrease (increase) in due from related organizations 7,934 (39,405)
Increase in deferred costs (120,510) (90,416)
Decrease (increase) in income taxes refund receivable 67,440 (67,440)
Decrease (increase) in other current assets 1,269 (4,119)
Decrease (increase) in security deposits 3,938 (31,361)
Increase in accounts payable and accrued expenses 955,105 846,126
---------- ----------
TOTAL ADJUSTMENTS 185,504 (650,237)
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (85,267) (802,389)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of goodwill (32,351) (213,208)
Purchases of property and equipment (18,430) (226,364)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES $ (50,781) $ (439,572)
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
For the Years Ended September 30, 1997 and 1996
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock $ 32,400 $ 55,001
Proceeds from line of credit, net 100,000 559,002
Principal repayments on capital lease obligations (29,582) (14,895)
Principal repayments on long-term debt (304,725) 795,620
Repayments of stockholder's loan -0- (149,200)
Distribution to stockholders -0- (141,531)
Principal payments on line of credit (216,128) -0-
Net proceeds, factor 717,745 -0-
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 299,710 1,103,997
----------- -----------
NET INCREASE (DECREASE) IN CASH 163,662 (137,964)
CASH - Beginning 51,742 189,706
----------- -----------
CASH - Ending $ 215,404 $ 51,742
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the years for:
Interest $ 215,604 $ 116,099
Income taxes $ 41,221 $ 79,784
Noncash investing and financing activities:
Issuance of common stock in exchange for assets acquired $ -0- $ 55,000
Acquisition of assets in exchange for debt $ -0- $ 259,241
Acquisition of equipment and inventory under capital lease
obligations $ 67,174 $ 55,798
Conversion of long-term debt to common stock $ 78,000 -0-
Conversion of line of credit to loan payable $ 350,000 -0-
Write-off of property and equipment $ 12,344 -0-
</TABLE>
F-8
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Summary of Significant Accounting Policies
------------------------------------------
Description of Business
-----------------------
Healix Healthcare, Inc. ("Healix - NY"), was incorporated on August
6, 1993 in the State of New York. Healix - NY was organized to take
over the home health care operations of Rye Beach Pharmacy, Inc.,
("Rye") a company owned by a 47% stockholder (the "47%
Stockholder") of Healix Healthcare Inc., a Delaware Corporation
("Healix - DE"). On September 30, 1993, Healix - NY acquired the
trade accounts receivable and inventory of Rye's home medical
equipment and home infusion divisions. On October 1, 1993, Healix -
NY began operations as an alternate site health care provider in
the New York metropolitan region.
On August 1, 1996 Healix - NY entered into a stock purchase and
exchange agreement (the "Agreement") with Healix - DE and its
individual stockholders. Pursuant to the Agreement, Healix - DE
issued 1,249,104 shares of its common stock in exchange for all of
the issued and outstanding common stock of Healix - NY on a one for
one basis. As a result of this stock transaction, Healix - DE
became the new parent company.
Acquisition of Assets
---------------------
On May 1, 1995, Healix Healthcare of New Jersey, a newly formed
wholly owned subsidiary of Healix - DE acquired certain assets of
Total Care Medical Systems, Inc., an infusion company in New Jersey
in exchange for 50,000 shares of Healix - DE's common stock for an
aggregate purchase price of $40,000.
On March 18, 1996, Healix Healthcare of New York, a newly formed
wholly owned subsidiary of Healix - DE acquired certain assets of
Alcare Respiratory Service, Inc. a respiratory and home medical
equipment company in New York in exchange for cash of $291,783 and
the assumption of liabilities totaling $69,051 for an aggregate
purchase price of $360,834.
On August 2, 1996, Amerix, a newly formed wholly owned subsidiary
of Healix - DE acquired the assets of Americare Home Nursing
Services, Inc. a provider of nursing and home health services in
New Jersey in exchange for notes payable of $259,241 and 27,500
shares of Healix -DE's common stock for an aggregate purchase price
of $314,241. In addition, the purchase price may be increased by up
to an aggregate maximum of $75,000 depending upon the achievement
of minimum revenue levels during each of the eight quarterly
periods commencing with the calendar quarter immediately following
the quarter in which the closing occurred.
Pooling of Interests
--------------------
On September 30, 1997, a stock purchase and exchange agreement was
executed between Healix - NY and PRN Home Care Agency, Inc. ("PRN")
whereby 629,248 shares of Healix -NY's common stock was issued in
exchange for all of the issued and outstanding common stock of PRN.
The merger qualifies as a "tax free" reorganization as contemplated
under the
F-9
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Summary of Significant Accounting Policies, Continued
------------------------------------------
Pooling of Interests, Continued
--------------------
provisions of Internal Revenue Service Code Section 368(a)(1)(B).
This transaction has been accounted for as a pooling of interests,
and accordingly, the Company's financial statements have been
restated to include the accounts and operations of PRN for all
periods prior to the merger.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of
Healix - DE and its wholly owned subsidiaries consisting of the
following companies:
<TABLE>
<CAPTION>
Company Date of Formation or Acquisition
-------------------------------------- --------------------------------
<S> <C>
Healix Healthcare, Inc. ("Healix - NY") August 6, 1993
Healix Healthcare of New Jersey, Inc.
("Healix Healthcare of New Jersey") May 1, 1995
Healix Healthcare of New York, Inc.
("Healix Healthcare of New York") March 1, 1996
Amerix, Inc. ("Amerix") August 1, 1996
Rye Beach Healthcare Inc. ("Rye Beach") April 1, 1996
PRN Home Care Agency, Inc. ("PRN") September 30, 1997
</TABLE>
The consolidated group is herein collectively referred to as (the
"Company"). All significant intercompany balances and transactions
have been eliminated in consolidation.
New Developments
----------------
In addition to providing the full range of home infusion therapy
services, including parenteral nutrition therapy, antibiotic
therapy and enteral therapy among other therapies, and home medical
equipment, the Company expanded its services in 1996 to include
respiratory therapy, renal dialysis and home health nursing
services, creating a comprehensive "one stop shop" model for their
provision of health services to the alternate site. The Company's
services are currently marketed to a variety of patient referral
sources including physicians, managed care organizations, hospital
discharge planners, other hospital officials, nursing homes,
insurance companies and other managed care systems.
F-10
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Summary of Significant Accounting Policies, Continued
------------------------------------------
Cash
----
The Company has cash balances in banks in excess of the maximum
amount insured by the FDIC as of September 31, 1997.
Inventory
---------
Inventory, consisting of medical and nutritional products and home
medical equipment, is valued at the lower of cost or market with
cost being determined on a first-in, first-out basis (FIFO). Home
medical equipment consists of equipment which is either leased to
patients or available for sale. Such equipment is depreciated using
the straight-line method over the estimated useful life of the
related assets which range from three to five years. Home medical
equipment is carried in inventory at its net book value with
depreciation charged to cost of goods as a direct expense (see Note
2).
Deferred Costs
--------------
Deferred costs consist of finance and legal costs related to the
acquisition of assets of various entities. Such costs are being
amortized over three years.
Property, Equipment and Depreciation
------------------------------------
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line or
accelerated methods over the respective useful lives of the assets
which range from 3 to 7 years.
Organization and Start-up Costs
-------------------------------
Amortization of organization and start-up costs is calculated on
the straight-line method over a period of sixty months.
Net Patient Service Revenue
---------------------------
Net patient service revenue is reported at the estimated net
realizable amounts from patients, third-party payers and others for
services rendered.
Cost of Sales
-------------
Cost of sales consists of medical and nutritional products and
supplies, depreciation expense on rental equipment capitalized as
inventory and direct salaries and fringes associated with skilled
home nursing and home health services.
Income Taxes
------------
Deferred income taxes are provided for accumulated temporary
differences due to basis differences in assets for financial
reporting and income tax purposes. The Company's temporary
differences are primarily due to accelerated depreciation, net
operating losses and expenses not currently deductible.
F-11
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Summary of Significant Accounting Policies, Continued
------------------------------------------
Reclassifications
-----------------
Certain accounts in the prior year financial statements have been
reclassified for comparative purposes to conform with the
presentation in the current year financial statements. These
reclassifications have no effect on previously reported income.
Use of Estimates in the Financial Statements
--------------------------------------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Stock-Based Compensation
------------------------
In October 1995, Financial Accounting Standards Board issued
Statements of Financial Accounting Standards, No. 123 "Accounting
for Stock Based Compensation" ("SFAS No. 123"). SFAS No. 123
requires compensation expense to be recorded (I) using the new fair
value method or (ii) using existing accounting rules prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25") and related interpretations with
pro forma disclosure of what net income and earnings per share
would have been had the Company adopted the new fair value method.
The Company intends to continue to account for its stock based
compensation plans in accordance with the provision of APB 25. Had
the Company elected to recognize compensation costs based on the
fair value of the options at the date of grant as prescribed by
SFAS No. 123, there would be no material effect from that
recognized under APB 25 for the year ended September 30, 1997.
NOTE 2 - Inventory
---------
Inventory at September 30, 1997 and 1996 consists of the following:
1997 1996
-------- --------
Home medical equipment and
medical and nutritional products $715,008 $523,393
Less: accumulated amortization 140,960 67,831
-------- --------
Inventory, net (see Note 1) $574,048 $455,562
======== ========
F-12
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - Property and Equipment
----------------------
Property and equipment as of September 30, 1997 and 1996, consists
of the following:
<TABLE>
<CAPTION>
Estimated
1997 1996 Useful Lives
-------- -------- ------------
<S> <C> <C> <C>
Transportation equipment $126,223 $138,568 3 - 7 years
Computer equipment 125,139 100,288 5 years
Furniture and fixtures 70,081 67,624 5 years
Office equipment 112,053 110,713 5 years
Leasehold improvements 35,846 31,268 3 years
--------- --------
Property and Equipment 469,342 448,461
Less: accumulated depreciation
and amortization 206,889 138,450
-------- --------
Property and Equipment, net $262,453 $310,011
======== ========
</TABLE>
NOTE 4 - Organization and Start-Up Costs and Goodwill
--------------------------------------------
Organization and start-up costs as of September 30, 1997 and 1996
consist of the following:
1997 1996
-------- --------
Organization and start-up costs $ 19,145 $ 22,351
Less: accumulated amortization 15,314 14,692
-------- --------
Total $ 3,831 $ 7,659
======== ========
Goodwill, which was recorded as a result of an asset purchase
agreement (see Note 1), consists of the following as of September
30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Goodwill $247,345 $215,000
Less: accumulated amortization 13,150 1,792
-------- --------
Total $234,195 $213,208
======== ========
</TABLE>
F-13
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - Lines of Credit
---------------
The Company entered into a credit facility agreement with a bank in
which it can borrow up to $200,000 (the "facility"). The facility
was repaid on October 2, 1996 and terminated. Borrowings under the
facility bear interest at prime plus 1 1/2%. The credit facility
which is personally guaranteed by the Company's major stockholders
is secured by all present and future accounts receivable of one of
the subsidiaries. The amount outstanding at September 30, 1996 was
$200,000.
On September 20, 1995, the Company entered into a credit facility
with another bank in which it can borrow up to $100,000. The credit
facility is payable on demand, bears interest at prime plus 1% and
is collateralized by all of the assets of the Company and is
personally guaranteed by one of the Company's major stockholders.
The amount outstanding at September 30, 1997 and 1996 was $97,586
and $98,769, respectively.
PRN had two short term unsecured revolving overdraft facilities
from a bank totaling $50,000 at September 30, 1997 and 1996. The
balance payable under these facilities at September 30, 1997 and
1996 amounted to $-0- and $14,944, respectively.
One June 21, 1994, PRN entered into an agreement with a bank for a
$250,000 short term revolving credit line for working capital
purposes. On August 17, 1995, PRN received an increase on this
revolving credit line to 350,000. On August 17, 1997, PRN entered
into an agreement to obtain a $350,000 business loan with the same
bank and repay the outstanding balance under the line of credit
(see Note 6). The credit facility is collateralized by the assets
of the Company and is personally guaranteed by the Company's
stockholders. The balance payable amounted to $-0- and $350,000 at
September 30, 1997 and 1996, respectively.
On August 1, 1996, PRN entered into another short term revolving
credit line for $250,000 for working capital purposes. The
principal balance payable amounted to $150,000 and $50,000 at
September 30, 1997 and 1996, respectively. The credit facilities
bear interest at the bank's prime rate plus 1.5% which amounted to
9.5% at September 30, 1997 and 10% at September 30, 1996,
respectively. The credit facilities are collateralized by the
assets of PRN and are personally guaranteed by the stockholders of
PRN.
NOTE 6 - Long-Term Debt
--------------
Long-term debt at September 30, 1997 and 1996 consists of the
following:
<TABLE>
<CAPTION>
1997 1996
--------- ----------
<S> <C> <C>
Note payable to Rye Beach Pharmacy, Inc. bearing interest
at 8% with monthly payments of principal and interest of
$8,022, until September 30, 1998. (Forward) $ 92,220 $ 177,373
</TABLE>
F-14
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - Long-Term Debt, Continued
--------------
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
(Forward) $ 92,220 $177,373
Loan payable to a stockholder payable on demand, bearing
interest at 8%, interest payable annually on September 30th -0- 100,000
Notes payable to a Bank bearing interest at rates ranging from 2.9%
to 10.25% with monthly payments totaling
$3,418 due through August 1999 64,563 100,296
Note payable to a stockholder bearing interest at 9.75%
There are no scheduled repayment terms and payments are
made monthly for interest only 53,500 42,000
Note payable bearing interest at 10.95%, monthly payment
of $6,484, from March 1996 to December 1998 101,673 164,554
Note payable bearing interest at 10.375%, monthly payment
of $925, from February 1996 to December 2000. The loan is
personally guaranteed by the Company's stockholders 31,306 38,780
Note payable bearing interest at 10.375%, monthly payment
of $1,491 from February 1996 to December 2000. The loan
is personally guaranteed by the Company's stockholders -0- 62,248
Note payable bearing interest at 8%, monthly payment of
$506, from February 1996 to February 1997 -0- 2,027
Notes payable bearing interest at 8.25% to 9.75%, payable
in quarterly installments totaling $27,496, from February
1997 to November 1999 -0- 259,242
Note payable to stockholder bearing interest at 8.25% in
monthly payments of $2,820 from December 1996 to May 1998. 21,882 -0-
-------- --------
(Forward) $365,144 $946,520
-------- --------
</TABLE>
F-15
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - Long-Term Debt, Continued
--------------
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
(Forward) $365,144 $946,520
Loans payable bank bearing interest at 9.00% with monthly payments
of $7,265 starting October 1997 with a final
payment due November 2007 350,000 -0-
Note payable bearing interest at 10.375%, monthly payment of
$1,491 from February 1997 to December 2000. The loan is
personally guaranteed by the Company's stockholders 50,251 -0-
Notes payable bearing interest at 8.25%, payable in quarterly
installments totaling $17,676, from February 1997 to
November 1998 70,223 -0-
Notes payable to a stockholder bearing interest at 9.75%, payable
in quarterly installments totaling $9,819 from
February 1997 to November 1, 1999 78,177 -0-
-------- --------
Total Long-Term Debt 913,795 946,520
Less: current maturities 454,714 429,751
-------- --------
Long-Term Debt, less current maturities $459,081 $516,769
======== ========
</TABLE>
Maturities of long-term debt at September 30, 1997 are as follows:
Year Ending
September 30, Amount
------------- --------
1998 $454,714
1999 183,947
2000 100,614
2001 84,849
2002 89,671
--------
Total $913,795
========
F-16
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - Capital Lease Obligations
-------------------------
<TABLE>
<CAPTION>
1997 1996
--------- ----------
<S> <C> <C>
Various leases payable with imputed interest at 12%
collateralized by certain items of inventory. Monthly
payments range from $104 to $459 and expire from
February 1995 to June 2000. $ 89,816 $ 52,224
Less: current maturities 35,187 15,982
--------- ----------
Capital Lease Obligations, less current maturities $ 54,629 $ 36,242
========= ==========
</TABLE>
Future minimum lease payments under capital lease obligations at
September 30, 1997 are as follows:
Year Ending
September 30, Amount
------------- ---------
1998 $ 35,187
1999 39,720
2000 14,909
---------
Total $ 89,816
=========
NOTE 8 - Income Taxes
------------
For income tax purposes, the Company has approximately $85,000 and
$48,000 in contribution carryforwards as of September 30, 1997 and
1996, respectively, available to offset future Federal and State
taxable income, subject to limits, through the year ending
September 30, 1999. In addition, the Company has a net operating
loss available through September 30, 2012 of approximately $50,000
as well as deferred tax assets and liabilities resulting from
temporary differences in depreciation, allowance for doubtful
accounts, and total differences from a subsidiary company (PRN)
whereas PRN has reported income on the accrual basis for book
purposes and on the cash basis for income tax purposes. The Company
is currently under audit regarding its 1995 Federal corporate
income tax return.
The components of the provision (credit) for income taxes for the
years ended September 30, 1997 and 1996 are as follows:
1997 1996
------------- ----------
Federal - Current $ -0- $ (63,221)
- Deferred -0- (38,531)
State - Current 1,753 176
- Deferred (106,086) (10,169)
------------- ----------
Total $ (104,333) $ (111,745)
============= ==========
F-17
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - Forgiveness of Debt
-------------------
On September 30, 1996, a stockholder forgave the debt in the amount
of $149,200, which was recognized as income by the Company as an
extraordinary item, net of income tax expense of $13,204.
NOTE 10 - Pension Plan
------------
The Company has a 401(k) pension plan covering substantially all
employees with one year of service completed. Total pension expense
charged to operations for the years ended September 30, 1997 and
1996 amounted to $6,677 and $8,463, respectively.
NOTE 11 - Related Party Transactions
--------------------------
As discussed in Note 5, long-term debt included $245,779 and
$319,373 at September 30, 1997 and 1996, respectively, due to
stockholders and Rye Beach Pharmacy, Inc. Also included in current
assets are amounts due from Rye Beach Pharmacy, Inc. for advances
made by the Company. Rye Beach Pharmacy, Inc. is also owned by the
47% Stockholder.
Included in operating expenses for the year ended September 30,
1996 is rent expense paid to the 47% Stockholder in the amount of
$23,000 and $202,143 for nursing services subcontracted and
management fees paid prior to the Company's acquisition of Rye
Beach in April 1996.
Included in operating expenses for the year ended September 1996 is
rent expense in the amount of $24,000, paid to a 4% stockholder
from whom the assets of Total Medical Care, Inc. were purchased on
May 1, 1995 and auto lease and insurance expenses paid on behalf of
the 47% Stockholder and a 21% stockholder in the amount of $14,467.
Included in operating expenses for the year ended September 30,
1997 is rent paid to a 3% stockholder in the amount of $25,000.
Also included in operating expenses for the year ended September
30, 1997 are auto lease and insurance expenses paid on behalf of a
30% stockholder and a 31% stockholder in the amount of $14,421.
On December 1, 1996, debt owed to a certain stockholder in the
amount of $100,000 was exchanged for 40,000 shares of the Company's
common stock, a one time cash payment of $10,000 and a new note in
the amount of $47,600. On April 14, 1997 15,000 shares of common
stock were purchased by an officer of the Company.
F-18
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - Related Party Transactions, Continued
---------------------------
On July 1, 1997 debt owed to a certain stockholder based on a prior
asset acquisition in the amount of $10,600 was exchanged for 10,000
shares of common stock. On July 1, 1997, debt owned to a certain
stockholder in the amount of $25,000 was exchanged for 29,717
shares of the Company's common stock of which 23,585 shares were
recorded as a conversion of debt and 6,132 shares were recorded as
stock compensation resulting from the difference between the fair
market value of the stock and amount of debt converted.
Interest payable to stockholders included in interest expense for
the years ended September 30, 1997 and 1996 is $19,281 and $30,733,
respectively.
NOTE 12 - Commitments and Contingencies
-----------------------------
The Company entered into an agreement to rent premises that
provides for a minimum annual rent of $147,355 until January 31,
2001. The Company also rents warehouse and office space from two
other parties. PRN signed a new lease agreement on October 15, 1997
extending its prior lease agreement expiring October 31, 1999. The
terms of the new lease agreement include an increase in the base
rent as well as a rental charge for additional space. The minimum
annual rental payments, under the terms of the new lease is
$32,100. Rent expense for the years ended September 30, 1997 and
1996 amounted to $235,386 and $182,493, respectively.
On July 22, 1997, PRN entered into a five year operating lease for
other equipment. The minimum annual rental payments for other
equipment, in the aggregate, amount to $7,500 through July 2002.
Future annual minimum lease payments at September 30, 1997 are as
follows:
Year Ending
September 30, Amount
------------- ----------
1998 $ 262,105
1999 249,256
2000 178,267
Thereafter 11,875
----------
Total $ 701,503
==========
F-19
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - Commitments and Contingencies, Continued
------------------------------
COVENANT AGREEMENT
The Company entered into a covenant agreement in connection with a
note payable for the purchase of equipment. Without the prior
written consent of the lender, the Company agrees not to change its
name, enter into a merger or other change in ownership in excess of
20% unless the surviving entity expressly assumes all obligations
and the net assets be at least equal to the net assets prior to the
change. Additionally, the Company agrees not to sell or dispose of
the collateral, not allow the equipment to be or become fixtures,
keep the collateral free of pledges, liens, charges and security
interests, maintain property insurance on the collateral, not allow
additions or upgrades which impair the equipment's functions, and
allow the lender the right to an inspection.
NOTE 13 - Significant Customers
---------------------
A majority of PRN's 1996 sales come from fewer than ten certified
agencies which represented approximately $848,565 or 34% of
accounts receivable at September 30, 1996. In addition, three of
these agencies represented approximately 28% of sales for the year
ended September 30, 1996.
NOTE 14 - Factoring Agreement
-------------------
On October 2, 1996, the Company entered into a revolving accounts
receivable and servicing agreement with a finance company whereby
accounts receivables are batched and sold for cash, net of certain
loss reserves and fees. The loss reserves, along with any amounts
collected in excess of amounts advanced, are paid to the Company
immediately after amounts which were advanced against each batch
have been collected in full. The total commitment is in the amount
of $2,000,000 subject to the availability of eligible receivables
meeting the buyer's criteria and is secured by a first lien
security interest in the trade accounts receivable of certain of
the Company's wholly owned subsidiaries and the limited personal
guarantees of certain of the Company's stockholders. All Company
debt owed to stockholders of the Company whose accounts receivables
are securing the debt, has been subordinated to the finance
company. The facility agreement is for three years, subject to
compliance with certain covenants and conditions. The Company is in
violation of a certain covenant related to this agreement. As a
result of this violation the finance company may increase the
interest rate by 400 basis points and discontinue funding.
Interest is charged weekly on uncollected balances outstanding at
the rate of the 30 day LIBOR (London Interbank Offered Rate) plus
450 basis points. The interest rate is adjusted weekly based upon
changes in the 30 day LIBOR. The amount outstanding at September
30, 1997 was $717,745.
F-20
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - Stock Options
-------------
During 1997, the Company granted 50,400 stock options at an
exercise price of $1.06 as an incentive to two key employees. The
total options granted and outstanding at September 30, 1997 was
50,400. No stock options have been exercised as of September 30,
1997.
NOTE 16 - Subsequent Event
----------------
In December 1997, an agreement and plan of merger was executed
between the Company, the Company's stockholders, Accuhealth, Inc.
("Accuhealth") and HHI Acquiring Corp., a wholly owned subsidiary
of Accuhealth. In accordance with the agreement, all of the shares
of the Company's stock will be exchanged on a pro rata basis
whereby the stockholders of the Company will receive .740721 shares
of Accuhealth common stock for each share of stock in the Company.
F-21
<PAGE>
HEALIX HEALTHCARE, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31, 1998
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 82,033
Accounts receivable, net 3,787,272
Inventory 543,849
Prepaid expenses 147,785
Due from related parties 23,452
Other current assets 17,421
-----------
Total Current Assets $ 4,601,812
Property and equipment, net of
accumulated depreciation of $249,565 271,183
Other Assets
Goodwill, net 248,506
Security deposits and other assets 51,319
-----------
Total Other Assets 299,825
-----------
TOTAL ASSETS $ 5,172,820
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 3,325,028
Line of credit 347,586
Other current liabilities 493,082
-----------
Total Current Liabilities $ 4,165,696
OTHER LIABILITIES
Long term debt 1,018,773
Capital lease obligations 124,247
-----------
Total Other Liabilities 1,143,020
-----------
TOTAL LIABILITIES 5,308,716
STOCKHOLDERS' DEFICIT
Capital stock 2,009
Additional paid in capital 632,092
Accumulated deficit (769,997)
-----------
TOTAL STOCKHOLDERS' DEFICIT (135,896)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 5,172,820
===========
See accompanying notes to financial statements
F-22
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 1998 and 1997
(Unaudited)
1998 1997
----------- -----------
NET SALES $ 6,732,334 $ 5,908,423
Cost of Sales 5,182,600 2,791,475
----------- -----------
Gross Profit 1,549,734 3,116,948
Operating Expenses
Selling General and Administrative 2,366,241 3,075,058
----------- -----------
Total Operating Expenses 2,366,241 3,075,058
----------- -----------
(Loss) Income from Operations (816,507) 41,890
----------- -----------
Other Income (Expense)
Interest Expense (128,953) (116,484)
Interest Income 783 11,366
Other Income 3,073
----------- -----------
Total Other Expense (128,170) (102,045)
----------- -----------
Loss Before Income Taxes (944,677) (60,155)
Income Tax Provision (Benefit) 6,257 (57,764)
----------- -----------
Net Loss $ (950,934) $ (2,391)
=========== ===========
See accompanying notes to financial statements
F-23
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
For the Six Months Ended March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Retained
Earnings Stockholders'
Common Additional (Accumulated Equity
Stock Paid in Capital Deficit) (Deficit)
--------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Balance, September 30, 1997
as originally reported $ 2,009 $ 632,092 $ 90,937 $ 725,038
Adjustment in connection with
pooling of interests 90,000 90,000
Balance, October 1, 1997 --------- --------- --------- ---------
as restated 2,009 632,092 180,937 815,038
Net loss for the six month period
ended March 31, 1998 (950,934) (950,934)
--------- --------- --------- ---------
Balance, March 31, 1998 $ 2,009 $ 632,092 $(769,997) $(135,896)
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements
F-24
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (950,934) $ (2,391)
----------- -----------
Adjustment to reconcile net loss to net cash provided by
operating activities
Depreciation and amortization 205,789 47,817
Provision for bad debts 183,496 38,285
Changes in operating assets and liabilities:
Accounts receivable (561,790) 247,042
Inventory 30,199 (73,558)
Prepaid expenses (22,389) 19,060
Due to/from related organizations (19,259) (269,066)
Other current assets 155,427 122,525
Security deposits (13,851) (550)
Accounts payable and accrued expenses 1,563,276 339,398
Income taxes payable (132,271)
----------- -----------
TOTAL ADJUSTMENTS 1,520,898 338,682
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 569,964 336,291
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (224,999) (34,304)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of capital stock 110,900
Principal advances (payments) on line of credit, net 100,000 (264,944)
Principal (payments) advances on long term debt, net (578,336) 78,148
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (478,336) (75,896)
----------- -----------
NET (DECREASE) INCREASE IN CASH (133,371) 226,091
CASH - Beginning 215,404 51,742
----------- -----------
CASH - Ending $ 82,033 $ 277,833
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH DURING THE PERIOD PAID FOR:
Interest $ 128,953 $ 116,484
</TABLE>
See accompanying notes to financial statements
F-25
<PAGE>
HEALIX HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements of Healix
Healthcare, Inc. and Subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. For
further information, refer to the audited consolidated financial
statements and footnotes of the Company included in this Form 8-K.
Operating results for the six month period ended March 31, 1998 are not
necessarily indicative of the results that may be expected for future
periods.
Note 2. Subsequent Events
-----------------
In December, 1997 an agreement and plan of merger (the "Agreement") was
executed between the Company, the Company's stockholders, Accuhealth,
Inc. ("Accuhealth") and HHI Acquiring Corp., a wholly owned subsidiary
of Accuhealth. In accordance with the Agreement, all of the shares of
the Company's common stock would be exchanged on a pro rata basis
whereby the stockholders of Healix would receive .740721 shares of
Accuhealth common stock for each share of common stock of the Company.
On April 9, 1998 the Company consummated its merger directly with
Accuhealth in a tax-free reorganization through the exchange of common
stock. The stockholders of Healix received .740721 shares of Accuhealth
common stock for each share of Healix common stock. The merger resulted
in Healix becoming a wholly owned subsidiary of Accuhealth and will be
accounted for as a pooling of interests.
Accuhealth, together with its wholly owned subsidiaries, provides
comprehensive health care services, including administration of a wide
range infusion services and sales of oral medications, sales and
rentals of home care medical equipment and related supplies to patients
in the home setting and in long term care facilities. Accuhealth is
located in the Bronx, New York and operates throughout the New York,
New Jersey and Connecticut areas.
F-26
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined balance sheet as of December 31,
1997, and the unaudited pro forma consolidated statements of operations for the
three years ended March 31, 1997, and the unaudited pro forma combined
statements of operations for the nine months ended December 31, 1997 and 1996
are based on the historical financial statements of Accuhealth, Inc. and Healix
Healthcare, Inc. and give effect to the pro forma adjustments described herein
as though the merger with Healix Healthcare, Inc. dated April 9, 1998 had been
consummated at December 31, 1997 for the unaudited combined balance sheet, and
at April 1, 1994 for the unaudited combined statements of operations.
The unaudited pro forma combined financial statements should be read in
conjunction with the notes thereto and with the historical financial statements
of Accuhealth, Inc., as filed in its annual report on Form 10-K and previously
filed Form 10-Q and the historical financial statements of Healix Healthcare,
Inc. included elsewhere herein. The unaudited pro forma combined financial
statements are not necessarily indicative of the Company's combined financial
position or results of operations that would have been achieved had the merger
been consummated at December 31, 1997 for the unaudited combined balance sheet,
and at April 1, 1994 for the unaudited combined statements of operations.
Under the terms of a merger agreement dated April 9, 1998, Accuhealth, Inc.
issued shares of its common stock in exchange for all of the outstanding common
stock of Healix Healthcare, Inc. The merger constituted a tax free
reorganization and will be accounted for as a pooling of interests. Accordingly,
all prior consolidated financial statements of Accuhealth, Inc. will be restated
to include the combined results of operations, financial position and cash flows
of Healix Healthcare, Inc. as though it had always been part of Accuhealth, Inc.
F-27
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Accuhealth Healix Adjustments Combined
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 205,475 $ 118,400 $ 323,875
Accounts receivable, net 6,083,673 3,423,964 9,507,637
Inventories 933,107 558,931 1,492,038
Prepaid expenses and other current assets 132,991 197,447 (70,000) (3) 260,438
------------ ----------- ------------
Total Current Assets 7,355,246 4,298,742 11,583,988
------------ ----------- ------------
OTHER ASSETS
Revenue producing equipment, net 462,370 462,370
Fixed assets, net 1,675,936 242,402 1,918,338
Goodwill, net 924,085 241,415 1,165,500
Other assets 284,242 261,511 545,753
------------ ----------- ------------
TOTAL ASSETS $ 10,701,879 $ 5,044,070 $ 15,675,949
============ =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable - revolving credit facility 3,108,492 347,586 3,456,078
Notes payable - term loan 500,000 500,000
Notes payable - other 432,799 432,799
Accounts payable 2,204,502 2,312,374 4,516,876
Accrued expenses and other current liabilities 1,376,762 763,390 2,140,152
Current portion of capital lease facility 321,750 321,750
Current portion of capital lease obligations 111,881 111,881
Income taxes payable 169,797 (160,000) (3) 9,797
------------ ----------- ------------
Total Current Liabilities 8,056,186 3,593,147 11,489,333
------------ ----------- ------------
OTHER LIABILITIES
Notes payable 81,479 810,889 892,368
Capital lease obligations, less current portion 102,266 77,429 179,695
------------ ----------- ------------
TOTAL LIABILITIES 8,239,931 4,481,465 12,561,396
------------ ----------- ------------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 3,000 shares
authorized, no shares issued and outstanding -- -- --
6% Redeemable cumulative convertible preferred stock,
$.01 par value, $2,713,500 liquidation preference,
1,350,000 shares authorized, issued and outstanding 13,500 13,500
Common stock, $.01 par value, 15,000,000 shares
authorized, 2,133,154 shares issued 21,332 14,888 (1) 36,220
Common stock, $.001 par value, 10,000,000 shares
authorized, 2,020,003 shares issued 2,009 (2,009) (2)
Additional paid-in capital 7,108,408 632,092 (14,888) (1) 7,727,621
2,009 (2)
Accumulated Deficit (4,056,972) (71,496) 90,000 (3) (4,038,468)
------------ ----------- ------------
3,086,268 562,605 3,738,873
Less treasury stock (308,004 shares) at cost (624,320) (624,320)
------------ ----------- ------------
TOTAL STOCKHOLDERS' EQUITY 2,461,948 562,605 3,114,553
------------ ----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,701,879 $ 5,044,070 $ 15,675,949
============ =========== ============
See accompanying notes to unaudited pro forma combined financial statements
F-28
</TABLE>
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
For the Year Ended March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Accuhealth Healix Adjustments Combined
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 16,369,376 $ 10,433,421 $ 26,802,797
COST OF SALES 9,599,256 4,961,531 14,560,787
------------ ------------ ------------
GROSS PROFIT 6,770,120 5,471,890 12,242,010
OPERATING EXPENSES
Selling general and administrative 6,146,783 5,474,296 11,621,079
------------ ------------ ------------
OPERATING INCOME (LOSS) 623,337 (2,406) 620,931
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest Income 15,756 15,756
Interest expense (496,606) (204,350) (700,956)
Other income 13,657 13,657
------------ ------------ ------------
Total Other Expense (496,606) (174,937) (671,543)
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 126,731 (177,343) (50,612)
PROVISION (BENEFIT) FOR INCOME TAXES 257,233 (326,500) (69,267)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 126,731 (434,576) 326,500 18,655
EXTRAORDINARY ITEM
Forgiveness of debt, net of applicable
income taxes of $13,204 in 1996 135,996 135,996
------------ ------------ ------------ ------------
NET INCOME (LOSS) 126,731 (298,580) 326,500 154,651
REDEEMABLE PREFERRED
STOCK DIVIDENDS AND ACCRETION (162,000) (162,000)
------------ ------------ ------------ ------------
NET LOSS APPLICABLE
TO COMMON STOCKHOLDERS $ (35,269) $ (298,580) $ 326,500 $ (7,349)
============ ============ ============ ============
PER SHARE DATA
Net loss per share of common stock applicable to common stockholders:
Loss before extraordinary item $ 0.01
Extraordinary item $ 0.05
Net (loss) income per share $ (0.00)
Weighted average common shares outstanding - basic and diluted 2,889,274
See accompanying notes to unaudited pro forma combined financial statements
</TABLE>
F-29
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
For the Year Ended March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Accuhealth Healix Adjustments Combined
---------- ------------ ----------- ------------
<S> <C> <C> <C>
NET SALES $ 15,112,071 $ 7,269,217 $ 22,381,288
COST OF SALES 8,180,422 3,329,538 11,509,960
------------ ------------ ------------
GROSS PROFIT 6,931,649 3,939,679 10,871,328
OPERATING EXPENSES
Selling general and administrative 7,104,529 3,970,854 11,075,383
------------ ------------ ------------
OPERATING LOSS (172,880) (31,175) (204,055)
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest Income 356 356
Interest expense (605,452) (46,316) (651,768)
Other income (136,981) (136,981)
------------ ------------ ------------
Total Other Expense (605,452) (182,941) (788,393)
------------ ------------ ------------
INCOME BEFORE INCOME TAXES (778,332) (214,116) (992,448)
------------ ------------ ------------
INCOME TAX BENEFIT (97,011) (97,011)
------------ ------------ ------------
NET LOSS (778,332) (117,105) (895,437)
REDEEMABLE PREFERRED
STOCK DIVIDENDS AND ACCRETION (203,836) (203,836)
------------ ------------ ------------ ------------
NET LOSS APPLICABLE
TO COMMON STOCKHOLDERS $ (982,168) $ (117,105) -- $ (1,099,273)
============ ============ ============ ============
PER SHARE DATA
Net loss per share of common stock $ (0.40)
Weighted average common shares outstanding - basic and diluted 2,762,125
See accompanying notes to unaudited pro forma combined financial statements.
F-30
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ACCUHEALTH, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Year Ended March 31, 1995
(Unaudited)
Pro Forma Pro Forma
Accuhealth Healix Adjustments Combined
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
NET SALES $ 15,468,400 $ 5,065,748 $ 20,534,148
COST OF SALES 8,256,780 2,451,363 10,708,143
------------ ----------- ------------
GROSS PROFIT 7,211,620 2,614,385 9,826,005
OPERATING EXPENSES
Selling general and administrative 6,913,958 2,412,857 9,326,815
------------ ----------- ------------
OPERATING INCOME 297,662 201,528 499,190
------------ ----------- ------------
OTHER INCOME (EXPENSE)
Interest Income 1,413 1,413
Interest expense (635,845) (61,196) (697,041)
Debt surrendered in claims statement 488,500 488,500
Recovery of off book cash practice 525,820 525,820
Other income 81,352 81,352
------------ ----------- ------------
Total Other Income (Expense) 378,475 21,569 400,044
------------ ----------- ------------
INCOME BEFORE INCOME TAXES 676,137 223,097 899,234
PROVISION FOR INCOME TAXES 97,092 97,092
------------ ----------- ------------
NET INCOME FROM CONTINUING
OPERATIONS 676,137 126,005 802,142
DISCONTINUED OPERATIONS
Loss from discontinued retail drug stores (473,178) (473,178)
Gain on disposal of retail drug stores 194,440 194,440
------------ ----------- ----------- ------------
INCOME BEFORE EXTRAORDINARY ITEM 397,399 126,005 523,404
EXTRAORDINARY GAIN ON DEBT SURRENDERED IN
SETTLEMENT OF CLAIMS 60,000 60,000
------------ ----------- ----------- ------------
NET INCOME 457,399 126,005 583,404
REDEEMABLE PREFERRED STOCK DIVIDENDS
AND ACCRETION (106,845) (106,845)
------------ ----------- ----------- ------------
NET INCOME APPLICABLE TO COMMON
STOCKHOLDERS $ 350,554 $ 126,005 -- $ 476,559
============ =========== =========== ============
PER SHARE DATA:
Net income (loss) per share of common stock Basic Fully Diluted
----- -------------
Continuing operations $ 0.27 $ 0.24
Discontinued operations $ (.09) $ (.08)
Extraordinary item $ .02 $ .02
Net income per share of common stock $ 0.16 $ 0.14
Weighted average common shares outstanding 2,961,701 3,382,841
See accompanying notes to pro forma combined financial statements
</TABLE>
F-31
<PAGE>
<TABLE>
<CAPTION>
ACCUHEALTH, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Nine Months Ended December 31, 1997
(Unaudited)
Pro Forma Pro Forma
Accuhealth Healix Adjustments Combined
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
NET SALES $ 13,359,784 $ 10,864,803 $ 24,224,587
COST OF SALES 7,496,247 6,310,311 13,806,558
------------ ------------ ------------
GROSS PROFIT 5,863,537 4,554,492 10,418,029
OPERATING EXPENSES
Selling General and Administrative 5,226,996 4,686,229 9,913,225
------------ ------------ ------------
Income (loss) from Operations 636,541 (131,737) 504,804
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest Income (9,572) (9,572)
Interest Expense (417,972) (163,039) (581,011)
Unicare Management Fee 23,716 23,716
Other Income 87,784 87,784
------------ ------------ ------------
Total Other Expense (417,972) (61,111) (479,083)
------------ ------------ ------------
INCOME (LOSS) BEFORE
INCOME TAXES 218,569 (192,848) 25,721
------------ ------------ ------------
INCOME TAX BENEFIT (164,403) (164,403)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 218,569 $ (28,445) -- $ 190,124
============ ============ ============ ============
PER SHARE DATA
Net income per share of common stock $ 0.05
Weighted average common shares outstanding - basic and diluted 3,458,132
See accompanying notes to unaudited pro forma combined financial statements
</TABLE>
F-32
<PAGE>
<TABLE>
<CAPTION>
ACCUHEALTH, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Nine Months Ended December 31, 1996
(Unaudited)
Pro Forma Pro Forma
Accuhealth Healix Adjustments Combined
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
NET SALES $ 12,304,599 $ 7,437,808 $ 19,742,407
COST OF SALES 7,165,648 3,503,762 10,669,410
------------ ----------- ------------
GROSS PROFIT 5,138,951 3,934,046 9,072,997
OPERATING EXPENSES
Selling General and Administrative 4,646,849 3,838,637 8,485,486
------------ ----------- ------------
Income (loss) from Operations 492,102 95,409 587,511
------------ ----------- ------------
OTHER INCOME (EXPENSE)
Interest Income 4,390 4,390
Deferred Financing Costs 135,996 135,996
Unicare Management Fee (100,000) (100,000)
Interest Expense (373,235) (145,423) (518,658)
Other Income 113,657 113,657
------------ ----------- ------------
Total other (expense) income (373,235) 8,620 (364,615)
------------ ----------- ------------
INCOME BEFORE 118,867 104,029 222,896
INCOME TAXES
PROVISION FOR INCOME TAXES 5,733 5,733
------------ ----------- ----------- ------------
NET INCOME $ 118,867 $ 98,296 -- $ 217,163
============ =========== =========== ============
PER SHARE DATA
Net income per share of common stock $ 0.08
Weighted average common shares outstanding - basic and diluted 2,863,364
See accompanying notes to unaudited pro forma combined financial statements
</TABLE>
F-33
<PAGE>
Accuhealth, Inc. and Subsidiaries
Notes to Pro Forma Combined Financial Statements
(Unaudited)
(1) To record issuance of 1,488,851 shares of Accuhealth, Inc. common stock
in connection with the merger with Healix Healthcare, Inc.
(2) To eliminate the common stock of Healix Healthcare, Inc. in connection
with the merger.
(3) To eliminate taxes payable and deferred tax assets and liabilities in
connection with the merger as a result of losses from the combined
entities.
(4) The pro forma combined financial statements include the combined
balance sheets of Accuhealth and Healix at December 31, 1997, the
combined statements of operations of Accuhealth and Healix for the
years ended March 31, 1997, 1996 and 1995 and the combined statements
of operations of Accuhealth and Healix for the nine months ended
December 31, 1997 and 1996.
The financial statements of Healix include the operations of PRN
Homecare Agency, Inc., a wholly owned subsidiary of Healix, which was
merged into Accuhealth on September 30, 1997. This was a tax-free
reorganization, which was accounted for as a pooling of interests. All
of the Healix financial statements presented have been retroactively
restated accordingly for the pooling
F-34
