SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act OF 1934
Date of Report (Date of earliest event reported): FEBRUARY 1, 1999
ALLION HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-17821 11-2962027
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(State or other jurisdiction (Commission File Number) (I.R.S.Employer
of incorporation) Identification No.)
33 WALT WHITMAN ROAD, SUITE 200A HUNTINGTON STATION, NY 11746
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code...(631) 547-6520
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Former name or former address: The Care Group, Inc.
Allion Healthcare, Inc. (the "Company") hereby amends and restates Item 7 of its
Current Report on Form 8-K dated August 1, 1999 in its entirety to read as set
forth below. The amended and restated Item 7 includes the audited balance sheet
of Allion Healthcare, Inc. as of February 1, 1999, the date the plan of
reorganization was approved.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, EXHIBITS
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Allion Healthcare, Inc. and Subsidiaries
Huntington Station, New York
We have audited the accompanying consolidated balance sheet of Allion
Healthcare, Inc. and Subsidiaries, as of February 1, 1999. This financial
statement is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the financial position of Allion Healthcare,
Inc. and Subsidiaries as of February 1, 1999, in conformity with generally
accepted accounting principles.
HOLTZ RUBENSTEIN & CO., LLP
Melville, New York
March 18, 2000
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ALLION HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
FEBRUARY 1, 1999
ASSETS (Note 4)
------
CURRENT:
Cash and cash equivalents $ --
Accounts receivable (Note 8) 4,907,345
Inventories 192,170
-----------
Total current assets 5,099,515
PROPERTY AND EQUIPMENT 467,748
OTHER ASSETS 322,219
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$ 5,889,482
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Revolving credit line (Notes 3 and 4) $ 5,134,914
Accrued expenses and other current
liabilities (Notes 3 and 8) 749,568
-----------
Total current liabilities 5,884,482
COMMITMENTS (NOTE 5)
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; shares authorized
5,000,000; issued and outstanding 3,000,000
(Notes 3,6 and 8) 30,000
Additional paid-in capital 975,000
-----------
TOTAL STOCKHOLDERS' EQUITY 1,005,000
SUBSCRIPTION RECEIVABLE (1,000,000)
-----------
5,000
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$ 5,889,482
===========
See notes to consolidated balance sheet.
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ALLION HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET
FEBRUARY 1, 1999
NOTE 1. THE COMPANY
Allion Healthcare, Inc. and Subsidiaries (the "Company") is the parent
corporation of Mail Order Meds, Inc., Mail Order Meds of New York, Inc., The
Care Group of Texas, Inc., Careline of Houston, Inc. and Commonwealth Certified
Home Care, Inc.
On September 15, 1998, the Company, formally known as The Care Group,
Inc., filed for protection under Chapter 11 of the Bankruptcy Code. On February
1, 1999, the United States Bankruptcy Court for the Western District of Texas
entered an order confirming the Company's First Amended Plan of Reorganization.
In accordance with generally accepted accounting principles, the Company was
required to adopt "fresh start" reporting, which valued all assets and
liabilities at their fair values as of the effective date. The financial
statements are not comparable with those prepared prior to confirmation because
they are, in effect, those of a new company. See Note 3 regarding the plan of
reorganization.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The consolidated financial statement includes the
accounts of the Company and its wholly owned subsidiaries. All significant
inter-company accounts and transactions have been eliminated in consolidation.
INVENTORIES. Inventories at February 1, 1999 were comprised of pharmaceuticals,
medical equipment and supplies. Inventories are recorded at lower of cost or
market, cost being determined on a first-in, first-out ("FIFO") basis.
USE OF ESTIMATES BY MANAGEMENT. The preparation of the Company's financial
statements in conformity with generally accepted accounting principles require
the Company's management to make certain estimates and assumptions that affect
the amounts reported in these financial statements and accompanying notes. Such
estimates primarily relate to accounts receivable and inventory. Actual results
could differ from those estimates.
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost and are
depreciated using the straight-line method over their estimated useful lives of
five years for office furniture and equipment.
INCOME TAXES. Deferred tax assets and liabilities are determined based on
differences between financial reporting and tax basis of assets and liabilities,
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
CREDIT RISK. Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash equivalents and trade
receivables. The Company places its cash equivalents with high-quality financial
institutions. The Company's customer base consists of a large number of diverse
customers.
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PROVISION FOR ESTIMATED UNCOLLECTABLE ACCOUNTS. Management regularly reviews the
collectability of accounts receivable by tracking collection and write-off
activity. Estimated write-off percentages are then applied to each aging
category by payor classification to determine the allowance for estimated
uncollectable accounts. The allowance for estimated uncollectable accounts is
adjusted as needed to reflect current collection, write-off and other trends,
including changes in assessment of realizable value.
NOTE 3. PLAN OF REORGANIZATION
On February 1, 1999 the Bankruptcy Court confirmed the Company's Plan
of Reorganization. The confirmed plan provided for the following:
It was determined that the Company's reorganization value computed
immediately before February 1, 1999, the date of plan confirmation, was none. In
the event the Company would not have successfully received confirmation of the
plan, and received new equity placement, the sum of the Company's assets, was
covered by a perfected security interest of, and subject to foreclosure by, its
secured lender.
In negotiations between creditors, prior equity holders, potential new
equity investors and the Bankruptcy Court, it was determined that new equity, to
be brought in to fund the Company upon successful completion of the confirmation
of the plan, would be $1 million at a price of $.40 per share.
The Company adopted fresh start reporting because the holders of
existing voting shares immediately before filing and confirmation of the plan
received less than 50% of the voting shares of the emerging entity and its
reorganization value is less than its post petition liabilities and allowed
claims, as shown below:
Postpetition current liabilities $5,884,567
Liabilities deferred pursuant to
Chapter 11 proceeding 7,997,572
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Total postpetition liabilities
and allowed claims 13,882,139
Reorganization value --
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Excess of liabilities over
reorganization value $13,882,139
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<TABLE>
<CAPTION>
(UNAUDITED) REORGANIZED
PRE-CONFIRMATION DEBT FRESH BALANCE
ASSETS BALANCE SHEET DISCHARGED START SHEET
------- ----------------- ---------- -------- -----------
Current:
<S> <C> <C> <C> <C>
Cash $ -- $ -- $ -- $ --
Receivables 8,852,100 -- (3,944,755) 4,907,345
Inventory 192,170 -- -- 192,170
------------ ------------ ------------ ------------
9,044,270 -- (3,944,755) 5,099,515
Property, Plant
and Equipment 467,748 -- -- 467,748
Security Deposits 20,219 -- -- 20,219
License 302,000 -- -- 302,000
Goodwill 11,823,000 -- (11,823,000) --
------------ ------------ ------------ ------------
$ 21,657,237 $ -- $(15,767,755) $ 5,889,482
============ ============ ============ ============
LIABILITIES AND
STOCKHOLDERS' DEFICIT
Liabilities Not Subject to
Compromise Current Liabilities
Revolving Credit Line $ 5,134,914 $ -- $ -- $ 5,134,914
Accounts Payable 546,359 -- -- 546,359
Other Liabilities 203,209 -- -- 203,209
------------ ------------ ------------ ------------
5,884,482 -- -- 5,884,482
Liabilities Subject to
Compromise Prepetition
Liabilities 7,997,572 (7,997,572) -- --
Stockholders' Deficit
Additional Paid-In
Capital-Old 23,905,000 -- (23,905,000) --
Additional Paid-In
Capital-New -- -- 975,000 975,000
Common Stock-Old 13,000 -- (13,000) --
Common Stock-New -- 5,000 25,000 30,000
Accumulated Deficit (16,142,817) 7,992,572 16,142,817 --
-- -- (7,992,572) --
------------ ------------ ------------ ------------
7,775,183 7,997,572 (14,767,755) 1,005,000
Subscription Receivable -- -- (1,000,000) (1,000,000)
------------ ------------ ------------ ------------
7,775,183 7,997,572 (15,767,755) 5,000
------------ ------------ ------------ ------------
$ 21,657,237 $ -- $(15,767,755) $ 5,889,482
============ ============ ============ ============
</TABLE>
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The Company accounted for the reorganization using fresh-start reporting.
Accordingly, all assets and liabilities are restated to reflect their realizable
value, which approximates fair value at the date of reorganization.
SECURED DEBT. The Company's $5,135,000 secured debt (secured by a first and
senior lien on all assets and intangibles), was reaffirmed. This debt was
converted into a $4,000,000 line of credit, with interest accruing at prime plus
2%, not to exceed 85% of qualified accounts as defined. The balance was
converted into a three-year note, with quarterly interest payments due, at a
rate of prime plus 4%. In addition, the Company issued 750,000 warrants. On June
30, 1999, the Company repurchased the 750,000 warrants previously issued to the
lender in connection with its new finance agreement for $500,000.
PRIORITY TAX CLAIMS. The Company is required to pay the State of Texas a claim
of approximately $16,000 in equal quarterly payments over six years with annual
interest of 12%.
TRADE AND OTHER MISCELLANEOUS CLAIMS. On February 7, 2000, the Company was
deemed to have complied with all requirements of the Confirmation order issued
on February 1, 1999 related to issuance of common stock of approved creditors.
The holders of approximately $7,997,572 of trade and other miscellaneous claims
received a total of 500,000 shares of common stock, issued on a pro-rata basis.
The stock certificates were distributed in February 2000.
PREFERRED STOCK. There were no holders of record of any preferred stock prior to
the bankruptcy.
COMMON STOCK. The holders of all shares of common stock received no compensation
of any kind from the Company.
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NOTE 4. REVOLVING CREDIT LINE
On February 1, 1999 the Company had a revolving credit facility and a
Debtor in Possession loan that expired in July of 1999, in the amount of $6.5
million available to the Company for short-term borrowings. Borrowings under the
facility bear interest at Prime + 5% and Prime + 2% respectively and are
collaterized by a perfected and primary security interest in all assets,
including, accounts receivable, trademarks, licenses and values of any kind of
the Company. On February 1, 1999 the borrowings under this facility were
$5,134,914. On April 21, 1999 the Company converted this facility into a $4.0
million revolving credit facility for short-term borrowings, bearing interest at
prime plus 2%, not to exceed 85% of qualified accounts as defined. The balance
was converted into a three-year note, with quarterly interest payments due, at a
rate of prime plus 4%. In addition, the Company issued 750,000 warrants (See
note 8).
NOTE 5. LEASE COMMITTMENTS
The Company leases office space in Huntington Station, New York and
Austin, Texas. The lease for the New York space expires in December 2003 and the
lease for the Texas space expires in May 2003.
At February 1, 1999, the Company's lease commitments provide for the
following minimum annual rentals.
1999 $ 106,805
2000 117,110
2001 121,668
2002 128,841
2003 99,891
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$ 574,315
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NOTE 6. STOCKHOLDERS' EQUITY
a. Common stock
Pursuant to the Company's Plan of Reorganization, 2,500,000
shares of common stock were issued to an investor group led by a
director of the Company for proceeds of $1,000,000.
Pursuant to the Company's Plan of Reorganization, 500,000
shares of common stock were issued to the holders of approximately
$7,997,572 of trade and other miscellaneous claims, on a pro-rata
basis.
b. Stock Options
(i) Under the terms of the Company's Stock Option Plan, the
Board of Directors may grant incentive and nonqualified stock options
to employees, officers, directors, agents, consultants and independent
contractors of the Company. In connection with the introduction of the
Stock Option Plan, 1,250,000 shares of common stock were reserved for
future issuance. Generally, the Company grants stock options with
exercise prices equal to the fair market value of the common stock on
the date of the grant, as determined by the Board of Directors. Options
generally vest over a two to five year period and expire ten years from
the date of the grant.
NOTE 7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The methods and assumptions used to estimate the fair value of the
following classes of financial instruments were: Current Assets and Current
Liabilities: The carrying amount of cash, current receivables and payables and
certain other short-term financial instruments approximate their fair value.
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NOTE 8. SUBSEQUENT EVENTS
DISCONTINUED OPERATIONS - On June 25, 1999, the Company sold certain
assets of its Houston, Texas operation including all licenses, inventory,
customer lists and names. The Company retained all accounts receivable for
services rendered prior to June 25, 1999. As a result, the Company discontinued
its operation in Houston, Texas as of June 25, 1999. The proceeds of the sale
were $2,820,805, including $2,420,805 in cash and a note for $400,000 payable on
June 30, 2000.
In addition, the Company sold all of its records, specified contracts
and licenses, operating certificates and permits of Commonwealth Certified Home
Care, Inc., a certified home health agency, for $302,000. The sale was
consummated in August 1999 in accordance with the confirmation order from the
Bankruptcy Court.
SETTLEMENT OF CLAIM WITH THE I.R.S. - The United States Bankruptcy
Court entered an order confirming the settlement of the I.R.S. claim against the
Company on September 29, 1999. The Company has agreed to pay $130,000 over the
next six years to satisfy the I.R.S. claim. The Company will not carry forward
any net operating losses or credits available from pre-1999 periods, into
post-1998 tax years. Also, the Company will not carry back any net operating
losses to pre-1999 tax years. The Company will have no federal income tax
liability from any periods prior to January 1, 1999. In addition, the I.R.S.
will not conduct any further audits of the company for periods prior to January
1, 1999, provided that the terms of the Bankruptcy Court's confirmation order of
February 1, 1999 apply.
NOTE PAYABLE - On December 16, 1999, the Company entered into a
promissory note agreement in the amount of $1,500,000 that is due and payable on
March 31, 2001. The note bears interest at 8.5% annually and the Company is
required to make monthly interest payments. The note was guaranteed by a
Director of the Company, in exchange for 375,000 warrants to purchase common
stock of the Company at a price of $1.00 per share.
WARRANTS - On June 30, 1999, the Company repurchased 750,000 warrants
previously issued to a lender in connection with its new financing agreement for
$500,000.
STOCK OPTIONS - During 1999, the Company issued 100,000 common stock
warrants to consultants, which resulted in compensation approximating $12,000.
SETTLEMENT OF LAWSUIT - On January 4, 2000, the Company settled a
pending lawsuit whereby the Company will receive $121,580 in six monthly
installments beginning in January 2000.
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Exhibit 2.1 Confirmation Order dated February 1, 1999.
2.2 First Amended Plan of Reorganization of The Care Inc., et
al dated January 2, 1998.
3.1 Restated Certificate of Incorporation of the Registrant,
filed with the Secretary of State of Delaware on
October 7, 1999.
3.2 Amended and Restated By-laws of the Registrant.
10.2 Asset Purchase Agreement, dated as of June 25, 1999,
by and between The Care Group of Texas, Inc., Care Line of
Houston, Inc. and Osher Investments, Ltd.
10.2 Agreement, dated as of November 1, 1999, among The Care
Group, Inc., Commonwealth Certified Home Care, Inc. and
Visiting Nurse Service New York Home Care.
18.1 Letter of Deloitte & Touche LLP re: change in accountants.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: March 18, 2000
ALLION HEALTHCARE, INC., AND SUBSIDIARIES
-----------------------------------------
(Registrant)
By: MICHAEL P. MORAN
Michael P. Moran, Director
President, Chief Executive Officer,
Chief Financial Officer, Secretary
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
/s/ JOHN PAPPAJOHN
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John Pappajohn, Director
Date: MARCH 16, 2000
/s/ DERACE SCHAFFER, M.D.
------------------------
Derace Schaffer, M.D., Director
Date: MARCH 16, 2000