Allion Healthcare Inc – ‘8-K/A’ for 2/1/99

On:  Friday, 7/28/00, at 2:49pm ET   ·   For:  2/1/99   ·   Accession #:  909012-0-490   ·   File #:  0-17821

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Amendment to Current Report   —   Form 8-K
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Document/Exhibit                   Description                      Pages   Size 

 1: 8-K/A       Fin. Statments Pro Forma Fin. Info. Exh.               8     44K 

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8-K/A
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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
 ----------                   -------                 ----------
(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       
----------------------------------------------------------        ----------    
  (Address of principal executive offices)                    (Zip Code)

     Registrant's telephone number, including area code...(631) 547-6520
                                                          --------------

 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 
                                                                   -----------
                                                                   $ 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
                                                                   -----------
                                                                   $ 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
                                                 ---------
Total postpetition liabilities              
       and allowed claims                       13,882,139
   Reorganization value                         --
                                                ----------
Excess of liabilities over                  
       reorganization value                    $13,882,139
                                               ===========

                                                        [Enlarge/Download Table]


                               (UNAUDITED)                                    REORGANIZED  
                            PRE-CONFIRMATION        DEBT           FRESH        BALANCE    
ASSETS                        BALANCE SHEET      DISCHARGED        START         SHEET     
-------                     -----------------    ----------      --------     -----------  
Current:                                                                                   
                                                                                           
 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 
                                 ============   ============   ============   ============ 


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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
                                    ----------
                                    $  574,315
                                    ==========

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                                                              
-------------------                                                             
John Pappajohn, Director                                                

Date: MARCH 16, 2000                                                    

/s/ DERACE SCHAFFER, M.D.                                                       
------------------------                                                        
Derace Schaffer, M.D., Director                                         

Date: MARCH 16, 2000                                                    

Dates Referenced Herein   and   Documents Incorporated by Reference

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