Case 15-32919-KRH Doc 283 Filed 07/21/15 Entered 07/21/15 21:35:50 Desc Main Document Page 1 of 304

Case 15-32919-KRH Doc 283 Filed 07/21/15 Entered 07/21/15 21:35:50 Desc Main Document Page 1 of 304 IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION In re: Chapter 11 HEALTH DIAGNOSTIC LABORATORY, Case No. 15-32919 (KRH) INC., et al., (Jointly Administered) Debtors.1 GLOBAL NOTES, METHODOLOGY, AND SPECIFIC DISCLOSURES REGARDING THE DEBTORS’ SCHEDULES OF ASSETS AND LIABILITIES AND STATEMENTS OF FINANCIAL AFFAIRS Introduction Health Diagnostic Laboratory, Inc. and certain of its affiliates, as debtors and debtors in possession in the above-captioned chapter 11 cases (collectively, the “Debtors”), with the assistance of their advisors, have filed their respective Schedules of Assets and Liabilities (the “Schedules”) and Statements of Financial Affairs (the “Statements, and together with the Schedules, the “Schedules and Statements”) with the United States Bankruptcy Court for the Eastern District of Virginia, Richmond Division (the “Bankruptcy Court”), pursuant to section 521 of title 11 of the United States Code (the “Bankruptcy Code”), Rule 1007 of the Federal Rules of Bankruptcy Procedure and Rule 1007-1 of the Local Bankruptcy Rules of the Bankruptcy Court. These Global Notes, Methodology, and Specific Disclosures Regarding the Debtors’ Schedules and Statements (the “Global Notes”) pertain to, are incorporated by reference in, and 1 The Debtors in these cases, along with the last four digits of each Debtor’s federal tax identification number, are: Health Diagnostic Laboratory, Inc. (0119), Central Medical Laboratory, LLC (2728) and Integrated Health Leaders, LLC (7832). Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Case Management Order (defined below). HUNTON & WILLIAMS LLP Riverfront Plaza, East Tower 951 East Byrd Street Richmond, Virginia 23219 Telephone: (804) 788-8200 Facsimile: (804) 788-8218 Tyler P. Brown (VSB No. 28072) Jason W. Harbour (VSB No. 68220) Henry P. (Toby) Long, III (VSB No. 75134) Justin F. Paget (VSB No. 77949) Counsel to the Debtors and Debtors in Possession Case 15-32919-KRH Doc 283 Filed 07/21/15 Entered 07/21/15 21:35:50 Desc Main Document Page 2 of 304 comprise an integral part of each Debtor’s Schedules and Statements. The Global Notes should be referred to, considered, and reviewed in connection with any review of the Schedules and Statements. The Schedules and Statements do not purport to represent financial statements prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States, nor are they intended to be fully reconciled with the financial statements of each Debtor. Additionally, the Schedules and Statements contain unaudited information that is subject to further review and potential adjustment, and reflect the Debtors’ reasonable efforts to report the assets and liabilities of each Debtor on an unconsolidated basis. The Debtors and their agents, attorneys and financial advisors do not guarantee or warrant the accuracy or completeness of the data that is provided herein or in the Schedules and Statements and shall not be liable for any loss or injury arising out of or caused in whole or in part by the acts, errors or omissions, whether negligent or otherwise, in procuring, compiling, collecting, interpreting, reporting, communicating or delivering the information contained herein and in the Schedules and Statements. While every effort has been made to provide accurate and complete information herein and in the Schedules and Statements, inadvertent errors or omissions may exist. The Debtors and their agents, attorneys and financial advisors expressly do not undertake any obligation to update, modify, revise or re-categorize the information provided herein or in the Schedules and Statements, or to notify any third party should the information be updated, modified, revised or re-categorized. In no event shall the Debtors or their agents, attorneys and financial advisors be liable to any third party for any direct, indirect, incidental, consequential or special damages (including, but not limited to, damages arising from the disallowance of a potential claim against the Debtors or damages to business reputation, lost business or lost profits), whether foreseeable or not and however caused, even if the Debtors or their agents, attorneys and financial advisors are advised of the possibility of such damages. Given, among other things, the uncertainty surrounding the valuation of certain assets and the valuation and nature of certain liabilities, to the extent that a Debtor shows more assets than liabilities, it is not an admission that such Debtor was solvent at the Petition Date (as defined herein) or at any time prior to the Petition Date. Likewise, to the extent that a Debtor shows more liabilities than assets, it is not an admission that such Debtor was insolvent at the Petition Date or any time prior to the Petition Date. Mr. Martin McGahan, the Debtors’ proposed Chief Restructuring Officer, has signed each of the Schedules and Statements. Mr. McGahan is an authorized signatory for each of the Debtors. In reviewing and signing the Schedules and Statements, Mr. McGahan necessarily has relied upon the efforts, statements, and representations of various personnel employed by the Debtors and their advisors. Mr. McGahan has not (and could not have) personally verified the accuracy of each statement and representation contained in the Schedules and Statements, including statements and representations concerning amounts owed to creditors, classification of such amounts, and creditor addresses. 2 Case 15-32919-KRH Doc 283 Filed 07/21/15 Entered 07/21/15 21:35:50 Desc Main Document Page 3 of 304 Global Notes and Overview of Methodology 1. Reservation of Rights. Reasonable efforts have been made to prepare and file complete and accurate Schedules and Statements; however, inadvertent errors or omissions may exist. The Debtors reserve all rights to amend or supplement the Schedules and Statements from time to time, in all respects, as may be necessary or appropriate, including, without limitation, the right to amend the Schedules and Statements with respect to any claim (“Claim”) description, designation, or Debtor against which the Claim is asserted; dispute or otherwise assert offsets or defenses to any Claim reflected in the Schedules and Statements as to amount, liability, priority, status, or classification; subsequently designate any Claim as “disputed,” “contingent,” or “unliquidated”; or object to the extent, validity, enforceability, priority, or avoidability of any Claim. Any failure to designate a Claim in the Schedules and Statements as “disputed,” “contingent,” or “unliquidated” does not constitute an admission by the Debtors that such Claim or amount is not “disputed,” “contingent,” or “unliquidated.” Listing a Claim does not constitute an admission of liability by the Debtor against which the Claim is listed or against any of the Debtors. Furthermore, nothing contained in the Schedules and Statements shall constitute a waiver of rights with respect to the Debtors’ chapter 11 cases, including, without limitation, issues involving Claims, substantive consolidation, defenses, equitable subordination, and/or causes of action arising under the provisions of chapter 5 of the Bankruptcy Code and any other relevant non-bankruptcy laws to recover assets or avoid transfers. Any specific reservation of rights contained elsewhere in the Global Notes does not limit in any respect the general reservation of rights contained in this paragraph. 2. Description of Cases and “As Of” Information Date. On June 7, 2015 (the “Petition Date”), the Debtors filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code. The Debtors are operating their businesses as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On June 9, 2015, the Bankruptcy Court entered an order directing procedural consolidation and joint administration of the Debtors’ chapter 11 cases [Docket No. 40]. On June 16, 2015, the United States Trustee for the Eastern District of Virginia Richmond Division appointed a statutory committee of unsecured creditors pursuant to section 1102(a)(1) of the Bankruptcy Code. The asset information provided herein represents the asset data of the Debtors as of May 31, 2015, except for information pertaining to the Debtors’ bank accounts and accounts receivable, which represent amounts as of the Petition Date. Unless otherwise noted herein and in the Schedules and Statements, liability information provided herein represents the liability data of the Debtors as of the Petition Date. 3. Net Book Value of Assets. Unless otherwise indicated, the Debtors’ Schedules and Statements reflect net book values as of May 31, 2015. Additionally, because the book values of assets may materially differ from their fair market values, they may be listed as undetermined amounts as of the Petition Date. Furthermore, values for assets that have been fully depreciated or were expensed for accounting purposes may not appear in these Schedules and Statements as they have no net book value. 3 Case 15-32919-KRH Doc 283 Filed 07/21/15 Entered 07/21/15 21:35:50 Desc Main Document Page 4 of 304 4. Recharacterization. Notwithstanding the Debtors’ reasonable efforts to properly characterize, classify, categorize, or designate certain Claims, assets, executory contracts, unexpired leases, and other items reported in the Schedules and Statements, the Debtors

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