1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORT): MARCH 27, 1998
RENEX CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 0-23165 65-0422087
(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION OF FILE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
2100 Ponce de Leon Boulevard, Suite 950, Coral Gables, Florida 33134
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
Registrant's telephone number, including area code: (305) 448-2044
Not Applicable
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
2
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
On March 27, 1998, Renex Corp. (the "Company") through its
wholly-owned subsidiary, Renex Dialysis Clinic of South Georgia,
Inc., purchased certain of the assets and the operating business and
assumed certain liabilities of South Georgia Dialysis Services, LLC.,
a Georgia limited liability company ("SGDS") which operated four
dialysis facilities. The purchase price of $4.5 million was paid in
cash at closing.
(a) The following financial statements of SGDS are included herein:
PAGE
----
Independent Auditors' Report F-1
Balance sheet as of December 31, 1997 F-2
Statement of operations for the year ended December 31, 1997 F-3
Statement of members' equity for the year ended December 31, 1997 F-4
Statement of cash flows for the year ended December 31, 1997 F-5
Notes to financial statements F-6
(b) Pro forma financial information.
Renex Corp.'s consolidated balance sheet as of
March 31, 1998 (unaudited). F-13
Renex Corp.'s pro forma consolidated statements of
operations for the year ended December 31, 1997 (unaudited). F-14
Renex Corp.'s pro forma consolidated statements of
operations for the three months ended March 31, 1998 (unaudited). F-15
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3
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 thereunto duly authorized.
RENEX CORP.
(Registrant)
By: /s/ James P. Shea
---------------------------------------------------
James P. Shea
President and Chief Executive Officer
By: /s/ Orestes L. Lugo
---------------------------------------------------
Orestes L. Lugo
Vice President--Finance and Chief Financial Officer
Date: May 29, 1998
------------
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4
SOUTH GEORGIA DIALYSIS SERVICES, LLC
Financial Statements for the
Year Ended December 31, 1997
and Independent Auditors' Report
5
INDEPENDENT AUDITORS' REPORT
To the Members of
South Georgia Dialysis Services, LLC
Thomasville, Georgia:
We have audited the accompanying balance sheet of South Georgia Dialysis
Services, LLC (the "Company") as of December 31, 1997 and the related
consolidated statement of operations, members' equity, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements 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 consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated 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 audit provides a reasonable basis
for our opinion.
In our opinion, such 1997 financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1997, and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
DELOITTE AND TOUCHE LLP
Certified Public Accountants
Miami, Florida
March 30, 1998
F-1
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SOUTH GEORGIA DIALYSIS SERVICES, LLC
BALANCE SHEET
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
1997
-----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 17,613
Accounts receivable (net of allowance for doubtful accounts and
allowance for contractual adjustments of $357,057 in 1997) 387,097
Inventories 33,169
-----------
Total current assets 437,879
FIXED ASSETS, Net 4,706,549
OTHER ASSETS 37,827
-----------
TOTAL $ 5,182,255
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 912,984
Accrued expenses and other 58,992
Notes payable to investors 90,907
Revolving line of credit 397,053
Current portion of capital lease obligations 195,759
Current portion of long-term debt 563,829
-----------
Total current liabilities 2,219,524
LONG-TERM DEBT, Less current portion 2,377,071
CAPITAL LEASE OBLIGATIONS, Less current portion 685,982
COMMITMENTS AND CONTINGENCIES
MEMBERS' EQUITY
Capital contributions 755,444
Accumulated deficit (855,766)
-----------
Total members' equity (100,322)
-----------
TOTAL $ 5,182,255
===========
See accompanying notes to financial statements.
F-2
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SOUTH GEORGIA DIALYSIS SERVICES, LLC
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
1997
-----------
NET REVENUES $ 4,603,058
OPERATING EXPENSES:
Facilities 3,407,857
General and administrative 315,934
Provision for doubtful accounts 742,508
Depreciation and amortization 375,566
-----------
Operating income (loss) (238,807)
OTHER INCOME (EXPENSES):
Interest expense (361,496)
Other income 9,972
-----------
NET LOSS $ (590,331)
===========
See accompanying notes to financial statements.
F-3
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SOUTH GEORGIA DIALYSIS SERVICES, LLC
STATEMENT OF MEMBERS' EQUITY
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 $ 490,009
Net loss (590,331)
---------
BALANCE AT DECEMBER 31, 1997 $(100,322)
=========
See accompanying notes to financial statements.
F-4
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SOUTH GEORGIA DIALYSIS SERVICES, LLC
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
1997
-----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (590,331)
Adjustments to reconcile net loss to net cash used
in operating activities:
Provision for doubtful accounts 742,508
Depreciation and amortization 375,566
Changes in operating assets and liabilities:
Increase in accounts receivable (890,640)
Increase in inventories (33,169)
Increase in accounts payable and accrued expenses 272,327
-----------
Net cash used in operating activities (123,739)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (558,111)
-----------
Net cash used in investing activities (558,111)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 1,022,339
Repayments of capital lease obligations (153,127)
Repayments of long-term debt (200,256)
-----------
Net cash provided by financing activities 668,956
-----------
DECREASE IN CASH AND CASH EQUIVALENTS (12,894)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 30,507
-----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 17,613
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 344,941
===========
See accompanying notes to financial statements.
F-5
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SOUTH GEORGIA DIALYSIS SERVICES, LLC
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - South Georgia Dialysis Services, LLC, (the "Company"),
provides outpatient hemodialysis treatment, continuous ambulatory
peritoneal dialysis, and home dialysis treatment support services to
patients suffering from end-stage renal disease. Operations are conducted
in four facilities in Southwest Georgia (see Note 12). Although the
Company's patients are individuals, accounts receivable for services
provided are collected primarily from government agencies, predominantly
Medicare and Medicaid. Additional amounts are collected from private
insurance companies and individual patients.
The Company was organized as a limited liability company on May 1, 1995
and began operations on January 1, 1996. Construction of facilities were
completed and operations of outpatient hemodialysis service began in
January and February of 1997. The Company has a limited history of
earnings and had an accumulated deficit of $855,766 through December 31,
1997, and is subject to all the risks inherent in the establishment of a
new business enterprise. The Company's ability to achieve profitability is
dependent upon increased utilization of its existing dialysis facilities,
controlling operating costs and its ability to develop or acquire and
manage additional dialysis facilities.
USE OF ESTIMATES - 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 the revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
NET REVENUES -Dialysis and ancillary services revenues include amounts for
services reimbursable by Medicare, Medicaid, and other third party payors
under contracted reimbursement formulas. Revenues are recognized when
services are provided. Revenues are reported at the amount expected to be
realized from governmental, third party payors, and patients based on
reimbursement contracts and ordinary and customary charges when the
services are provided.
During the years ended December 31, 1997, the Company received
approximately 73% and 26% of its dialysis revenues from Medicare and
Medicaid programs, respectively. The remaining balance of dialysis revenue
was from insurance companies and private and other third-party payors.
Beginning in January of 1998, the Medicare reimbursement rates for
pharmaceutical products (excluding Epogen) administered to dialysis
patients were reduced by approximately 5%. HCFA has recently established
reimbursement guidelines for Epogen, which is used to prevent anemia, a
common problem with end-stage renal disease ("ESRD") patients. Medicare
will pay for Epogen until a patient's hematocrit (a measure of anemia)
reaches a 90-day rolling average of 36%. This allows dialysis providers a
three-month window to control dosages in order to keep patients at this
beneficial level or obtain additional medical justification for exceeding
this limit.
These recent and proposed reductions will be partially offset by new
legislation enacted by Congress. The new law requires private insurance
companies to increase the length of ESRD patient coverage from 18 months
to 30 months. Private insurance generally pays at rates significantly
above the Medicare rates. However, there can be no assurance that this
change will be adequate to cover the Medicare rate reductions.
Revenues associated with the administration of Epogen are a significant
source of revenue for the Company. The Company is unable to predict future
changes in the reimbursement rate for Epogen treatments, the typical
dosage per administration or the cost of the medication. In addition,
Epogen is produced by only one manufacturer. The interruption of supplies
of Epogen to the
F-6
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Company would have a material adverse effect on the Company's business,
financial condition, and results of operations.
PROVISION FOR BAD DEBT - The Company provides an allowance for doubtful
accounts based on historical experience of amounts that result to be
uncollectible. Amounts written off are charged against the allowance.
CASH EQUIVALENTS - The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash
equivalents.
MEDICAL SUPPLIES INVENTORY - Medical supplies inventory is stated at the
lower of cost (first-in, first-out) or market.
FIXED ASSETS - Fixed assets are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets ranging from six to twelve years for medical and other equipment,
and furniture and fixtures, and forty years for buildings.
INCOME TAXES - The limited liability company is considered a partnership
for Federal and State income tax purposes. Accordingly, the equity owners
account for their pro rata share of the Company's income, deductions, and
credits in their separate tax returns. As a result, income tax expenses,
assets, and liabilities are not recognized in the financial statement of
the Company.
For income tax purposes, the Company uses a hybrid method reporting which
allows the taxpayer to use accrual method for purchases and sales and the
cash method for all other items of income and expenses. (Section 446(c)4
of IRC).
FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company's financial instruments
include receivables, payables, debt and credit lines. The fair values of
such financial instruments have been determined based on market interest
rates as of December 31, 1997. The fair values were not materially
different than their carrying values.
F-7
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2. ALLOWANCE FOR DOUBTFUL ACCOUNTS
Changes in the Company's allowance for doubtful accounts are as follows:
DECEMBER 31,
1997
---------
Beginning balance $ 399,520
Provision for doubtful accounts 742,508
Write-offs (961,140)
---------
Ending balance allowance for doubtful accounts 180,888
Allowance for contractual discounts 176,169
---------
Total $ 357,057
=========
The Company grants credit without collateral to its patients, most of whom
are insured under third-party payor agreements, including Medicare and
Medicaid which represent the significant portion of the balance of
receivables for the year ended December 31, 1997. The remaining
receivables are primarily due from third party payors, including
commercial and insurance. The Company also has receivables due from
patients who are self-payors or owe co-payments.
3. FIXED ASSETS
Fixed assets are summarized as follows:
DECEMBER 31,
1997
-----------
Land $ 492,330
Building and leasehold improvements 3,057,672
Medical equipment 126,210
Equipment, furniture and fixtures 205,794
Equipment, under capital lease obligations 1,034,868
Automobiles 167,955
-----------
Total 5,084,829
Less accumulated depreciation (378,280)
-----------
Fixed assets - net $ 4,706,549
===========
4. MEDICAL MALPRACTICE INSURANCE
The Company maintains general liability and professional malpractice
liability insurance on its staff and other insurance appropriate for its
operations. The general liability policy provides coverage of $1,000,000
per occurrence and $2,000,000 in the aggregate. The professional liability
policy provides coverage for professional (medical) activities of the
Company's employees. This policy provides coverage of $1,000,000 per
occurrence and $2,000,000 in the aggregate.
F-8
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5. LINE OF CREDIT AND NOTES PAYABLE TO RELATED PARTY
Short-term debt consists of the following at December 31, 1997:
Revolving credit agreement $397,053
Notes payable - related party 90,907
--------
Total short-term debt $487,960
========
In addition to its long-term debt, the Company has a revolving credit
agreement with a bank that provides for borrowing up to a total of
$400,000 for general working capital purposes. Borrowings under the
agreement are secured by receivables, inventory, property and equipment of
the Company and accrue interest at the bank's prime rate plus 1.5% per
annum. The Company had outstanding borrowings of $397,053 on December 31,
1997.
6. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997:
DECEMBER 31,
1997
----------
Various notes due bank dated February 1, 1997 collateralized
by real estate. Interest rate is 9.69% and monthly installments
of $23,367 including interest $2,146,847
Various notes due bank dated February 1, 1997 collateralized by equipment.
Interest rate is 9.69% and monthly installments of $10,475 including interest 416,029
Notes due bank dated September 23, 1996 collateralized by real estate. Interest
rate is 10.43% and monthly installment of $3,672 including interest 316,460
Notes due bank dated September 23, 1996 collateralized by equipment. Interest
rate is 9% and monthly installment of $1,374 including interest 61,564
----------
Totals 2,940,900
Less current maturities 563,829
----------
Net long-term debt $2,377,071
==========
F-9
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The maturity schedule of long-term debt as of December 31, 1997 is as
follows:
YEAR ENDING TOTAL
1998 $ 804,271
1999 877,386
2000 877,386
2001 874,153
2002 142,996
----------
3,576,192
Less amount representing interest 635,292
----------
Total $2,940,900
==========
The loan contains certain restrictive covenants including financial
covenants as to minimum net worth, leverage, and cash flows. Effective May
1, 1997, the loan agreement was revised as to the minimum net worth and
cash flows covenants. On December 31, 1997, the Company was in breach of
working capital and other financial ratio covenants of loan agreements. On
March 30, 1998, the Bank waived such defaults as they may have existed as
of December 31, 1997, reserving rights to remedies as to any defaults
occurring after December 31, 1997.
7. CAPITAL LEASE OBLIGATIONS
The Company leases their dialysis equipment and other equipment under
non-cancelable lease agreements with expiration date through December 1,
2001. The leases require the Company to pay insurance and property taxes
on the equipment.
The following is a schedule of the future minimum lease payments at
December 31, 1997.
YEAR ENDING AMOUNT
1998 $ 268,733
1999 269,947
2000 268,736
2001 246,948
----------
1,054,364
Less amount representing interest 172,623
----------
Total $ 881,741
==========
8. EMPLOYEE BENEFIT PLANS
The Company has qualified defined contribution (profit sharing plan)
covering, substantially all employees who have met plan eligibility
requirements. The plan also provides for a 401(k) salary reduction
provision. Contributions and matching 401(k) contributions are at the
discretion of the Company. The Company did not make voluntary
contributions or matching 401(k) contributions to the plan for the year
ended December 31, 1997.
9. RELATED PARTY TRANSACTIONS
Medical directors fee of $120,000 is paid to the managing member of the
Company for the year ended December 31, 1997. This amount is offset with
$118,250, representing the rent receivable and loan
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receivable from the managing member. In addition, the Company owed the
managing member, member of management and equity investors $28,500 on
December 31, 1997.
The Company had unsecured notes payable to the managing member and member
of management. The borrowings are due on demand and bear interest at a
bank's reference rate (prime plus 2%). The outstanding balance on the
notes were $90,907 as of December 31, 1997.
The Company paid management consulting and accounting fees of $29,527 to
an organization which a member of management has an immediate family
member as a principal of the organization.
The Company leases a medical office building to the managing member.
Rental income received under the agreement is $38,250 for the year ended
December 31, 1997.
10. COMMITMENTS AND CONTINGENCIES
LITIGATION - The Company is subject to claims and suits in the ordinary
course of business, including those arising from patient treatments, which
the Company believes are covered by insurance. The Company is not involved
in any material litigation and is not aware of any potential claims which
would give rise to material liability.
IMPACT OF THE YEAR 2000 ISSUE - The Company is undertaking a comprehensive
review of all of its computer software, computer hardware, and other
operating equipment to mitigate disruption of its business related to the
Year 2000 issue. There can be no assurance until 2000, however, that all
of the Company's systems, and the systems of its suppliers, shippers,
payors and other external business partners will function adequately. If
the systems of the Company's suppliers, shippers and other external
business partners are not Year 2000 compliant, it could have a material
adverse effect of the Company. The Company does not expect the costs
associated with this undertaking to have a material effect on its
financial position or results of its operations.
11. SUBSEQUENT EVENTS
In March 1998, the Company entered into a definitive agreement to sell
certain assets, the operating business and certain liabilities to Renex
Corp. On March 27, 1998, the purchase price of $4.5 million was paid in
cash of which $2.0 million was used to pay down certain long-term debt.
Concurrent with the sale, the Company entered into a long-term lease
agreement for the four dialysis facilities with Renex Corp.
* * * * * *
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(b) PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma consolidated statements of operations for the
year ended December 31, 1997 and for the three months ended March 31,
1998, represent the results of operations of SGDS assuming the sale had
been consummated as of the beginning of the periods presented. It
includes the impact of certain adjustments, such as: changes in
expenses based on contractual arrangements, amortization of
intangibles, increased interest expense on acquisition debt, decreased
interest income on use of cash on hand to payoff the debt following the
Company's initial public offering and the related income tax effects.
The unaudited consolidated balance sheet as of March 31, 1998 reflects
the assets acquired and liabilities assumed. A portion of the purchase
price was allocated to the net assets acquired based on their estimated
fair values. The balance of the purchase price, approximately $3.3
million, was recorded as goodwill.
The pro forma information does not purport to be indicative of the
results of operations or the financial position which would have
actually been obtained if the transaction had been consummated as of
the beginning of the periods presented. In addition, the pro forma
financial information does not purport to be indicative of the results
of operations or financial position, which may be obtained in the
future.
The pro forma financial information should be read in conjunction with
the Company's Annual Report on Form 10-K and the Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998, as well as SGDS'
audited financial statements for the year-ended December 31, 1997
included in this Form 8-K/A1.
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RENEX CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
--------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents .................................... $ 9,587,000
Accounts receivable, net ..................................... 6,151,000
Inventories .................................................. 507,000
Prepaids and other ........................................... 851,000
------------
Total current assets ..................................... 17,096,000
Fixed assets, net .............................................. 9,469,000
Intangible assets, net ......................................... 5,693,000
Notes receivable from affiliates, interest rate at 8% .......... 85,000
Other assets ................................................... 241,000
------------
Total assets ............................................. $ 32,584,000
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................. $ 1,177,000
Accrued expenses and other ................................... 4,739,000
Current portion of capital lease obligations ................. 636,000
------------
Total current liabilities ................................ 6,552,000
------------
Capital lease obligations, less current portion ................ 2,040,000
------------
Commitments
Shareholders' equity:
Common stock, $.001 par value, 30,000,000 shares authorized,
6,974,247 shares issued and outstanding .................... 7,000
Additional paid-in capital ..................................... 30,600,000
Accumulated deficit ............................................ (6,615,000)
------------
Total shareholders' equity ............................... 23,992,000
------------
Total liabilities and shareholders' equity ............... $ 32,584,000
============
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RENEX CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
HISTORICAL
------------------------------
PRO FORMA
RENEX CORP. SGDS ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------
Net revenues ................................... $ 26,073,000 $ 4,604,000 $ -- $ 30,677,000
Operating expenses:
Facilities ................................... 20,182,000 3,398,000 423,000 (1) 24,003,000
General and administrative ................... 2,991,000 316,000 -- 3,307,000
Provision for doubtful accounts .............. 962,000 743,000 -- 1,705,000
Depreciation and amortization ................ 1,635,000 376,000 180,000 (2) 2,191,000
------------ ------------ ------------ ------------
Operating income (loss) .................... 303,000 (229,000) (603,000) (529,000)
------------ ------------ ------------ ------------
Other income (expense):
Gain (loss) on sale of assets ................ (27,000) -- -- (27,000)
Net interest income (expense) ................ (771,000) (361,000) (108,000)(3) (1,240,000)
Amortization of deferred financing costs ..... (162,000) -- -- (162,000)
------------ ------------ ------------ ------------
Loss before extraordinary item ................. (657,000) (590,000) (711,000) (1,958,000)
Extraordinary item charge for
early retirement of debt ..................... (1,441,000) -- -- (1,441,000)
------------ ------------ ------------ ------------
Net loss ................................... $ (2,098,000) $ (590,000) $ (711,000) $ (3,399,000)
============ ============ ============ ============
Basic and Diluted Earnings Per Share:
Loss per share before extraordinary item ..... $ (0.14) $ (0.13) $ (0.15) $ (0.42)
============ ============ ============ ============
Extraordinary charge for early retirement
of debt .................................... (0.31) -- -- (0.31)
============ ============ ============ ============
Net loss ..................................... $ (0.45) $ (0.13) $ (0.15) $ (0.73)
============ ============ ============ ============
Weighted average shares outstanding .......... 4,672,707 4,672,707 4,672,707 4,672,707
============ ============ ============ ============
(1) To record medical director fee and lease expense for medical office
building.
(2) To record amortization of intangibles and reduction of depreciation expense
for assets not acquired.
(3) To record interest expense for debt obtained to purchase assets, reduction
of interest expense for liabilities not assumed, and reduction of interest
income on use of cash on hand to pay off debt obtained following the
Company's initial public offering.
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RENEX CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
HISTORICAL
----------------------------
PRO FORMA
RENEX CORP. SGDS ADJUSTMENTS PRO FORMA
----------- ----------- ----------- -----------
Net revenues ................................ $ 7,750,000 $ 887,000 $ -- $ 8,637,000
Operating expenses:
Facilities ................................ 5,849,000 724,000 106,000(1) 6,679,000
General and administrative ................ 1,045,000 39,000 -- 1,084,000
Provision for doubtful accounts ........... 251,000 67,000 -- 318,000
Depreciation and amortization ............. 465,000 67,000 45,000(2) 577,000
----------- ----------- ----------- -----------
Operating income (loss) ................. 140,000 (10,000) (151,000) (21,000)
----------- ----------- ----------- -----------
Other income (expense):
Net interest income (expense) ............. 197,000 (100,000) 18,000(3) 115,000
----------- ----------- ----------- -----------
Income (loss) before taxes .................. 337,000 (110,000) (133,000) 94,000
Income tax expense .......................... (17,000) -- -- (17,000)
----------- ----------- ----------- -----------
Net income (loss) ....................... $ 320,000 $ (110,000) $ (133,000) $ 77,000
=========== =========== =========== ===========
Basic Earnings Per Share:
Net income (loss) ......................... $ .05 $ (.02) $ (.02) $ .01
=========== =========== =========== ===========
Weighted average shares outstanding ....... 6,977,372 6,977,372 6,977,372 6,977,372
=========== =========== =========== ===========
Diluted Earnings Per Share:
Net income (loss) ......................... $ .05 $ (.02) $ (.02) $ .01
=========== =========== =========== ===========
Weighted average shares outstanding ....... 7,050,387 7,050,387 7,050,387 7,050,387
=========== =========== =========== ===========
(1) To record medical director fee and lease expense for medical office
building.
(2) To record amortization of intangibles and reduction of depreciation expense
for assets not acquired.
(3) To record reduction of interest expense for liabilities not assumed, and
reduction of interest income on use of cash on hand related to the
purchase.
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