<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
(x) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1996
--------------------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
( ) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ______________________ to __________________
Commission File Number 0-26488
----------------------------------------------------
R.F. Management Corp.
---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 22-3318886
---------------------------------------------------------------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
95 Madison Avenue, Suite 301, Morristown, N.J. 07960
---------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 292-2833
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at December 31, 1996
Common stock, par value $.0001 per share 3,327,500 shares
<PAGE>
R.F. MANAGEMENT CORP.
DECEMBER 31, 1996
(Unaudited)
I N D E X
---------
Page No.
--------
PART I - Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets as at December 31, 1996 (Unaudited)
and September 30, 1996 . . . . . . . . . . . . . . . . . . 3-4
Consolidated Statements of Operations
For the Three Months Ended December 31, 1996
and 1995 (Unaudited). . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
For the Three Months Ended December 31, 1996
and 1995 (Unaudited). . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements (Unaudited) . . . 7-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . 12-14
PART II - Other Information
Item 15 Legal Proceedings . . . . . . . . . . . . . . . 15
Item 2 Changes in Securities . . . . . . . . . . . . . 15
Item 3 Defaults upon Senior Securities . . . . . . . . 15
Item 4 Submission of Matters to a Vote of Security Holders 15
Item 5 Other Information . . . . . . . . . . . . . . . . 15
Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 16
Exhibit 11.1 . . . . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
R.F. MANAGEMENT CORP.
CONSOLIDATED BALANCE SHEETS
A S S E T S
-----------
December 31, September 30,
1996 1996
---------------------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 1,485,041 $2,258,333
Certificate of deposit 413,263 408,266
Accounts receivable 1,847,164 296,893
Due from affiliate - 19,743
Loans receivable 388,030 -
Deferred income taxes 268,878 218,798
Other current assets 171,970 101,210
----------- ----------
Total current assets 4,574,346 3,303,243
----------- ----------
Other assets:
Equipment (net of accumulated depreciation
of $498,109 and $24,969, respectively) 5,907,183 130,730
Investment in limited partnership 10,243 11,120
Investment in joint venture 350,000 350,000
Deferred consulting fees 985,104 -
Deposits and other assets 137,342 80,866
Goodwill 1,040,183 -
Organization costs (net of accumulated
amortization of $5,974 and $76, respectively) 20,463 192
----------- ----------
Total other assets 8,450,518 572,908
----------- ----------
$13,024,864 $3,876,151
----------- ----------
----------- ----------
See notes to consolidated financial statements.
-3-
<PAGE>
R.F. MANAGEMENT CORP.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, September 30,
1996 1996
------------ -------------
(Unaudited)
Current liabilities:
Lines of credit $ 445,000 $ 167,700
Accounts payable 363,310 47,505
Accrued expenses 555,877 32,766
Due to affiliates 589,776 -
Notes payable - current portion 1,392,642 -
Notes payable - stockholders 150,000 150,000
----------- ----------
Total current liabilities 3,496,605 397,971
----------- ----------
Other liabilities:
Notes payable - net of current portion 5,199,196 -
Notes payable - stockholders 300,000 300,000
Consulting fees payable 1,008,811 -
----------- ----------
Total other liabilities 6,508,007 300,000
----------- ----------
Minority interest in equity of subsidiaries 62,538 -
Commitments and contingency
Stockholders' equity:
Common stock - $0.0001 par value
Authorized - 15,000,000 shares
Issued and outstanding - 3,327,500 and
3,327,500 shares, respectively 333 333
Additional paid-in capital 4,123,641 4,123,641
Deficit ( 1,166,260) ( 945,794)
----------- ----------
Total stockholders' equity 2,957,714 3,178,180
----------- ----------
$13,024,864 $3,876,151
----------- ----------
----------- ----------
See notes to consolidated financial statements.
-4-
<PAGE>
R.F. MANAGEMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
December 31,
--------------------------
1996 1995
----------- ------------
Revenues:
Management fees $ 680,818 $ 121,656
---------- ----------
Costs and expenses:
Operating expenses 963,610 419,708
Interest 15,099 15,938
Depreciation and amortization 7,028 2,354
Interest income ( 37,976) ( 60,295)
---------- ----------
Total costs and expenses 947,761 377,705
---------- ----------
Loss from operations before credit
for income taxes ( 266,943) ( 256,049)
Credit for income taxes ( 49,213) ( 16,527)
---------- ----------
Loss from operations before
partnership income (loss) ( 217,730) ( 239,522)
Income (loss) from a limited partnership -
net of income taxes ( 519) 1,663
---------- ----------
Loss before minority interests ( 218,249) ( 237,859)
Minority interest in income from subsidiaries 2,217 -
---------- ----------
Net loss ($ 220,466) ($ 237,859)
---------- ----------
---------- ----------
Primary
Weighted average shares outstanding 3,327,500 3,327,500
--------- ---------
--------- ---------
Loss per share amounts ($ 0.07) ($ 0.07)
---------- ----------
---------- ----------
See notes to consolidated financial statements.
-5-
<PAGE>
R.F. MANAGEMENT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
December 31,
1996 1995
Cash flows from operating activities:
Net loss ($ 220,466) ($ 237,859)
---------- ----------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 7,028 2,354
Deferred income taxes ( 50,080) ( 10,507)
Investment in limited partnership 877 ( 1,663)
Minority interest in income from subsidiaries 2,217 -
Consulting fees 23,707 -
Increase (decrease) in cash flows as a result of
changes in asset and liability account balances:
Accounts receivable ( 1,550,271) ( 70,755)
Other current assets ( 70,760) 2,288
Organization costs ( 20,263) -
Accounts payable and accrued expenses 838,916 29,255
Income taxes payable - ( 3,825)
---------- ----------
Total adjustments ( 818,629) ( 52,853)
---------- ----------
Net cash used in operating activities ( 1,039,095) ( 290,712)
---------- ----------
Cash flows from investing activities:
Equipment additions ( 5,783,309) ( 48,041)
Increase in minority interest 60,321 -
Acquisition of goodwill ( 1,040,183) -
Investment in certificate of deposit ( 4,997) -
Note receivable - ( 1,275)
Increase in loans receivable ( 388,030) -
Deposits and other assets ( 56,476) ( 3,800)
---------- ----------
Net cash used in investing activities ( 7,212,674) ( 53,116)
---------- ----------
Cash flows from financing activities:
Advances from affiliates 609,519 -
Increase in notes payable 6,591,658 -
Advances from lines of credit 277,300 -
---------- ----------
Net cash provided by financing activities 7,478,477 -
---------- ----------
Net decrease in cash and cash equivalents ( 773,292) ( 343,828)
Cash and cash equivalents - beginning 2,258,333 4,620,520
---------- ----------
Cash and cash equivalents - ending $1,485,041 $4,276,692
---------- ----------
---------- ----------
Supplemental Information:
Cash paid during the period:
Income taxes $ 449 $ -
---------- ----------
---------- ----------
Interest $ 15,099 $ 13,758
---------- ----------
---------- ----------
Noncash transactions:
Investment in foreign joint venture
and related accounts payable $ - $ 350,000
---------- ----------
---------- ----------
Acquisition of consulting services in connection
with an asset purchase, resulting in the following:
Deferred consulting fees $ 998,979 $ -
---------- ----------
---------- ----------
Consulting fees payable $ 998,979 $ -
---------- ----------
---------- ----------
See notes to consolidated financial statements.
-6-
<PAGE>
R.F. MANAGEMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES.
The consolidated balance sheet as of December 31, 1996 and the
consolidated statements of operations and cash flows for the three months
ended December 31, 1996 and 1995 have been prepared by the Company and are
presented herein without audit.
In the opinion of management, the accompanying financial statements
referred to above contain all necessary adjustments, consisting of normal
accruals and recurring entries only, which are necessary to present fairly
the Company's consolidated results for the interim periods being presented.
The accounting policies followed by the Company are set forth in Note
2 to the Company's financial statements included in its Annual Financial
Statement filed on Form 10-K for the year ended September 30, 1996, which
is incorporated herein by reference. Specific reference is made to that
report for a description of the Company's securities and the notes to
financial statements included therein.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable and short-term debt approximate fair value due
to the short maturity of the instruments and the provision for what
management believes to be adequate reserves for potential losses. It was
not practicable to estimate the fair value of long-term debt because quoted
market prices do not exist and an estimate could not be made through other
means without incurring excessive costs.
The results of operations and cash flows for the three months ended
December 31, 1996 and 1995 are not necessarily indicative of the results to
be expected for the full year.
NOTE 2 - INCOME (LOSS) PER COMMON SHARE.
Income (loss) per common share is computed by dividing the net income
(loss) by the weighted average number of common shares and common
equivalent shares outstanding during each period.
-7-
<PAGE>
NOTE 3 - RELATED PARTY TRANSACTIONS.
The Company maintains an office at 95 Madison Avenue, Suite 301,
Morristown, New Jersey. Expenses incurred in the operation of the
Company's office facility including rent, telephone and office expenses are
allocated to numerous businesses which share the facility. The allocations
are based on usage and revenues. Management believes that the allocations
are reasonable and proper. The allocated expenses for the three months
ended December 31, 1996 and 1995 aggregated $14,900 and $15,944,
respectively.
The Company entered into an agreement with an affiliated company to
provide marketing services to the Company. For the three months ended
December 31, 1996 and 1995, compensation for these services totalled $4,500
and $1,400, respectively.
The Company has entered into an agreement with two affiliated
companies to finance a portion of their accounts receivable. Loans
receivable under the agreements amounted to approximately $127,000 and
$111,000 at December 31, and September 30, 1996, respectively.
Included in other assets, the Company has an outstanding note
receivable from one of its officers for approximately $24,000. The
conditions and repayment terms of the note have not yet been determined.
NOTE 5 - INVESTMENT IN A LIMITED PARTNERSHIP.
The Company has a one percent (1%) ownership in Union Diagnostic
Facilities Group, L.P. The investment is recorded on the equity method
since the Company is the only general partner. The Company's duties
include contract negotiations, site selection, equipment procurement,
construction, office personnel and physician staffing, office management
and marketing. The Company records its investments in the limited
partnership and its income from the limited partnership monthly.
The following is a summary of condensed financial data from the
financial statements of the limited partnership in which the Company has an
investment at December 31, 1996 (unaudited) and September 30, 1996:
Total Long-Term Total Total
Assets Debt Liabilities Capital
-------- ----------- ----------- --------
December 31, 1996 (unaudited) $777,370 $ 88,977 $471,908 $305,462
September 30, 1996 821,822 102,702 402,117 419,704
Assets Liabilities
--------------------- -----------------------
Current Non-Current Current Non-Current
-------- ----------- ---------- -----------
December 31, 1996 (unaudited) $418,796 $ 358,574 $382,931 $ 88,977
September 30, 1996 454,465 367,356 299,415 102,702
Net Allocation
Net Income of income
Revenues (Loss) (Loss)
---------- ----------- ----------
For the three months ended
December 31, 1996 (unaudited) $ 345,235 ($ 87,742) ($ 877)
For the year ended September 30, 1996 1,642,128 13,637 135
-8-
<PAGE>
NOTE 5 - INVESTMENT IN A LIMITED PARTNERSHIP. (Continued)
Gross profit and income from continuing operations does not differ
from net income. The partnership has no redeemable securities or minority
interest.
NOTE 6 - ACQUISITIONS.
On May 31, 1995, R.F. Management Corp. (R.F.) acquired one hundred
percent (100%) of the outstanding shares (one hundred (100) shares of no
par value common stock) of Northern New Jersey Medical Management, Inc.
("Northern"), a New Jersey Corporation, engaged in the management of a
medical diagnostic facility in Union, New Jersey. The terms of the
agreement call for a payment of one hundred and fifty thousand dollars
($150,000) and a six hundred thousand dollar ($600,000) note, which bears
interest at prime plus one percent (1%) and requires principal payments of
one hundred and fifty thousand dollars ($150,000), plus accrued interest,
on January 30, 1996, 1997, 1998 and 1999. The annual principal payments
are subject to a one-third (1/3) reduction in the event that the gross
revenues of Northern fall below two hundred thousand dollars ($200,000) per
annum. The Company accounted for the business combination in a manner
similar to a pooling of interest due to the stockholders' common control of
both R.F. and Northern.
On December 27, 1995, R.F. acquired forty percent (40%) of the
outstanding shares of Mobile Medical Services Limited ("Mobile"), a
privately held Company incorporated in Ireland, and a fifty one percent
(51%) interest in the property owned or leased by its subsidiaries for
$350,000. The payment terms call for the Company to make payments directly
to designated creditors on behalf of Mobile. As of December 31, 1996,
$350,000 is reflected as an investment in joint venture.
On November 15, 1996, the Company acquired a 75% interest in
Mobiletec, Inc. ("Mobiletec"), a newly formed entity incorporated in the
State of New Jersey. Mobiletec provides mobile M.R.I. facilities to
doctors, hospitals and medical groups for which it receives a per-test fee.
The results of operations from its inception are included in these
consolidated financial statements.
On December 1, 1996, the Company acquired certain assets and assumed
certain liabilities from Luther W. Brady & Associates, P.C. and Bucks
Radiation Oncology, Inc. The assets are used to provide radiation therapy
services and are located in Voorhees, New Jersey and Havertown and
Langhorne, Pennsylvania. The purchase price for these assets was
$3,700,000. The Company also assumed certain notes payable totalling
approximately $837,000. The fair value of the assets acquired aggregated
approximately $3,635,000. The difference between the purchase price and
the fair value of the assets, net of liabilities assumed, resulted in the
creation of goodwill of approximately $902,000. In connection with the
acquisition, the Company has arranged for financing of the purchase price
aggregating $3,500,000, in the form of installment notes, payable in 60
monthly installments including interest at 11.6%, totalling approximately
$77,150 per month. Repayment of these notes is to commence March 1, 1997.
-9-
<PAGE>
NOTE 6. ACQUISITIONS. (Continued)
On December 27, 1996, the Company acquired 65% of the outstanding
capital stock of Empire State Imaging Associates, Inc. ("Empire"), a New
York corporation, from an affiliated company for a total of $250,000.
Empire operates an imaging center which provides non-claustrophobic MRI, CT
scanning, mammography, ultrasound and x-ray services. As part of the
purchase price, the Company issued an installment note, in the principal
sum of $225,000, payable in nine monthly installments plus interest at
prime plus 1% on the unpaid balance.
NOTE 7 - LINE OF CREDIT.
On April 30, 1996, the Company entered into a one year $400,000 line
of credit agreement with a bank. Interest is payable on a quarterly basis
at prime plus one percent. The line is collateralized by a certificate of
deposit which matures on April 30, 1997. As of December 31, 1996, the
amount outstanding under this line of credit amounted to $400,000.
NOTE 8 - COMMITMENTS AND CONTINGENCY.
On March 20, 1996, the Company formed a wholly-owned subsidiary, RF
Management Corp. of Toms River "RFTR", a New Jersey corporation. In April
1996, RFTR entered into an agreement to lease a 9,000 square foot facility
for five years with a base annual rental cost of $117,000.
In July 1996, RFTR entered into a lease and management service
agreement with Surgical Associates, P.A. to provide space, equipment and
nonprofessional services, including management and billing and collection
functions to a newly formed Surgical Center.
On May 30, 1996, the Company entered into a five-year lease and
management Service Agreement with Associates in Otolaryngology of New
Jersey, P.A. to provide management, administrative marketing, operational
and related services to the physicians office in addition to providing the
necessary fixtures and equipment to be utilized in the practice. The
Company has also guaranteed the rental payments on the facility for the
term of the management service agreement. The five year term of this
agreement commences with the completion of the new facility construction.
On December 1, 1996, in connection with the aforementioned asset
purchase agreement, the Company entered into a consulting agreement with
Luther W. Brady, M.D. The agreement is for a period of six years and calls
for Dr. Brady to provide the Company with a variety of consulting services.
For his services, the Company has agreed to pay Dr. Brady $250,000 a year
for an aggregate of $1,500,000, payable in equal monthly installments of
$20,833 and commencing on the date of this agreement. The parties to the
agreement have verbally agreed to defer the commencement of the payments
until August 27, 1997. Under the terms of the agreement, the Company is
obligated to pay the fee to Dr. Brady, his designees or his heirs
regardless of his ability to render such services.
-10-
<PAGE>
NOTE 8 - COMMITMENTS AND CONTINGENCY. (Continued)
Therefore, the Company has recorded a liability, discounted at 11.6% to its
present value, which at December 31, 1996 amounted to approximately
$1,009,000 and a non-current asset for consulting services, which amounted
to approximately $985,000 at December 31, 1996.
The Company has recognized consulting fees in connection with this
agreement which amounted to $23,707 for the three months ended December 31,
1996.
-11-
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
R.F. Management Corp. (the "Company") was formed in August of 1994, for the
purpose of establishing, administering and managing free-standing outpatient
ambulatory surgery centers. The Company is responsible for the day to day
management of the site, including hiring and selection of non-medical employees,
marketing and the responsibility of all computer operations at the site.
Medical professionals employed at the Center provide all medical and diagnostic
services at the site. The Company is not engaged in the practice of medicine.
On May 31, 1995, the Company acquired 100% of the outstanding shares of Northern
New Jersey Medical Management, Inc. ("Northern") in a business combination
accounted for as a pooling of interests. Northern, a New Jersey corporation
formed in 1986, is engaged in the management of a diagnostic imaging center
located in Union, New Jersey. All references to the Company's prior operating
history relates to the operations of Northern.
On December 27, 1995, R.F. acquired 40% of the outstanding shares of Mobile
Medical Services Limited ("Mobile"), a privately held Company incorporated in
Ireland, and a 51% interest in the property owned or leased by its subsidiaries
for $350,000. Mobile Medical Services Limited provides mobile MRI, CT,
Lithotripsy and Cardiac Catheterization services in the Netherlands, United
Kingdom, Italy and Germany. The payment terms call for the Company to make
payments directly to designated creditors on behalf of Mobile. As of December
31, 1996, $350,000 is reflected as an investment in joint venture.
On March 20, 1996, the Company formed a wholly-owned subsidiary, R.F. Management
Corp. of Toms River ("RFTR"), a New Jersey corporation, who in July 1996 entered
into a lease and management service agreement with Surgical Associates, PA.
This agreement is to commence upon the completion of the construction of a one
room surgical suite.
On May 30, 1996, the Company entered into a five year lease and management
service agreement with Associates in Otolaryngology of New Jersey, PA. This
agreement is to commence upon the completion of the construction of a one room
surgical suite.
On November 15, 1996, the Company acquired a 75% interest in Mobiletec, Inc.
("Mobiletec"), a newly formed entity incorporated in New Jersey. Mobiletec
provides mobile MRI facilities to doctors, hospitals and medical groups for
which it receives a per-test fee. Mobiletec's results of operations have been
included in the consolidated financial statements.
On December 1, 1996, the Company acquired certain assets and assumed certain
liabilities from Luther W. Brady & Associates, P.C. and Bucks Radiation
Oncology, Inc. The assets are employed in the operation of three radiation
treatment centers located in Voorhees, New Jersey and Havertown and Langhorne,
Pennsylvania. The Company acquired the assets for $3,700,000 and also assumed
certain liabilities totalling approximately $837,000. The transaction resulted
in the creation of goodwill of approximately $902,000.
-12-
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
On December 27, 1996, the Company acquired 65% of the outstanding capital stock
of Empire Imaging Associates, Inc. ("Empire"), a New York corporation, from an
affiliated company for $250,000. Empire operates an imaging center in Yonkers,
New York which provides non-claustrophobic MRI, CT scanning, mammography,
ultrasound and x-ray services. The transaction resulted in the creation of
goodwill of approximately $138,000.
The Company has entered into letters of intent to administer free standing
ambulatory surgical centers with the following: Ambulatory Surgery Center of
Morris County, Inc., D/B/A Rigdedale Surgery Center on February 24, 1996,
Middlesex Ambulatory Surgical Center (East Brunswick, New Jersey) on March 26,
1996, Ocean OB/GYN Associates (Toms River, New Jersey) on July 15, 1995, Michael
Schalet, D.O. (Morristown, New Jersey) on June 21, 1995, Monica Mehta, M.D. and
H. Shah, M.D. (Jersey City, New Jersey) on October 4, 1995, M. Fateh, M.D.
(Millburn, New Jersey) on July 13, 1995, N.S. Botros, M.D. (Bayonne, New Jersey)
on October 25, 1995, and Rameth Tandon, M.D. (Montville, New Jersey) on April
10, 1996.
THREE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO
THREE MONTHS ENDED DECEMBER 31, 1995.
RESULTS OF OPERATIONS
Management fees increased $559,162 (460.0%) to $680,818 for the three months
ended December 31, 1996 as compared to the comparable period in 1995. The
increase in fees is attributable to the acquisitions of the three radiation
centers ($406,000) and the majority interest in Mobiletec ($128,000) in December
and November 1996, respectively.
Operating expenses increased $543,902 (130.0%) to $963,610 in 1996 as compared
to 1995. Of the increase, $299,677 and $119,475 are attributable to the
Company's new operations of the radiation centers and Mobiletec, respectively.
An additional $23,707 was attributable to a new consulting agreement entered
into by the Company in December 1996 with Luther Brady, M.D. The balance of the
increase is primarily attributable to additional personnel costs as the Company
continues to seek expansion opportunities.
Interest income decreased $22,319 (37.0%) to $37,976 in 1996 as compared to
1995. This decrease is directly attributable to the Company's use of available
funds as it seeks to expand its operations.
Net loss for the three months ended December 31, 1996 was $220,466 as compared
to a loss of $237,859 for the comparable period in 1995, a decrease of $17,393
(7.3%). The decreased loss is primarily attributable to a $32,686 increase in
the credit for income taxes in 1996 as compared to 1995.
-13-
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (Continued)
The healthcare dollar for the past few years has been earmarked for reductions.
Although third party payors are shrinking the amount of healthcare payments,
quality care and highly technological equipment is still a priority. With
increases in the cost of highly technological equipment and the cost to borrow
money, profit margins will be reduced. It is the Company's aim to address the
effects of lower healthcare reimbursement and increased equipment costs by
handling a larger volume of patients at its newly acquired centers and at its
future centers through a managed care network.
LIQUIDITY AND CAPITAL RESOURCES
The Company experienced a decrease in cash and cash equivalents for the three
months ended December 31, 1996 totalling $773,292. Of this total, $1,039,095
was used in operations for the Company. In addition to the net loss, the
Company used $1,550,271 in increasing accounts receivable, partially offset by
an increase of $838,916 in accounts payable and accrued expenses. Both of these
increases are directly attributable to the acquisitions made by the Company
during the period.
The Company used $7,212,674 in investing activities during the period, comprised
primarily of equipment additions of $5,783,309, the acquisition of goodwill of
$1,040,183 and an increase in loans receivable of $388,030. These increases are
also primarily attributable to the acquisitions made by the Company during the
period.
The Company obtained $7,478,477 from financing activities during the period.
Notes payable increased $6,591,658, including three new notes created for the
acquisition of the radiation centers totalling $3,500,000. The balance of the
notes payable were assumed in the Company's acquisitions. The Company also
received an additional $277,300 under a line of credit with a bank. Advances
from affiliates of the Company increased by $609,519 during the period.
The Company has working capital at December 31, 1996 of $1,077,741 as compared
to working capital of $2,905,272 at September 30, 1996. The decrease is
primarily attributable to the Company's rapid expansion during the current
period.
The Company believes that it has sufficient capital resources to support its
operations and begin its proposed surgical center operations during the next
twelve months. The Company believes that its new acquisitions will provide it
with positive cash flow which will assist the Company in its continued expansion
plans. The Company also plans to continue to seek additional financing for its
expansion, on terms which are favorable to the Company.
There are no other known trends, demands, commitments or events that will impact
the Company's results of operations, liquidity and/or capital resources.
-14-
<PAGE>
PART II - Other Information
Item 1 Legal Proceedings
Not applicable.
Item 2 Changes in Securities
Not applicable.
Item 3 Defaults upon Senior Securities
Not applicable.
Item 4 Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5 Other Information
Not applicable.
Item 6 Exhibits and Reports on Form 8-K:
(a) Exhibits:
11.1 Computation of per share earnings
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant
during the quarterly period ended December 31, 1996
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
R.F. Management Corp.
--------------------------
(Registrant)
Date: March 3, 1997 /s/Roger Findlay
--------------------------
Roger Findlay, President
Chief Executive Officer
Date: March 3, 1997 /s/Louis D'Esposito
--------------------------
Louis D'Esposito
Chief Financial Officer
-16-
<PAGE>
Exhibit 11.1
R.F. MANAGEMENT CORP.
COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
For the Three Months Ended
December 31,
1996 1995
---------- ----------
Net loss ($ 220,466) ($ 237,859)
---------- ----------
---------- ----------
Primary
Weighted average shares 3,327,500 3,327,500
Assumed conversions
A warrants and B warrnts - -
---------- ----------
Total weighted average shares outstanding 3,327,500 3,327,500
---------- ----------
---------- ----------
Loss per share amounts ($ 0.07) ($ 0.07)
---------- ----------
---------- ----------
Fully diluted earnings per share have not been presented and are deemed to be
anti-dilutive.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from consolidated
balance sheets, and consolidated statements of income of the Company in the
Company's Form 10-Q and is qualified in its entirety by reference to such
finanacial statements
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 1,898,304 0
<SECURITIES> 0 0
<RECEIVABLES> 1,847,164 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,574,346 0
<PP&E> 6,405,292 0
<DEPRECIATION> 498,109 0
<TOTAL-ASSETS> 13,024,864 0
<CURRENT-LIABILITIES> 3,496,605 0
<BONDS> 5,499,196 0
0 0
0 0
<COMMON> 333 0
<OTHER-SE> 4,123,641 0
<TOTAL-LIABILITY-AND-EQUITY> 13,024,864 0
<SALES> 0 0
<TOTAL-REVENUES> 680,818 121,656
<CGS> 0 0
<TOTAL-COSTS> 970,638 422,062
<OTHER-EXPENSES> 519 (1,663)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 15,099 15,938
<INCOME-PRETAX> (267,462) (254,386)
<INCOME-TAX> (49,213) (16,527)
<INCOME-CONTINUING> (220,466) (237,859)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (220,466) (237,859)
<EPS-PRIMARY> (.07) (.07)
<EPS-DILUTED> 0.0 0.0
</TABLE>
