U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934
For the transition period from to
Commission File No. 000-27836
ORTHODONTIX, INC.
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(Exact name of small business issuer as specified in its charters)
Florida 65-0643773
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1428 Brickell Avenue, Suite 105
Miami, Florida 33131
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(Address of principal executive offices)
(305) 371-4112
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(Issuer's Telephone Number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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 [ ].
On May 11, 2001, the number of shares of outstanding Common Stock of
the issuer was 3,357,384.
Traditional Small Business Disclosure Format (check one) Yes [X] No [ ]
Documents Incorporated by reference None
ORTHODONTIX, INC.
FORM 10-QSB
QUARTER ENDED MARCH 31, 2001
TABLE OF CONTENTS
PART I
Item 1. Financial Information 1
Item 2. Management's Plan of Operation 1
PART II
Item 1. Legal Proceedings 2
Item 2. Changes in Securities 2
Item 3. Defaults upon Senior Securities 2
Item 4. Submission of Matters to a Vote of Security Holders 2
Item 5. Other Information 2
Item 6. Exhibits and Reports on Form 8-K 2
SIGNATURES 3
INDEX TO FINANCIAL STATEMENTS F-1
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited, condensed consolidated financial statements included
herein, commencing at page F-1, have been prepared in accordance with the
requirements of Regulation S-B and, therefore, omit or condense certain
footnotes and other information normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America. In the opinion of management, all adjustments
(including all normal recurring adjustments) necessary for a fair presentation
of the financial information for the interim periods reported have been made.
Results of operations for the three months ended March 31, 2001 are not
necessarily indicative of the results of operations expected for the year ending
December 31, 2001.
ITEM 2. MANAGEMENT'S PLAN OF OPERATION
The following discussion contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are based on current plans and expectations of Orthodontix,
Inc. (the "Company") and involve risks and uncertainties that could cause actual
future activities and results of operations to be materially different from
those set forth in the forward-looking statements. Important factors that could
cause actual results to differ include, among others, risks relating to the
ability of the Company to locate and consummate an acquisition of an operating
business.
The discussion of the plan of operation should be read in conjunction
with the Company's condensed consolidated financial statements and notes thereto
included elsewhere in this Report.
Cessation of the Orthodontic Practice Management Business
As of June 6, 2000, the Company had terminated its affiliation with all
orthodontic practices except for the practice of Dr. Stephen Grussmark. In
connection with the termination of its affiliation with the orthodontic
practices, the Company sold orthodontic practice assets back to the practices,
terminated its management relationship with such practices, and received in the
aggregate $1,341,285 in cash, $691,300 in notes receivable and 1,948,150 shares
of the Company's Common Stock.
On May 14, 2001, the Company terminated its affiliation with the
orthodontic practice of Dr. Grussmark and sold back to Dr. Grussmark his
practice assets in exchange for 96,571 shares of the Company's common stock held
by Dr. Grussmark. Dr. Grussmark returned to the Company an additional 345,385
shares of common stock for a cash payment of $115,000 and payment of $30,000 in
legal fees incurred in connection with these transactions. Dr. Grussmark
resigned his positions as Chief Executive Officer and as a member of the Board
of Directors of the Company. The Company and Dr. Grussmark also exchanged mutual
releases.
The Company has not provided any management services to orthodontic
practices since November 1999 and, accordingly, has generated no fee revenue
since November 1999.
With the cessation of the orthodontic practice management business, the
Company intends to effect a business combination with an operating business in
an industry unrelated to orthodontic practice management. There can be no
assurance that the Company's efforts to effect such a business combination will
be successful.
1
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2001, the Company had net working capital of
approximately $1,085,000 consisting primarily of cash and cash equivalents of
$336,000, short-term investments in money market accounts and certificates of
deposit of $1,238,000 and total liabilities of $681,000. The Company received
interest income relating to its working capital during the quarter ended March
31, 2001 of approximately $27,600.
At present, the Company expects that the primary use of working capital
will be to fund the general and administrative expenses of the Company. The
Company believes that its current level of funds will be sufficient for its cash
expenses for at least the next twelve months. However, in the event that the
Company locates an operating business with which to effect a business
combination, the Company may require additional capital beyond the current level
of funds available.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended March 31, 2001, no matters were submitted to a
vote of security holders of the Company through the solicitation of proxies or
otherwise.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K
None.
2
SIGNATURES
In accordance with 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.
ORTHODONTIX, INC.
(Registrant)
Dated: May 17, 2001 By: /s/ Glenn L. Halpryn
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Glenn L. Halpryn
Chairman and President (Principal Executive Officer)
Dated: May 17, 2001 By: /s/ Alan Jay Weisberg
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Alan Jay Weisberg
Acting Chief Financial Officer
(Principal Financial and Accounting Officer)
3
INDEX TO FINANCIAL STATEMENTS
Pages
Condensed Consolidated Balance Sheets as of March 31, 2001 (Unaudited)
and December 31, 2000 F-2
Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 2001 and 2000 (Unaudited) F-3
Condensed Consolidated Statement of Changes in Stockholders' Equity for
the Three Months Ended March 31, 2001 (Unaudited) F-4
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2001 and 2000 (Unaudited) F-5
Notes to the Condensed Consolidated Financial Statements F-6
F-1
ORTHODONTIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2001 DECEMBER 31,
(UNAUDITED) 2000
-------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 336,174 $ 390,739
Investment 1,237,534 1,217,218
Prepaid expenses and other current assets 191,913 191,178
----------- -----------
Total current assets 1,765,621 1,799,135
Advances to Founding Practices, net of allowance of $117,000 at
December 31, 2000 -- 5,747
Assets held for sale, net -- 9,318
Notes and other receivables 12,618 16,411
Deferred tax asset 73,825 73,825
----------- -----------
Total assets $ 1,852,064 $ 1,904,436
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 606,675 $ 486,783
Deferred tax liability 73,825 73,825
----------- -----------
Total current liabilities 680,500 560,608
----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.0001 par value, 100,000,000 shares authorized,
no shares issued and outstanding -- --
Common stock, $.0001 par value, 100,000,000 shares authorized,
3,933,571 shares issued and outstanding at March 31, 2001
and December 31, 2000 393 393
Additional paid-in capital 4,409,502 4,409,502
Accumulated deficit (3,130,296) (2,958,032)
Less: common stock receivable (108,035) (108,035)
----------- -----------
Total stockholders' equity 1,171,564 1,343,828
----------- -----------
Total liabilities and stockholders' equity $ 1,852,064 $ 1,904,436
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-2
ORTHODONTIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-----------------------
2001 2000
--------- ---------
Management service fee revenue $ -- $ --
--------- ---------
Direct practice expenses -- --
General and administrative 105,824 68,180
Loss on sale of certain assets and liabilities
of Founding Practice (Note 5) 94,000 --
--------- ---------
Total expenses 199,824 68,180
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Net operating loss (199,824) (68,180)
--------- ---------
Other income:
Interest income 27,560 26,794
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Total other income 27,560 26,794
--------- ---------
Net loss $(172,264) $ (41,386)
========= =========
Loss per common and common equivalent share:
Basic $ (0.04) $ (0.01)
========= =========
Diluted $ (0.04) $ (0.01)
========= =========
Weighted average number of common and common
equivalent shares outstanding -
basic and diluted 3,933,571 4,183,112
========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-3
ORTHODONTIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
(UNAUDITED)
Additional Total
Common Stock Paid-In Accumulated Common Stock Stockholders'
Shares Amounts Capital Deficit Receivable Equity
--------- ------- ---------- ----------- ------------ -------------
Balance, December 31, 2000 3,933,571 $ 393 $4,409,502 $(2,958,032) $ (108,035) $ 1,343,828
Net loss for the period -- -- -- (172,264) -- (172,264)
--------- ------- ---------- ----------- ---------- -----------
Balance, March 31, 2001 3,933,571 $ 393 $4,409,502 $(3,130,296) $ (108,035) $ 1,171,564
========= ======= ========== =========== ========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-4
ORTHODONTIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------
2001 2000
--------- ---------
Cash flows from operating activities:
Net loss $(172,264) $ (41,386)
Adjustments to reconcile net loss to net cash
used in operating activities:
Noncash compensation expense -- 17,262
Changes in assets and liabilities 86,579 (59,082)
--------- ---------
Net cash used in operating activities (85,685) (83,206)
--------- ---------
Cash flows from investing activities:
Payment of notes receivable 31,120 51,289
--------- ---------
Net cash provided by investing activities 31,120 51,289
--------- ---------
Net decrease in cash and cash equivalents (54,565) (31,917)
Cash and cash equivalents, beginning of period 390,739 407,474
--------- ---------
Cash and cash equivalents, end of period $ 336,174 $ 375,557
========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-5
ORTHODONTIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements of
Orthodontix, Inc. ("Orthodontix" or the "Company") presented herein do
not include all disclosures required by accounting principles generally
accepted in the United States of America for a complete set of financial
statements. In the opinion of management, these financial statements
include all adjustments, including normal recurring adjustments,
necessary for a fair presentation of the results of interim periods.
The results of operations for the three months ended March 31, 2001 are
not necessarily indicative of the results of operations to be expected
for the year ended December 31, 2001. The unaudited condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-KSB as filed with the Securities and
Exchange Commission on April 14, 2001.
2. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following:
March 31, 2001 December 31,
(Unaudited) 2000
-------------- ------------
Accounts payable $ 82,953 $ 83,884
Accrued expenses 523,722 402,899
---------- ----------
$ 606,675 $ 486,783
========== ==========
3. EARNINGS PER SHARE:
Basic earnings per share is calculated by dividing net income or loss by
the weighted average number of common shares outstanding during the
period. Diluted earnings per share is calculated by dividing net income
or loss by the weighted average number of common shares and potential
common equivalent shares outstanding during the period. Potential common
shares consist of the dilutive effect of outstanding options calculated
using the treasury stock method. For the three month periods ended March
31, 2001 and 2000, the potential common shares were antidilutive; thus
there was no difference in the basic net income per share and the diluted
net income per share.
F-6
ORTHODONTIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001, Continued
(UNAUDITED)
4. ASSETS HELD FOR SALE AND TERMINATION OF AFFILIATION WITH CERTAIN FOUNDING
PRACTICES:
During the three months ended March 31, 2001, the Company did not sell
any practice assets. However, during the three months ended March 31,
2000, the Company sold certain practice assets, consisting principally of
accounts receivable and property and equipment, and certain liabilities
to two of the Founding Practices. As a result of these transactions, the
Company received 134,932 shares of the Company's common stock which was
valued at $16,867. Such consideration received includes amounts repaid to
the Company by the Founding Practices related to amounts outstanding that
previously had been classified as Advances to Founding Practices.
The assets sold or settled as a result of the transactions during the
three months ended March 31, 2000 described above, were as follows
(unaudited):
Billed and unbilled patient receivables, net $ 35,921
Property and equipment 13,670
Other assets and liabilities, net (32,724)
---------
$ 16,867
=========
In addition, in connection with these transactions, certain orthodontists
who were affiliated with the Founding Practices and served on the
Company's Advisory Board resigned such positions and their vested options
were returned to the Company and their unvested options were cancelled.
As a result of these transactions, the Company recorded a reduction in
deferred compensation of $13,926 for the three months ended March 31,
2000. There were no such transactions for the three months ended March
31, 2001.
In 1999, in connection with the discussions to terminate the affiliation
with the remaining Founding Practices, the Company entered into
standstill arrangements with these Founding Practices. Therefore, the
Company classified certain practice assets and liabilities as assets held
for sale at December 31, 2000 as follows:
F-7
ORTHODONTIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001, Continued
(UNAUDITED)
4. ASSETS HELD FOR SALE AND TERMINATION OF AFFILIATION WITH CERTAIN FOUNDING
PRACTICES, Continued:
Billed and unbilled patient receivables, net $ 50,655
Property and equipment, net 8,530
Other assets and liabilities, net (19,867)
---------
39,318
Less: asset impairment charge (30,000)
---------
Assets held for sale $ 9,318
=========
As of March 31, 2001, the Company continues discussions with the one
remaining Founding Practice (see Note 5).
5. SUBSEQUENT EVENT:
Subsequent to March 31, 2001, the Company's Chairman of the Board of
Directors and the Company's President and Chief Operating Officer, who
also was a member of the Board of Directors, resigned their positions. In
connection with their resignations and the execution of mutual releases
with the Company, these individuals returned shares of the Company's
common stock and the Company cancelled stock options to acquire 350,000
shares of common stock with exercise prices ranging from $8.00 to $9.11.
As a result of this transaction, the Company recorded other income and a
corresponding common stock receivable at December 31, 2000 in the amount
of $95,246.
The Company also settled certain outstanding liabilities to companies
that had provided professional services to the Company. In connection
with the settlement with certain professional services firms that had
provided services to the Company, 68,207 shares of the Company's common
stock were returned to the Company and the Company cancelled stock
options to acquire 47,500 shares of common stock with an exercise price
of $9.11. As a result of this transaction, the Company recorded a
reduction of general and administrative expenses and a corresponding
common stock receivable at December 31, 2000 in the amount of $12,789
related to the value of the common stock returned to the Company. In
addition, the Company recorded a reduction of $58,417 to general and
administrative expenses for the year ended December 31, 2000 related to
amounts previously expensed by the Company with respect to professional
services.
On May 14, 2001, the Company terminated its affiliation with the one
remaining Founding Practice owned by Dr. Stephen M. Grussmark and sold
certain practice assets, consisting principally of accounts receivable
and property and equipment, and certain liabilities to the remaining
Founding Practice. In connection with this transaction, the Company
received 96,571 shares of the Company's common stock from the remaining
Founding Practice.
F-8
ORTHODONTIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001, Continued
(UNAUDITED)
5. SUBSEQUENT EVENT, Continued:
In addition, in connection with this transaction, the Company paid
$115,000 in cash to Dr. Grussmark as consideration for the return of
345,385 shares of the Company's common stock to the Company.
The Company also paid $30,000 for legal expenses incurred by the
remaining Founding Practice and Dr. Grussmark, individually, in
connection with the transaction.
In connection with these transactions, the Company and Dr. Grussmark
executed certain mutual releases and Dr. Grussmark resigned as the
Company's Chief Executive Officer and as a member of the Company's Board
of Directors.
As a result of the transactions, the Company recorded a loss in the
amount of $94,000 at March 31,2001 in connection with the sale of the
certain assets and satisfaction of certain liabilities and other matters
described above.
6. CONTINGENCIES:
The Company is exposed to various asserted and unasserted claims in its
normal course of business. In the opinion of management, the resolution
of these matters will not have a material effect on the Company's
financial position, results of operations or cash flows.
F-9