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 June 30, 2002 [ ] 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. ---------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Florida 65-0643773 ----------------------- ----------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1428 Brickell Avenue, Suite 105 Miami, Florida 33131 ---------------------------------------------------------------- (Address of principal executive offices) (305) 371-4112 ---------------------------------------------------------------- (Issuer's Telephone Number) ---------------------------------------------------------------- (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 August 8, 2002, the number of shares of outstanding Common Stock of the issuer was 2,915,428. Traditional Small Business Disclosure Format (check one) Yes [X] No [ ] Documents Incorporated by reference None
ORTHODONTIX, INC. FORM 10-QSB QUARTER ENDED June 30, 2002 TABLE OF CONTENTS PART I Item 1. Financial Statements 1 Item 2. Management's Discussion and Analysis and 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 3 Item 6. Exhibits and Reports on Form 8-K 3 SIGNATURES 3 INDEX TO FINANCIAL STATEMENTS F-1 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 and six months ended June 30, 2002 are not necessarily indicative of the results of operations expected for the year ending December 31, 2002. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION The following discussion with regard to the Company's financial condition and operating results 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, the Company's inability to consummate an acquisition of an operating business on terms favorable to the Company or, in the event the Company does consummate the transaction contemplated, the Company's ability to successfully manage and operate the combined business. The discussion of the Company's financial condition and plan of operation should be read in conjunction with the Company's unaudited, condensed consolidated financial statements and notes thereto included elsewhere in this Report and the Company's Annual Report on Form 10-KSB filed with the Securities and Exchange Commission. FINANCIAL RESULTS FOR THE QUARTER ENDED JUNE 30, 2002 For the quarter ended June 30, 2002, the Company recorded a net loss of approximately $32,200 or $0.01 per share. Included in the financial results for the quarter ended June 30, 2002, were general and administrative expenses of approximately $36,900 and interest and other income of approximately $4,700. The Company does not expect to generate operating revenues or net income until such time as it effects a business combination with an operating company. However, in the event the Company does consummate a merger or an acquisition of an operating company, there can be no assurances that the combined operation will operate profitably. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2002, the Company had cash and cash equivalents of approximately $836,800 and total liabilities of approximately $61,400. The Company's cash is primarily invested in money market accounts. The Company continues to anticipate that the primary uses of working capital will include general and administrative expenses and costs associated with seeking to locate and consummate a business combination. The Company believes that its operating funds will be sufficient for its cash expenses for at least the next twelve months. PLAN OF OPERATION Management of the Company intends to continue devoting substantially all of its time to consummating a merger or acquisition with an operating business and has evaluated numerous companies and other business combinations since July 2001. The Company has focused its efforts on businesses operating in selected industries including aircraft maintenance and related service companies, health care, pharmaceutical, banking and financial services. In the event the Company locates an acceptable operating business, the Company intends to effect the transaction utilizing any combination of its common stock, cash on hand, or other funding sources that the Company reasonably believes are available. The Company currently has no contractual commitment with regard to effecting an acquisition or other business combination with an operating company. Although the Company believes that it will be successful in consummating a business combination with an operating company, there can be no assurances that the Company will enter into such a transaction in the near term or on terms favorable to the Company, or that other funding sources will be 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 June 30, 2002, no matters were submitted to a vote of security holders of the Company through the solicitation of proxies or otherwise. 2
ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. None. (b) Reports on Form 8-K None. 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: August 8, 2002 By: /s/ Glenn L. Halpryn --------------------------------------- Glenn L. Halpryn Chairman and President (Principal Executive Officer) Dated: August 8, 2002 By: /s/ Alan Jay Weisberg --------------------------------------- Alan Jay Weisberg Acting Chief Financial Officer (Principal Financial and Accounting Officer) 3
INDEX TO FINANCIAL STATEMENTS Pages Condensed Consolidated Balance Sheets as of June 30, 2002 (Unaudited) and December 31, 2001 F-2 Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2002 and 2001 (Unaudited) F-3 Condensed Consolidated Statement of Changes in Stockholders' Equity for the Six Months Ended June 30, 2002 (Unaudited) F-4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001 (Unaudited) F-5 Notes to the Condensed Consolidated Financial Statements F-6 F-1
ORTHODONTIX, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, 2002 DECEMBER 31, ASSETS (UNAUDITED) 2001 --------------- ------------ Current assets: Cash and cash equivalents $ 836,798 $ 915,635 Prepaid expenses and other current assets 47,244 40,493 --------------- ------------ Total current assets 884,042 956,128 Notes and other receivables 55,349 67,056 --------------- ------------ Total assets $ 939,391 $ 1,023,184 =============== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 61,417 $ 77,276 --------------- ------------ Total current liabilities 61,417 77,276 =============== ============ Commitments 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, 2,915,428 shares issued and outstanding at June 30, 2002 and December 31, 2001 292 292 Additional paid-in capital 4,232,821 4,232,821 Accumulated deficit (3,355,139) (3,287,205) --------------- ------------ Total stockholders' equity 877,974 945,908 --------------- ------------ Total liabilities and stockholders' equity $ 939,391 $ 1,023,184 =============== ============ 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 SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------- ------------------------- 2002 2001 2002 2001 --------- --------- --------- --------- General and administrative $ 36,875 $ 65,048 $ 77,498 $ 170,872 Loss on sale of certain assets and liabilities of Founding Practice (Note 4) - - - 94,000 --------- --------- --------- --------- Total expenses 36,875 65,048 77,498 264,872 --------- --------- --------- --------- Net operating loss (36,875) (65,048) (77,498) (264,872) --------- --------- --------- --------- Other income: Interest income 4,537 12,524 9,252 40,084 Other income 162 - 312 - --------- --------- --------- --------- Total other income 4,699 12,524 9,564 40,084 --------- --------- --------- --------- Net loss $ (32,176) $ (52,524) $ (67,934) $(224,788) ========= ========= ========= ======== Loss per common and common equivalent share: Basic $ (0.01) $ (0.02) $ (0.02) $ (0.06) Diluted $ (0.01) (0.02) $ (0.02) $ (0.06) Weighted average number of common and common equivalent shares outstanding - basic and diluted 2,915,428 3,149,591 2,915,428 3,541,581 ========= ========= ========= ========= 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) for the six months ended June 30, 2002 Additional Common Stock Paid-In Accumulated Shares Amounts Capital Deficit Total ------------ ------------- ------------- ------------- ---------------- Balance, December 31, 2001 2,915,428 $ 292 $ 4,232,821 $ (3,287,205) $ 945,908 Net loss for the period - - - (67,934) (67,934) ------------ ------------- ------------- ------------- ---------------- Balance, June 30, 2002 2,915,428 $ 292 $ 4,232,821 $ (3,355,139) $ 877,974 ============ ============= ============== ============= ================ 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) SIX MONTHS ENDED JUNE 30, ------------------------- 2002 2001 --------- --------- Cash flows from operating activities: Net loss $ (67,934) $(224,788) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Loss on sale of doctor practices - 94,000 Changes in assets and liabilities (29,670) 700,412 --------- --------- Net cash (used in) provided by operating activities (97,604) 569,624 --------- --------- Cash flows from investing activities: Payments received from notes receivable 18,617 64,765 Cash used in sales of certain practices assets - (78,935) Proceeds from the sale of fixed assets 150 - --------- --------- Net cash provided by (used in) investing activities 18,767 (14,170) --------- --------- Net (decrease) increase in cash and cash equivalents (78,837) 555,454 Cash and cash equivalents, beginning of period 915,635 390,739 --------- --------- Cash and cash equivalents, end of period $ 836,798 $ 946,193 ========= ========= 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 JUNE 30, 2002 (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 six months ended June 30, 2002 are not necessarily indicative of the results of operations to be expected for the year ended December 31, 2002. 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 March 29, 2002. 2. ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses consist of the following: June 31, 2002 December 31, (Unaudited) 2001 -------------- ------------ Accounts payable $ 4,214 $ 4,214 Other accrued expenses 57,203 73,062 -------------- ------------ $ 61,417 $ 77,276 ============== ============ 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 six months period ended June 30, 2001, 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. There were no potential common equivalents shares for the six months ended June 30, 2002. F-6
ORTHODONTIX, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2002, Continued (UNAUDITED) 4. LOSS ON SALE OF CERTAIN ASSETS AND LIABILITIES OF FOUNDING PRACTICE: 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 of accounts receivable and property and equipment. In addition, the Founding Practice assumed certain liabilities. The carrying value of the practice assets sold less liabilities assumed was $15,065 at the date of transaction. In connection with this transaction, the Company received 96,571 shares of the Company's common stock from the remaining Founding Practice. In addition, in connection with this transaction, the Company paid $115,000 for the return of an additional 345,385 shares of the Company's common stock. The Company also paid $30,000 for legal expenses in connection with the transaction. All shares received from Dr. Grussmark have been cancelled and are no longer outstanding. 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 a member of the Company's Board of Directors. As a result of the transactions described above, the Company recorded a loss in the amount of $94,000 for the six months ended June 30, 2001. F-7