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