<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 000-27836
ORTHODONTIX, INC.
-----------------
(Exact Name of Small Business Issuer in Its Charter)
Florida 65-0643773
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2222 Ponce de Leon Blvd., 3rd Floor, Coral Gables, FL 33134
-----------------------------------------------------------
(Address of Principal Executive Offices)
(305) 446-8661
--------------
(Issuer's Telephone Number)
Embassy Acquisition Corp.
1428 Brickell Avenue, Suite 105, Miami, FL 33131
------------------------------------------------
(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 [ ]
As of May 7, 1998, the Company had a total of 5,914,637 shares (the
"Shares") of Common Stock, par value $.0001 per share (the "Common Stock"),
outstanding.
Traditional Small Business Disclosure Format (check one)
Yes [x] No [ ]
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
None.
[This Space Intentionally Left Blank]
(ii)
<PAGE> 3
ORTHODONTIX, INC.
FORM 10-QSB
QUARTER ENDED MARCH 31, 1998
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C> <C>
PART I
Item 1. Financial Statements .......................................... 1
Item 2. Management's Discussion and Analysis or Plan of Operation ..... 1
PART II ................................................................ 3
Item 1. Legal Proceedings ............................................. 3
Item 2. Changes in Securities ......................................... 3
Item 3. Defaults Upon Senior Securities ............................... 3
Item 4. Submission of Matters to Vote of Security Holders ............. 3
Item 5. Other Information ............................................. 4
Item 6. Exhibits and Reports on Form 8-K .............................. 4
SIGNATURES ............................................................. 5
FINANCIAL STATEMENTS ................................................. F-1
</TABLE>
(iii)
<PAGE> 4
PART I
ITEM 1. FINANCIAL STATEMENTS
The unaudited, condensed financial statements included herein,
commencing at page F-1, have been prepared in accordance with the requirements
of Regulation S-B and supplementary financial information included herein, if
any, has been prepared in accordance with Item 310(b) of Regulation S-B and,
therefore, omit or condense certain footnotes and other information normally
included in financial statements prepared in accordance with generally accepted
accounting principles. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation of the
financial information for the interim periods reported have been made. Results
of operations for the three month ended March 31, 1998 are not necessarily
indicative of the results for the year ending December 31, 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Orthodontix, Inc. (f/k/a Embassy Acquisition Corp. (the "Company") was
formed in November 1995 to seek to effect a merger, exchange of capital stock,
asset acquisition or similar business combination (a "Business Combination")
with an acquired business (an "Acquired Business"). In connection with its
initial capitalization, the Company issued an aggregate of 1,160,000 shares of
Common Stock to its officers, directors, and other shareholders for an aggregate
sum of $76,078. On April 2, 1996, the Company's Registration Statement on Form
SB-2 (the "Registration Statement") was declared effective by the U.S.
Securities and Exchange Commission (the "SEC"). Pursuant to the Registration
Statement, the Company, in its initial public offering of securities, offered
and sold 1,380,000 shares of Common Stock, par value $.0001 per share, at a
purchase price of $6.00 per share (the "Offering") and received net proceeds of
approximately $7,052,300 after the payment of all expenses of the Offering (the
"Net Proceeds"). In addition, the Company issued Underwriter Options to purchase
120,000 shares of Common Stock. The Offering was a "blank check" offering.
On May 6, 1997, the Company entered into a Letter of Intent with
Orthodontix Subsidiary, Inc.(f/k/a Orthodontix, Inc. (the "Letter of Intent") a
Florida corporation ("Orthodontix"), regarding a business combination of the
Company or its wholly-owned subsidiary and Orthodontix, Inc. (the
"Transaction"). Orthodontix had conducted no operations as of such date other
than in connection with its agreements in principle to acquire certain assets,
assume certain liabilities, and provide long-term management services to certain
orthodontic practices (the "Practices") in exchange for cash and shares of
common stock (the "Practice Acquisitions").
On August 29, 1997, the Company and Orthodontix amended the terms of
the Letter of Intent to provide that either party could terminate the Letter of
Intent if a definitive agreement had not been executed by October 30, 1997. The
Letter of Intent had previously provided that either
1
<PAGE> 5
party could terminate the Letter of Intent if a definitive agreement regarding
the Transaction had not been executed by August 30, 1997.
As of October 30, 1997, the Company and Orthodontix entered into an
Agreement and Plan of Merger and Reorganization (the "Agreement") regarding the
Transaction. Pursuant to the Agreement, the parties would engage in the
Transaction, which at the closing of the Transaction (the "Closing") would
result in Orthodontix becoming a wholly-owned subsidiary corporation of the
Company in exchange for that number of shares of Common Stock of the Company
(the "Merger Stock") representing approximately 56% of the Company's outstanding
shares of Common Stock after giving effect to the Transaction but without giving
effect to any options or warrants to acquire shares of Common Stock which are
contemplated to be outstanding at the Closing. The actual number of shares to be
issued in connection with the Transaction was subject, in part, to the average
of the closing bid and ask price, as reported on the OTC Electronic Bulletin
Board or similar quotation board of the Company's shares of Common Stock for the
15 trading days immediately preceding the date of the Closing (the "Share
Value").
On April 16, 1998, the Company consummated the Transaction pursuant to
the Agreement. At the closing of the Transaction, (i) Orthodontix became a
wholly-owned subsidiary of the Company in exchange for, among other things,
3,374,637 shares of the Company's Common Stock, representing approximately 57.1%
of the Company's outstanding Common Stock after giving effect to the
Transaction; and (ii) the Company changed its name to "Orthodontix, Inc." The
Company's Registration Statement on Form S-4, as amended (SEC File No.
333-48677), relating to the Transaction is incorporated by reference herein.
Liquidity and Capital Resources/Plan of Operation
As of March 31, 1998 and December 31, 1997, the Company had cash and
cash equivalents of $475,751 and $547,939, respectively, and restricted cash and
cash equivalents of $6,955,040 and $6,878,156, respectively. As of March 31,
1998 and December 31, 1997, the Company had total liabilities of $70,910 and
$88,850, respectively, and common stock subject to redemption of $7,401,103 and
$7,378,467, respectively. 90% of the Net Proceeds ($6,346,800) (the "Escrow
Fund") were delivered to Fiduciary Trust International of the South, as Escrow
Agent, to be held in escrow by such firm, until the earlier of (i) written
notification by the Company of its need for all or substantially all of the
Escrow Fund for the purpose of implementing a Business Combination; or (ii) the
exercise by certain shareholders of the Redemption Offer (as defined in the
Registration Statement). As of March 31, 1998, there was $6,955,040 (at market
value) in the Escrow Fund. The Escrow Fund is currently invested in United
States government-backed short-term securities.
Other than the Escrow Fund, the Company, as of March 31, 1998, had
$475,751 and cash equivalents all of which was received from the initial
capitalization and the Offering (other than
2
<PAGE> 6
interest income earned thereon) (the "Operating Funds"). The Company believes
the Operating Funds will be sufficient for its cash requirements for at least
the next twelve months.
For the three month period ended March 31, 1998, the Company incurred
$49,265 of operating expenses and derived interest income of $83,561 as compared
with the three month period ended March 31, 1997, when the Company incurred
$12,323 of operating expenses and derived interest income of $81,245.
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to, nor is it aware of, any pending
litigation to which it is a party or of which its property is subject.
ITEM 2. CHANGES IN SECURITIES
In connection with the consummation of the Transaction, the Company
issued an aggregate of 3,374,637 shares of the Company's Common Stock (the
"Shares") and granted options to acquire an aggregate of 956,303 shares of
Common Stock (the "Options"), of which options to acquire 537,500 shares are
currently exercisable. The Shares were issued in a transaction registered on the
Company's Registration Statement on Form S-4 declared effective by the
Securities and Exchange Commission on March 26, 1998. The Company relied upon
the exemption in Section 4(2) of the Securities Act of 1933 in connection with
the issuance of the Options.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
During the first quarter ended March 31, 1998, no matters were
submitted to a vote of security holders of the Company through the solicitation
of proxies or otherwise. On April 16, 1998 at the Company's Special
Stockholders' Meeting, the following votes were taken:
To approve and adopt the Transaction and to approve an amendment to the
Articles of Incorporation of the Company to change the name of the Company to
"Orthodontix, Inc."
<TABLE>
<CAPTION>
Votes: FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2,254,200 -- --
</TABLE>
3
<PAGE> 7
To consider and vote upon a proposal to amend and restate Articles of
Incorporation of the Company to provide for an authorized class of Preferred
Stock consisting of 100,000,000 shares, par value $.0001 per share, with rights,
preferences and designations of such shares to be determined by the Board of
Directors of the Company.
<TABLE>
<CAPTION>
Votes: FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2,254,200 -- --
</TABLE>
To consider and vote upon a proposal to approve the 1997 Embassy
Acquisition Corp. Stock Option Plan.
<TABLE>
<CAPTION>
Votes: FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2,254,200 -- --
</TABLE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27. Financial Data Schedule
(b) Reports on Form 8-K.
Current Report on Form 8-K dated April 16, 1998 regarding the
consummation of the Transaction.
4
<PAGE> 8
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.
Date: May 8, 1998 By: /s/ F.W. Mort Guilford
--------------------------------------
F.W. Mort Guilford, President
Date: May 8, 1998 By: /s/ Richard Alfonso
--------------------------------------
Richard Alfonso, Vice President,
Treasurer, Principal Financial Officer
5
<PAGE> 9
FINANCIAL STATEMENTS
F-1
<PAGE> 10
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Balance Sheets as of March 31, 1998 and December 31, 1997...................................F-3
Statements of Operations for the Three Months Ended March 31, 1998 and
March 31, 1997 and for the Period from November 30, 1995
(date of inception) to March 31, 1998.....................................................F-4
Statement of Changes in Stockholders' Equity for the Years Ended
December 31, 1996 and 1997 and for the Three Months Ended March 31,
1998 and For the Period from November 30, 1995
(date of inception) to March 31, 1998.....................................................F-5
Statements of Cash Flows for the Three Months Ended March 31, 1998 and
March 31, 1997 and for the Period from November 30, 1995
(date of inception) to March 31, 1998.....................................................F-6
Notes to Financial Statements...............................................................F-7
</TABLE>
F-2
<PAGE> 11
ORTHODONTIX, INC.
F/K/A EMBASSY ACQUISITION CORP.
(A DEVELOPMENT STAGE CORPORATION)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
MARCH 31, 1998 DECEMBER 31, 1997
--------------------- ----------------------
<S> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 475,751 $ 547,939
RESTRICTED CASH AND CASH EQUIVALENTS 6,955,040 6,878,156
ACCRUED INTEREST RECEIVABLE -- --
---------- ----------
TOTAL CURRENT ASSETS 7,430,791 7,426,095
DEFERRED TAX ASSETS 41,222 41,222
---------- ----------
TOTAL ASSETS $7,472,013 $7,467,317
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCRUED EXPENSES $ 31,815 $ 38,916
INCOME TAXES PAYABLE 39,095 49,934
---------- ----------
TOTAL LIABILITIES 70,910 88,850
COMMON STOCK SUBJECT TO REDEMPTION 7,401,103 7,378,467
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
COMMON STOCK, $.0001 PAR VALUE, 100,000,000 SHARES
AUTHORIZED, 2,540,000 ISSUED AND OUTSTANDING AT DECEMBER
31, 1997 AND 1996 -- --
RETAINED EARNINGS ACCUMULATED DURING THE DEVELOPMENT STAGE -- --
---------- ----------
TOTAL STOCKHOLDERS' EQUITY -- --
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,472,013 $7,467,317
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-3
<PAGE> 12
ORTHODONTIX, INC.
F/K/A EMBASSY ACQUISITION CORP.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1995
MARCH 31, (DATE OF INCEPTION) TO
1998 1997 MARCH 31, 1998
----------- ----------- ----------------------
<S> <C> <C> <C>
OPERATING REVENUES $ -- $ -- $ --
----------- ----------- ---------
OPERATING EXPENSES:
GENERAL AND ADMINISTRATIVE 49,265 12,323 257,705
----------- ----------- ---------
TOTAL OPERATING EXPENSES 49,265 12,323 257,705
----------- ----------- ---------
LOSS FROM OPERATIONS (49,265) (12,323) (257,705)
----------- ----------- ---------
OTHER INCOME:
INTEREST INCOME 83,561 81,245 671,148
----------- ----------- ---------
OTHER INCOME 83,561 81,245 671,148
----------- ----------- ---------
INCOME BEFORE INCOME TAX PROVISION 34,296 68,922 413,443
INCOME TAX PROVISION 11,661 23,501 140,682
----------- ----------- ---------
NET INCOME $ 22,635 $ 45,421 $ 272,761
=========== =========== =========
PER SHARE DATA:
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE:
BASIC $ 0.01 $ 0.02
=========== ===========
DILUTED $ 0.01 $ 0.02
=========== ===========
WEIGHTED AVERAGE SHARES USED IN COMPUTING
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE:
BASIC 2,540,000 2,540,000
=========== ===========
DILUTED 2,553,101 2,540,000
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-4
<PAGE> 13
ORTHODONTIX, INC.
F/K/A EMBASSY ACQUISITION CORP.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997 AND FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND FOR THE PERIOD FROM
NOVEMBER 30, 1995 (DATE OF INCEPTION) TO MARCH 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------
SHARES AMOUNT
----------- ----------
<S> <C> <C>
ISSUANCE OF STOCK TO ORIGINAL STOCKHOLDERS 1,160,000 $ 116
--------- ----------
BALANCE, DECEMBER 31, 1995 1,160,000 116
ISSUANCE OF STOCK TO PUBLIC STOCKHOLDERS IN CONNECTION WITH INITIAL PUBLIC OFFERING 1,380,000 --
NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 -- --
AMOUNTS ACCRUING TO THE BENEFIT OF PUBLIC STOCKHOLDERS -- (116)
--------- ----------
BALANCE, DECEMBER 31, 1996 2,540,000 --
NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1997 -- --
AMOUNTS ACCRUING TO THE BENEFIT OF PUBLIC STOCKHOLDERS -- --
--------- ----------
BALANCE, DECEMBER 31, 1997 2,540,000 --
NET INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1998 -- --
AMOUNTS ACCRUING TO THE BENEFIT OF PUBLIC STOCKHOLDERS -- --
--------- ----------
BALANCE, MARCH 31, 1998 2,540,000 $ --
========= ==========
<CAPTION>
ADDITIONAL
PAID-IN RETAINED
CAPITAL EARNINGS TOTAL
------------ ---------- --------
<S> <C> <C> <C>
ISSUANCE OF STOCK TO ORIGINAL STOCKHOLDERS $ 75,962 $ -- $ 76,078
--------- ---------- --------
BALANCE, DECEMBER 31, 1995 75,962 -- 76,078
ISSUANCE OF STOCK TO PUBLIC STOCKHOLDERS IN CONNECTION WITH INITIAL PUBLIC OFFERING -- -- --
NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 -- 131,681 131,681
AMOUNTS ACCRUING TO THE BENEFIT OF PUBLIC STOCKHOLDERS (75,962) (131,681) (207,759)
--------- -------- --------
BALANCE, DECEMBER 31, 1996 -- -- --
NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1997 -- 118,445 118,445
AMOUNTS ACCRUING TO THE BENEFIT OF PUBLIC STOCKHOLDERS -- (118,445) (118,445)
--------- -------- --------
BALANCE, DECEMBER 31, 1997 -- -- --
NET INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1998 -- 22,635 22,635
AMOUNTS ACCRUING TO THE BENEFIT OF PUBLIC STOCKHOLDERS -- (22,635) (22,635)
--------- -------- --------
BALANCE, MARCH 31, 1998 $ -- $ -- $ --
========= ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-5
<PAGE> 14
ORTHODONTIX, INC.
F/K/A EMBASSY ACQUISITION CORP.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1995
MARCH 31, (DATE OF INCEPTION) TO
1998 1997 MARCH 31, 1998
------------ ------------- ----------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 22,635 $ 45,421 $ 272,761
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH USED IN
OPERATING ACTIVITIES:
DEFERRED INCOME TAXES -- -- (41,222)
NET INTEREST ON RESTRICTED CASH AND CASH EQUIVALENTS (83,561) (81,245) (671,148)
CHANGES IN CERTAIN ASSETS AND LIABILITIES:
ACCRUED INTEREST RECEIVABLE -- 30 1,342
ACCRUED EXPENSES (7,100) (3,404) 31,816
INCOME TAXES PAYABLE (10,839) (40,498) 39,095
--------- --------- -----------
NET CASH USED IN OPERATING ACTIVITIES (78,865) (79,696) (367,356)
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
INCREASE (DECREASE) IN RESTRICTED CASH AND CASH EQUIVALENTS 6,677 8,894 (6,285,234)
--------- --------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 6,677 8,894 (6,285,234)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
NET PROCEEDS FROM ISSUE OF COMMON STOCK -- -- 7,128,341
--------- --------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES -- -- 7,128,341
--------- --------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (72,188) (70,802) 475,751
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 547,939 763,965 --
--------- --------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 475,751 $ 693,163 $ 475,751
========= ========= ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-6
<PAGE> 15
ORTHODONTIX, INC.
F/K/A EMBASSY ACQUISITION CORP.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
(1) BASIS OF PRESENTATION:
The accompanying interim financial statements presented herein do not include
all disclosures provided in the annual financial statements. These unaudited
financial statements should be read in conjunction with the annual financial
statements and the footnotes for the fiscal year ended on December 31, 1997
thereto contained in the Form 10-KSB of Embassy Acquisition Corp. (the
"Company") as filed with the U.S. Securities and Exchange Commission on March
31, 1998.
In the opinion of the Company, the accompanying unaudited financial statements
contain all adjustments, which are of a normal recurring nature, necessary for a
fair presentation of the financial statements. The results of operations for the
three months ending March 31, 1998 are not necessarily indicative of the results
of operation to be expected for the full year.
(2) ORGANIZATION:
On April 9, 1996, the Company sold to the public 1,380,000 shares of its common
stock, including 180,000 shares purchased by the underwriter to cover
overallotments, $0001 par value at a price of $6 per share (the "Offering").
Proceeds totaled $7,053,700, which was net of $1,226,300 in underwriting and
other expenses.
In connection with the Offering, the Company sold to the managing underwriter
(the "Underwriter") and its designees, for total consideration of $10, stock
purchase options ("the "Underwriter Options") to purchase up to 120,000 shares
of the Company's common stock at an exercise price of $7.80 per share. The
Underwriter Options will be exercisable for a period of five years from the
effective date of the Company's Registration Statement. The Company has also
agreed to certain registration rights with respect to the shares underlying the
Underwriter Options.
In accordance with the Offering, 90% of the net proceeds therefrom were placed
in an interest bearing escrow account (the "Escrow Fund") subject to the earlier
of (i)
F-7
<PAGE> 16
ORTHODONTIX, INC.
F/K/A EMBASSY ACQUISITION CORP.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
(2) ORGANIZATION (CONTINUED):
written notification by the Company of its need for all or substantially all of
the Escrow Fund for the purpose of implementing a business combination, (ii) the
exercise by certain shareholders of the Redemption Offer, as defined, or (iii)
the expiration of no more than 30 months from the date of the Offering. Amounts
in the Escrow Fund, including interest earned thereon, are prohibited from being
used for any purpose other that a business combination. Such amounts are
included in restricted cash and cash equivalents at March 31, 1998.
In the event the Company does not successfully effect a business combination
within 24 months (or in certain circumstances 30 months) from the date of the
consummation of the Offering, the Company will submit a proposal to liquidate
the Company. If such proposal is approved, the Company will distribute the
Company's Liquidation Value, as defined, to the Public Stockholders. Since the
Company may be required to refund all available equity to the Public
Shareholders, such amounts have been classified in the accompanying balance
sheet as common stock subject to redemption. Periodic changes in the Liquidation
Value are reflected as adjustments to stockholders' equity.
(3) NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE:
The calculation of basic and diluted net income per share for the three months
ended March 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Net Income $ 22,635 $ 45,421
========= =========
Basic income per share:
Weighted average common shares
outstanding 2,540,000 2,540,000
========= =========
Basic income per share $ 0.01 $ 0.02
========= =========
</TABLE>
F-8
<PAGE> 17
ORTHODONTIX, INC.
F/K/A EMBASSY ACQUISITION CORP.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
(3) NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE (CONTINUED):
<TABLE>
<S> <C> <C>
Diluted income per share:
Weighted average common shares
outstanding 2,540,000 2,540,000
Underwriter warrants 13,101 (1)
--------- ---------
Weighted average common and
potential common shares
outstanding 2,553,101 2,540,000
========= =========
Diluted income per share $ 0.01 $ 0.02
========= =========
</TABLE>
(1) Warrants to purchase 120,000 shares of common stock were not included in
computation of diluted net income per share for 1997 since warrants exercise
price was greater than the average price of the underlying common shares.
(4) SUBSEQUENT EVENT:
On May 6, 1997, the Company (Embassy Acquisition Corp.) entered into a Letter of
Intent with Orthodontix, Inc. ("Orthodontix"), a Florida corporation, regarding
a business combination of the Company or its wholly-owned subsidiary and
Orthodontix (the "Transaction"). Orthodontix had conducted no operations as of
such date other than in connection with its agreements in principle to acquire
certain assets, assume certain liabilities and provide long-term management
services to certain orthodontic practices (the "Practices").
As of October 30, 1997, the Company and Orthodontix entered into an Agreement
and Plan of Merger and Reorganization (the "Agreement") regarding the
Transaction. Pursuant to the Agreement, the parties would engage in the
Transaction, which at the closing of the Transaction (the "Closing") would
result in Orthodontix becoming a wholly-owned subsidiary corporation of the
Company in exchange for that number of shares of Common Stock of the Company
(the "Merger Stock") representing approximately 56% of the Company's outstanding
shares of Common Stock after giving effect to the transaction but without giving
effect to any options or warrants to acquire shares of Common Stock which are
(4) SUBSEQUENT EVENT (CONTINUED):
F-9
<PAGE> 18
ORTHODONTIX, INC.
F/K/A EMBASSY ACQUISITION CORP.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
contemplated to be outstanding at the Closing. The actual number of shares to be
issued in connection with the transaction was subject, in part, to the average
of the closing bid and ask price, as reported on the OTC Electronic Bulletin
Board or similar quotation board of the Company's shares of Common Stock for the
last 15 trading days immediately preceding the date of the Closing (the "Share
Value").
On April 16, 1998, the Company consummated the transaction pursuant to the
Agreement. At the Closing (i) Orthodontix became a wholly-owned subsidiary of
the Company in exchange for, among other things, 3,374,637 shares of the
Company's Common Stock, representing approximately 57.1% of the Company's
outstanding Common Stock after giving effect to the transaction; and (ii) the
Company changed its name to "Orthodontix, Inc."
F-10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ORTHODONTIX, INC. FOR THE THREE MONTHS ENDED MARCH 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
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