ORTHALLIANCE INC, S-1/A, 1997-07-03

ORTHALLIANCE INC
S-1/A, 1997-07-03
MANAGEMENT SERVICES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 1997.

REGISTRATION NO. 333-27143
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------

PRE-EFFECTIVE AMENDMENT NO. 2 TO

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
ORTHALLIANCE, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 8741 95-4632134
(State or other jurisdiction (Primary Standard Industrial (I.R.S. employer
of incorporation or organization) Classification Code Number) identification no.)
</TABLE>

23848 HAWTHORNE BOULEVARD, SUITE 200, TORRANCE, CALIFORNIA 90505
(310) 791-5656
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
SAM WESTOVER
CHIEF EXECUTIVE OFFICER
ORTHALLIANCE, INC.
23848 HAWTHORNE BOULEVARD, SUITE 200
TORRANCE, CALIFORNIA 90505
(310) 791-5656
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
COPIES OF ALL CORRESPONDENCE TO:

<TABLE>
<C> <C>
PAUL A. QUIROS, ESQ. F. MITCHELL WALKER, ESQ.
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P. BASS, BERRY & SIMS PLC
FIRST UNION PLAZA, SUITE 1400 2700 FIRST AMERICAN CENTER
999 PEACHTREE STREET, N.E. NASHVILLE, TENNESSEE 37238
ATLANTA, GEORGIA 30309 (615) 742-6200
(404) 817-6000 (615) 742-6293 (FAX)
(404) 817-6050 (FAX)
</TABLE>

---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
====================================================================================================================
PROPOSED MAXIMUM
AMOUNT TO BE AGGREGATE OFFERING AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED(1) PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock $.001 par value...................... $35,880,000 $10,873(3)
==================================================================================================================
</TABLE>

(1) Pursuant to Rule 457(o), the aggregate number of shares need not be
included.

(2) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(o).

(3) $9,637 previously paid.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED JULY 3, 1997

PROSPECTUS

2,600,000 SHARES

LOGO ORTHALLIANCE

CLASS A COMMON STOCK
---------------------

The 2,600,000 shares of Class A Common Stock ("Common Stock") offered
hereby are being sold by OrthAlliance, Inc. (the "Company" or "OrthAlliance").
Prior to this offering (the "Offering"), there has been no public market for the
Common Stock. It is currently anticipated that the initial public offering price
will be between $10.00 and $12.00 per share. See "Underwriting" for information
relating to the factors to be considered in determining the initial public
offering price. The Common Stock and the Company's Class B Common Stock are each
entitled to one vote per share and will vote as a single class on all matters
presented to the Company's stockholders. The Company will make application for
the Common Stock to be listed for trading on The Nasdaq Stock Market's National
Market (the "Nasdaq National Market") under the symbol "ORAL."

The Company has filed a shelf registration statement with the Securities
and Exchange Commission relating to the separate offering of up to 2,500,000
shares of Common Stock to be used in connection with future affiliations with
Allied Practices. See "Business -- Growth Strategy."

---------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=============================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
- -------------------------------------------------------------------------------------------------------------
Total(3).......................... $ $ $
=============================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting estimated expenses of $1.7 million payable by the Company.

(3) The Company has granted the Underwriters an over-allotment option,
exercisable for 30 days from the date of this Prospectus, to purchase up to
390,000 additional shares of Common Stock on the same terms and conditions
as set forth above. If all such shares are purchased by the Underwriters,
the total Price to Public will be $ , the total Underwriting
Discount will be $ and the total Proceeds to Company will be
$ . See "Underwriting."

---------------------

The shares of Common Stock are offered subject to receipt and acceptance by
the several Underwriters, to prior sale and to the Underwriters' right to reject
any order in whole or in part and to withdraw, cancel or modify the offer
without notice. It is expected that certificates for the shares of Common Stock
will be available for delivery on or about , 1997.
---------------------

J.C.Bradford & Co.

, 1997
<PAGE> 3

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZATION AND SHORT-COVERING TRANSACTIONS. FOR A DESCRIPTION OF
THESE ACTIVITIES SEE "UNDERWRITING."
---------------------

2
<PAGE> 4

PROSPECTUS SUMMARY

Simultaneously with and as a condition to the closing of this Offering,
OrthAlliance will acquire certain operating assets of 58 separate orthodontic
practices (collectively, the "Founding Practices") in exchange for cash and
shares of Common Stock and will enter into long-term management or consulting
services agreements with the Founding Practices (the "Acquisitions"). The number
of shares of Common Stock issued in connection with the Acquisitions will depend
on the initial public offering price of the Common Stock.

As a result of the merger of Premier Orthodontic Group, Inc. ("Premier")
and US Orthodontic Care, Inc. ("USOC") with and into OrthAlliance, effective
prior to the closing of the Offering (the "Merger"), OrthAlliance succeeds to
the rights of Premier and USOC under agreements with the Founding Practices. See
"Certain Transactions." The term "Allied Practice" includes each of the Founding
Practices and any orthodontic practice with which the Company enters into
long-term management or consulting services agreements in the future. Unless
otherwise indicated by the context, references herein to practice management
services, agreements or rights include consulting and other similar arrangements
which the Company will enter into with certain Allied Practices to comply with
applicable regulations regarding practice management in certain states. As used
herein, the term "Allied Orthodontists" refers to orthodontists affiliated with
an Allied Practice. The Company has conducted no operations and generated no
revenues to date.

THE COMPANY

OrthAlliance was recently organized to create a leading provider of
practice management services to orthodontic practices in the United States. The
Company will manage the business aspects of the Allied Practices (subject to
applicable state laws), thereby allowing Allied Orthodontists to focus on
delivering cost-effective, high quality patient care, and will provide capital
for the development and growth of such practices. The Company will affiliate
with Allied Practices pursuant to long-term management services agreements and
will generate revenues by providing management, marketing and development
services to Allied Practices. The Company intends to aggressively expand its
network of Allied Practices by acquiring certain operating assets of and
entering into long-term management services agreements with additional practices
throughout the United States (herein sometimes referred to as the "affiliation"
with other practices.)

The Company has entered into definitive agreements, to be consummated
simultaneously with the closing of this Offering, to acquire certain operating
assets of, or the stock of entities holding certain operating assets of, and
enter into long-term management services agreements with 58 Founding Practices,
which include 86 orthodontists operating 154 offices located in 17 states. See
"Business -- Agreements with Allied Practices and Allied Orthodontists."
Management believes that the Company has distinguished itself from its
competitors by affiliating with the Founding Practices, which management
believes are leading practices in their markets. The Founding Practices were
selected based on a variety of factors, including size, profitability,
historical growth and reputation for high quality care, both among local
consumers of orthodontic services and within the orthodontic services industry.
For the year ended December 31, 1996, the Founding Practices had average
adjusted patient revenues of approximately $1,032,000, compared to average
practice revenues for the orthodontic industry as a whole, estimated by the
Company to be approximately $545,000.

The United States orthodontic industry is highly fragmented, with over 90%
of the approximately 9,000 practicing orthodontists in the United States
operating as sole practitioners. Annual gross revenues for the industry are
approximately $3.5 billion, which have grown at an average rate of 7.5% per year
in recent years (as derived from the 1992 Journal of Clinical Orthodontists
Orthodontic Practice Study and the 1995 JCO study (as hereinafter defined)).
Management believes that less than 2% of the orthodontists currently practicing
in the United States are affiliated with publicly held practice management
companies.

3
<PAGE> 5

Management believes that the Company's operating strategy will enable
Allied Practices to compete more effectively with and realize greater
profitability than traditional orthodontic practices, thereby inducing
additional orthodontists to affiliate with the Company. Key elements of the
Company's operating strategy are:

- Emphasizing quality patient care by (i) relieving the Allied
Orthodontists from various time-consuming administrative
responsibilities, (ii) affiliating with high quality practices
conducted by orthodontists who have completed accredited graduate
orthodontic training programs, and (iii) recommending practice
standards, procedures and protocols under the direction of the
Company's board of advisors, composed of the Allied Orthodontists in
the Founding Practices;

- Capitalizing on the best demonstrated practices of Allied
Orthodontists through identification and promotion of successful
practice-level strategies including, but not limited to, treatment,
delivery of patient care, marketing, financing and cost control
strategies;

- Achieving operating efficiencies and economies of scale through (i)
the implementation of national purchasing discounts for professional
and clerical supplies and equipment, (ii) the reduction of certain
expenses common to all Allied Practices, including, but not limited
to, insurance and employee benefits, and (iii) work flow and patient
flow enhancements and programs; and

- Increasing market penetration and expansion through (i) local
marketing programs, supported by demographic and economic analysis,
and (ii) patient payment plans designed to enhance the affordability
of orthodontic services.

The Company also intends to implement an aggressive growth strategy focused
on (i) affiliating with additional orthodontic practices that fit the
OrthAlliance model of high quality and strong financial performance; (ii)
expanding Allied Practices by providing capital, support and consultation for
satellite office expansion; (iii) assisting the Allied Practices with their
internal growth by increasing gross revenues through increased patient volume;
and (iv) expanding profit margins through operational efficiencies.

THE OFFERING

Common Stock offered by the
Company.................. 2,600,000 shares

Common Stock to be
outstanding after the
Offering................. 11,416,618 shares(1)

Class B Common Stock to be
outstanding after the
Offering................. 250,000 shares

Use of Proceeds............ To fund the cash portion of the Acquisitions of the
Founding Practices; to repay certain indebtedness;
and for general corporate purposes, which are
expected to include future acquisitions and the
development of satellite offices. See "Use of
Proceeds."

Class B Common Stock....... In connection with the Merger, 250,000 shares of
Class B Common Stock will be issued to the
stockholders of USOC and Premier as part of the
Merger consideration. Holders of Class B Common
Stock are entitled to one vote per share and such
shares shall be voted with the Common Stock on all
matters presented to the holders of Common Stock.
The shares of Class B Common Stock are not
transferable, except to the holder's spouse,
parents, siblings, lineal descendants, a trust for
the benefit of any such person or as determined by
will or the laws of descent. See "Description of
Capital Stock."

4
<PAGE> 6

Conversion of Class B
Common Stock............... Each share of Class B Common Stock shall
automatically convert into Common Stock (i) at the
ratio of six shares of Common Stock for each share
of Class B Common Stock upon the attainment of
certain average closing price calculations for the
Common Stock, as determined on the Nasdaq National
Market, or other over-the-counter market or an
exchange, as then applicable (the "Conversion
Prices"), or (ii) if not converted pursuant to
subparagraph (i), at the ratio of one share of
Common Stock for each share of Class B Common Stock
upon the sixth anniversary of the date of this
Prospectus. The maximum number of shares of Common
Stock that may be issued upon conversion of the
Class B Common Stock is 1,500,000. The shares of
Class B Common Stock convertible pursuant to
subparagraph (i) above will convert in five
increments of up to 50,000 shares of Class B Common
Stock (20% of the total number of shares of Class B
Common Stock issued) upon the attainment of each of
the five specified Conversion Prices. At each
automatic conversion, each holder of Class B Common
Stock will be deemed to have converted a pro rata
share of such Class B Common Stock then
outstanding. The Conversion Prices shall be
established at premiums to the initial public
offering price. Each Conversion Price will be
deemed to have been achieved at the end of the
trading day on which the average closing price of
the Common Stock for the preceding 20 consecutive
trading days exceeds such Conversion Price. The
closing prices will be those reported on the Nasdaq
National Market, or such other reported
over-the-counter market or an exchange, as
applicable. The initial Conversion Price is equal
to 150% of the price to public in the Offering, and
each of the subsequent Conversion Prices is equal
to 120% of the preceding Conversion Price.
Therefore, if the price to public in the Offering
is the mid-point of the estimated initial public
offering price range ($11.00), the five Conversion
Prices at which up to 50,000 shares of the
outstanding Class B Common Stock shall be
automatically converted to Common Stock are $16.50,
$19.80, $23.76, $28.51 and $34.22, respectively. In
the event that there are any shares of Class B
Common Stock outstanding on the sixth anniversary
of the date of this Prospectus, all such shares
shall automatically convert into an equal number of
shares of Common Stock. The holders of the Class B
Common Stock may convert each share of Class B
Common Stock into one share of Common Stock at any
time after 180 days from the date of this
Prospectus but on or before the sixth anniversary
date of this Prospectus.

Nasdaq Symbol.............. ORAL
- ---------------

(1) Includes (i) 2,250,000 shares of Common Stock issued by OrthAlliance in
connection with the Merger, and (ii) 6,566,618 shares of Common Stock to be
issued in connection with the Acquisitions, but excludes 602,500 shares of
Common Stock issuable pursuant to the grant of options for the purchase of
Common Stock under the Company's stock option plans or upon the exercise of
outstanding warrants to purchase shares of Common Stock. The actual number
of shares issued in connection with the Acquisitions will be determined by
dividing $72.3 million by the initial public offering price. See "The
Company," "Management -- Stock Plans," "Certain Transactions" and
"Description of Capital Stock -- Warrants."

5
<PAGE> 7

The preceding summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information in
this Prospectus assumes (i) the Underwriters' over-allotment option is not
exercised, (ii) the consummation of the Merger and the Acquisitions and (iii) an
initial Offering price of $11.00 per share (the mid-point of the estimated
initial public offering price range). This Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ materially from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in "Risk Factors."

Unless otherwise indicated, the industry information used in this
Prospectus is derived from the 1995 Journal of Clinical Orthodontists
Orthodontic Practice Study ("1995 JCO Study") and relates to 1994 unless
otherwise indicated. Comparable information for 1995 and 1996 is not expected to
be available until the release of the 1997 JCO Study in late 1997 or early 1998.
The information compiled in the 1995 JCO Study relates to orthodontists who have
completed accredited graduate orthodontic training programs and does not include
general dentists who also perform certain orthodontic services.

6
<PAGE> 8

SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The summary pro forma combined financial information is based upon the
historical combined financial statements of the Founding Practices and the
historical financial statements of the Company and gives effect to the following
as of January 1, 1996 (with respect to the statement of operations data for the
year ended December 31, 1996 and the three months ended March 31, 1997, and as
of March 31, 1997) (with respect to the balance sheet data): (i) the Merger;
(ii) the Acquisitions; and (iii) a provision for federal and state income taxes
as if the Company had been a C corporation during the periods presented. This
information is derived from the unaudited pro forma combined financial
statements of the Company and the related notes thereto included elsewhere in
this Prospectus. The unaudited pro forma financial information does not purport
to represent the financial position or the operating results that would have
been achieved had the Merger and Acquisitions occurred on the dates indicated or
project the financial position or results of operations for any future date or
period.

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED
1996 MARCH 31, 1997
------------- --------------
PRO FORMA(1) PRO FORMA(1)
------------- --------------
<S> <C> <C>
PRO FORMA STATEMENT OF OPERATIONS DATA(2):
Net revenue(3).............................................. $ 45,637 $ 11,904
Expenses:
Salaries, wages and benefits.............................. 16,912 4,754
Orthodontic supplies and lab.............................. 5,938 1,667
Rent...................................................... 4,134 1,071
Advertising and marketing................................. 1,421 334
General and administrative................................ 9,312 2,368
Depreciation and amortization............................. 886 170
---------- ----------
Total expenses.................................... 38,603 10,364
---------- ----------
Operating income.................................. 7,034 1,540
Interest income (expense), net.............................. -- 11
Gain on sale of assets...................................... 122 5
---------- ----------
Income before provision for income taxes.................... 7,156 1,556
Provision for income taxes........................ 2,719 591
---------- ----------
Net income........................................ $ 4,437 $ 965
========== ==========
Net income per share.............................. $ 0.38 $ 0.08
========== ==========
Number of shares used in net income per share
calculation(1)............................................ 11,716,573 11,716,573
========== ==========
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1997(1)
-----------------------------
PRO FORMA
PRO FORMA(2) AS ADJUSTED(4)
------------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 4,651 $ 14,738
Total assets................................................ 13,229 21,170
Long-term debt, less current portion........................ 1,000 0
Stockholders' equity........................................ 6,507 17,593
</TABLE>

- ---------------
(1) See unaudited pro forma combined financial statements and the notes thereto
included elsewhere in this Prospectus for a discussion of the assumptions
made and adjustments applied in preparation of this information.
(2) There is no historical presentation for OrthAlliance as it incurred no
expense and generated no revenues for the year ended December 31, 1996 or
the three months ended March 31, 1997.

(3) Represents pro forma revenue calculated by applying the terms of the
long-term management services to the historical operating results of the
individual Founding Practices. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview" and
"Business -- Agreements with Allied Practices and Allied Orthodontists."

(4) As adjusted gives effect to the sale of 2,600,000 shares of Common Stock
offered by the Company at an assumed initial public offering price of $11.00
per share (the mid-point of the estimated initial public offering price
range) and the application of the estimated net proceeds therefrom. See "Use
of Proceeds."

7
<PAGE> 9

RISK FACTORS

An investment in the shares of Common Stock offered hereby involves a high
degree of risk. In addition to the other information contained in this
Prospectus, the following risk factors should be considered carefully in
evaluating the Company and its business before purchasing shares of Common Stock
offered hereby. This Prospectus contains forward-looking statements that involve
risks and uncertainties. Actual results could differ from those discussed in the
forward-looking statements as a result of certain factors, including those set
forth below and elsewhere in this Prospectus.

Absence of Combined Operating History. OrthAlliance was founded in October
1996 and has conducted no operations and generated no revenues to date. As a
result of the Merger, OrthAlliance succeeds to the rights of Premier and USOC
under agreements to acquire certain operating assets of and enter into long-term
management services agreements with the Founding Practices. The Acquisitions
involve the assumption of certain liabilities, some or all of which could have a
material adverse effect on the Company's business, financial condition and
results of operations. See Unaudited Pro Forma Combined Financial Statements and
the notes thereto and "Certain Transactions." The Founding Practices have been
operating as separate, independent entities and there can be no assurance that
management will be able to operate the Company successfully, manage the Founding
Practices' operations, achieve any cost savings as a result of the Acquisitions
or institute the necessary systems and procedures to manage the Company on a
profitable basis. The combined historical financial results of the Founding
Practices cover periods when the Founding Practices were not under common
control or management and, therefore, may not be indicative of the Company's
future financial or operating results. The Company may experience delays,
complications and expenses in implementing, integrating and operating such
systems, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
management group has been assembled recently and there can be no assurance that
such persons will be able to effectively oversee the implementation of the
Company's operating, growth, acquisition and business strategies. The inability
of the Company to successfully integrate or operate the Founding Practices could
have a material adverse effect on the Company's business, financial condition
and results of operations and make it unlikely that the Company's acquisition
program will be successful. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Management" and "Certain
Transactions."

Dependence on Allied Orthodontists. The Company receives fees for services
provided to Allied Practices under management services agreements, but does not
employ orthodontists or control or own the practices of its Allied
Orthodontists. The Company's revenue is dependent on revenue generated by the
Allied Practices, which in turn is largely dependent on the efforts of the
Allied Orthodontists and, therefore, the performance of Allied Orthodontists is
essential to the Company's success. The long-term management services agreements
with Allied Practices have 20 year terms, subject to prior termination by either
party for, among other things, a material default by the other party or a change
of control (as defined therein) applicable to the Company. Any material loss of
revenue by the Company's Allied Orthodontists or termination of such long-term
management services agreements could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Agreements with Allied Practices and Allied Orthodontists."

Risks Related to Additional Affiliations and Growth Strategy. One of the
Company's primary business strategies is to increase revenue and expand the
markets it serves beyond the Founding Practices by acquiring certain operating
assets of and entering into long-term management services agreements with
additional orthodontic practices. Competition for such affiliations has
increased significantly in recent years and, as a result, there may be fewer
candidates available for affiliation with the Company. There can be no assurance
that the Company will be able to identify additional practices or contract with
such practices on favorable terms. Further, such arrangements involve a number
of risks, including diversion of management's attention, dependence on
retaining, hiring and training key personnel, and risks associated with the
assumption of certain contingent legal liabilities, some or all of which could
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, there can be no assurance that the
Founding Practices or other Allied Practices will achieve anticipated revenues
and earnings. To the extent that the Company is unable to enter into
affiliations with additional orthodontic practices, its ability to expand its
operations and increase its revenues to the degree desired would be reduced
significantly and would have a material adverse effect on the Company's

8
<PAGE> 10

business, financial condition and results of operations. See
"Business -- Operating Strategy" and " -- Growth Strategy."

Risks Related to the Company's Affiliation Strategy. The Company intends
to finance future affiliations with cash, the issuance of shares of Common Stock
or the issuance of indebtedness as consideration. In the event that the Common
Stock does not maintain a sufficient market value, or potential acquisition
candidates are unwilling to accept Common Stock as partial consideration for
their practices, the Company may be required to use its cash resources, if
available, to initiate and maintain its acquisition program. If the Company
lacks sufficient cash resources to pursue acquisitions, its growth could be
limited unless it is able to obtain additional capital through debt or equity
financing. There can be no assurance that the Company will be able to obtain
such financing if and when it is needed or that, if available, such financing
can be obtained on favorable terms. The inability to obtain such financing could
have a material adverse effect on the Company's business, financial condition
and results of operations. Furthermore, issuing shares of Common Stock as
consideration for (or in order to provide financing for) future acquisitions
could result in significant dilution to existing stockholders. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- Growth
Strategy."

Risks Related to the Company's Ability to Continue Internal
Growth. Certain of the Founding Practices have experienced significant growth
in the past, principally through growth of operations of existing orthodontic
offices and the opening of new offices. There can be no assurance that the
Company will be able to expand its market presence in its current locations or
successfully enter other markets by providing financial resources to the Allied
Practices required for opening new orthodontic offices. Such offices may incur
substantial costs, delays or other operational or financial problems. The
ability of the Company to continue its growth will depend on a number of
factors, including the availability of working capital to support such growth,
existing and emerging competition and the Company's ability to maintain
profitability while facing pricing pressures and rising overhead costs. The
Company must also manage costs in a changing regulatory environment, adapt its
infrastructure and systems to accommodate growth, and recruit and train
additional qualified personnel. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "-- Operating Strategy" and " -- Growth Strategy."

Risks Related to Changes in Government Regulation. The orthodontic
industry and orthodontic practices are regulated extensively at the state and
federal levels. The Company will not control the practice of orthodontics by its
Allied Orthodontists as required by certain regulatory requirements directly
applicable to the orthodontists and their practices. The laws of many states
prohibit non-orthodontic entities (such as OrthAlliance) from practicing
orthodontics, owning all or certain assets of an orthodontic practice, employing
orthodontists or controlling the content of an orthodontist's advertisements.
The laws of many states also prohibit orthodontists from paying any portion of
fees received for orthodontic services in consideration for the referral of a
patient. In addition, many states impose limits on the tasks that may be
delegated by an orthodontist to other staff members. There can be no assurance
that any review of the Company's business relationships by regulatory
authorities or the courts will not result in determinations that could adversely
affect the operations of the Company or that the regulatory environment will not
change to restrict the Company's existing or future operations. These laws and
their interpretations vary from state to state and are enforced by regulatory
authorities with broad discretion. There can be no assurance that the legality
of the Company's long-term management services agreements will not be
successfully challenged or that enforceability of the provisions thereof will
not be limited. See "Business -- Agreements with Allied Practices and Allied
Orthodontists." The laws and regulations of certain states in which the Company
may seek to expand may require the Company to change the form of relationships
entered into with orthodontists in a manner which may restrict the Company's
operations in those states or may prevent the Company from acquiring the assets
of or managing or providing consulting services to orthodontic practices in
those states. In addition, there can be no assurance that the laws and
regulations of states in which the Founding Practices presently maintain
operations will not change or be interpreted in the future to either restrict or
adversely affect the Company's relationships with Allied Orthodontists in those
states. See "Business -- Government Regulation."

Risks Related to Future Health Care Reform. The United States Congress has
considered various health care reform proposals, including comprehensive
revisions to the current health care system. It is uncertain what

9
<PAGE> 11

legislative proposals will be adopted in the future or what actions federal or
state legislatures or third-party payors may take in anticipation of or in
response to any health care reform proposals or legislation. Health care reform
legislation adopted by Congress could have a material adverse effect on the
operations of the Company, and changes in the health care industry, such as the
growth of managed care organizations and provider networks, may result in lower
payment levels for the services of the Allied Orthodontists.

Dependence on Enforceability of Operative Agreements. To effect the
consummation of the Acquisitions, the Company, as successor to Premier and USOC,
required the Founding Practices and certain of their orthodontists to execute
three agreements (collectively, the "Operative Agreements"): (i) a purchase and
sale agreement, stock purchase and sale agreement or agreement and plan of
reorganization by and between the Founding Practice and OrthAlliance; (ii) a
long-term management services agreement by and between the Founding Practice and
OrthAlliance; and (iii) employment agreements by and between the Founding
Practice and certain of its orthodontists. The consummation of the Acquisitions
and the subsequent viability of the Company are dependent on the initial and
continuing enforceability of the Operative Agreements. While OrthAlliance has
attempted to structure the Operative Agreements in accordance with applicable
law, there can be no assurance that the enforceability of certain non-compete
and other provisions will not be successfully challenged. Further, because each
of the employment agreements is between the Allied Orthodontist and the Allied
Practice, there can be no assurance that the parties thereto will not terminate
or amend the terms and conditions of such employment agreements. See
"Business -- Agreements with Allied Practices and Allied Orthodontists."

Dependence on Key Personnel. The success of the Company is dependent upon
the continued services of the Company's senior management, including Sam
Westover, Chief Executive Officer, Robert S. Chilton, Chief Financial Officer
and P. Craig Hethcox, Chief Operating Officer. The loss of the services of
Messrs. Westover, Chilton or Hethcox or other Company senior management could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Management."

Risks Related to Competition. The business of providing orthodontic
services is highly competitive in each market in which the Company operates.
Each of the Company's Allied Orthodontists faces competition from other
orthodontists or general dentists in the communities served, some of whom have
more established practices in the market. The Company is aware of several other
companies currently developing, consolidating and managing orthodontic practices
throughout much of the United States, and the Company may encounter substantial
competition from those entities, as well as new market entrants. Other
competitors involved in managing multiple practices may have greater marketing,
financial and other resources and more established operations than the Company.
The Company expects that the level of competition with regional or national
management concerns will remain high in the future, which could limit the
Company's ability to maintain or increase its market share or maintain or
increase gross margins, either of which could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business -- Competition."

Risk of Providing Orthodontic Services. Each of the Allied Orthodontists
provides orthodontic services to the public and may be exposed to the risk of
professional liability and other claims. Several Allied Orthodontists treat
patients complaining of or diagnosed with temporomandibular joint syndrome
("TMJ"). TMJ consists of a poorly understood set of disorders largely of unknown
origins which cause jaw and facial pain, headaches, earaches, clicking sounds
and restricted jaw movement. Future litigation concerning the failure to
properly diagnose or treat TMJ could materially adversely affect the Company.
Failure to recognize periodontal disease, among other things, may also serve as
the basis for lawsuits against the Company and/or the Allied Orthodontists and
Allied Practices. Claims relating to orthodontic treatment, TMJ-related claims
and claims for failure to diagnose periodontal disease, if successful, could
result in substantial damage awards to the claimants which may exceed the limits
of any applicable insurance coverage. Further, there can be no assurance that
claims not covered by the Company's insurance (e.g., claims for punitive
damages) will not arise. The Company will not control the practice of
orthodontics by its Allied Orthodontists or the compliance with regulatory and
other requirements directly applicable to the Allied Orthodontists and the
Allied Practices. Although the Company maintains liability insurance for itself
(with limits and retention amounts to be negotiated), and intends to be named as
an additional insured party on the liability insurance policies of the Allied
Orthodontists (where permitted by insurers and applicable state law), successful
malpractice claims against the Company or the Allied Orthodontists could have a
material adverse effect on the Company's business, financial condition and
results of operations. Claims against

10
<PAGE> 12

the Company, the Allied Practices and/or the Allied Orthodontists, regardless of
their merit or eventual outcome, may also have a material adverse effect on the
Company's ability to attract patients to Allied Practices or expand its
business. Further, because insurance policies must be renewed annually, there
can be no assurance that the Company, the Allied Practices and/or the Allied
Orthodontists, will be able to obtain liability insurance coverage in the future
on acceptable terms, if at all. See "Business -- Litigation and Insurance."

Substantial Proceeds of Offering Payable to Affiliates. Approximately
$13.8 million of the net proceeds of this Offering will be used to pay the cash
portion of the purchase price of the purchase and sale agreements and agreements
and plans of reorganization in the Acquisitions. In addition, approximately $3.2
million of the net proceeds from the Offering will be used to repay indebtedness
assumed by the Company in connection with the Merger and the Acquisitions. See
"The Company," "Use of Proceeds" and "Certain Transactions."

Control by Existing Management and Stockholders. Following the completion
of the Acquisitions and the Offering, the Founding Practices, the officers and
directors of the Company and entities affiliated with such persons will
beneficially own approximately 69% of the then outstanding shares of Common
Stock and Class B Common Stock and are likely to exercise substantial control
over the Company's affairs. These stockholders acting together will be able to
elect the Board of Directors of the Company and approve or disapprove any matter
submitted to a vote of stockholders, including amendments to the Company's
Certificate of Incorporation (the "Certificate"), mergers, share exchanges, the
sale of all or substantially all of the Company's assets, going private
transactions or other fundamental corporate transactions. See "Principal
Stockholders" and "Description of Capital Stock."

In addition, certain Allied Orthodontists, officers and directors of the
Company will own an aggregate of 250,000 shares of the Class B Common Stock,
which is entitled to one vote per share and is entitled to vote with the Common
Stock on all matters submitted to a vote of the Company's stockholders. The
Class B Common Stock will automatically convert into shares of Common Stock at a
ratio of six shares of Common Stock for each share of Class B Common Stock upon
the attainment of the Conversion Prices. Attainment of each of the Conversion
Prices will result in conversion of the Class B Common Stock into 1,500,000
shares of Common Stock, further increasing the holders' of such shares control
over the Company's affairs. In the event all of the Class B Common Stock is
converted into the maximum number of shares of Common Stock possible, through
the achievement of all of the Conversion Prices on or before the sixth
anniversary of the date of this Prospectus, the Allied Orthodontists, the
officers and directors of the Company and entities affiliated with such persons
would beneficially own approximately 80% of the then outstanding shares of
Common Stock and Class B Common Stock. If the Conversion Prices are not achieved
prior to , 2003, all outstanding shares of Class B Common Stock will
convert to shares of Common Stock at a ratio of one share for one share on such
date. See "Description of Capital Stock -- Common Stock and Class B Common
Stock."

Shares Eligible for Future Sale. All of the shares of Common Stock being
sold in this Offering will be freely tradeable unless acquired by affiliates of
the Company. The market price of the Common Stock could be adversely affected by
the sale of substantial amounts of Common Stock of the Company in the public
market following this Offering. Upon the closing of this Offering, the owners of
the Founding Practices will receive, in the aggregate, 6,566,618 shares of
Common Stock as a portion of the consideration for the affiliation of their
orthodontic practices with the Company. The 6,566,618 shares received by the
owners of the Founding Practices are not being offered by this Prospectus;
however, holders of such shares have certain incidental registration rights
pursuant to the purchase and sale agreements and agreements and plans of
reorganization between OrthAlliance and the Founding Practices, whereby the
Company must use its reasonable efforts to register such shares under certain
circumstances during the twenty-four months following the closing of the
Acquisitions. See "Description of Capital Stock -- Registration Rights." Certain
other stockholders of OrthAlliance will hold, in the aggregate, an additional
2,250,000 shares of Common Stock and 250,000 shares of Class B Common Stock. See
"Certain Transactions." None of these 2,250,000 shares were acquired in
transactions registered under the Securities Act and, accordingly, such shares
may not be sold except in transactions registered under the Securities Act or
pursuant to an exemption from registration thereunder. The 250,000 shares of
Class B Common Stock are not transferable, except to the holder's spouse,
parents, siblings, lineal descendants, a trust for the benefit of any such
person or as determined by will of the laws of descent.

11
<PAGE> 13

The Company, all of the owners of the Founding Practices, and the executive
officers, directors and 5% or greater shareholders of the Company will be
restricted from offering or selling shares of Common Stock for a period of 365
days (the "Lock-up Period") after the date hereof without the prior written
consent of J.C. Bradford & Co., except in connection with acquisitions or upon
the exercise of options granted under the Company's stock option plans. See
"Underwriting." After the Lock-up Period, all of such shares may be sold in
accordance with Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), subject to the volume, holding period and other
limitations of Rule 144.

The Company has filed a registration statement with respect to 2.5 million
shares of Common Stock under the Securities Act for use in connection with
future acquisitions. These shares generally will be freely tradable upon
issuance to persons not deemed to be affiliates of the Company, unless the
Company contractually restricts the sale or other transfer of such shares.

No Prior Public Market; Possible Volatility of Stock Price. Prior to this
Offering, there has been no public market for the Common Stock. The Company will
file an application for the Common Stock to be approved for quotation on the
Nasdaq National Market, however, there can be no assurance that, following the
Offering, a regular trading market for the Common Stock will develop or be
sustained. The initial public offering price has been determined by negotiation
among the Company and the Representative (as defined below) and may bear no
relationship to the market price of the Common Stock after this Offering. See
"Underwriting." The market price of the Common Stock could be subject to
significant fluctuations in response to variations in quarterly operating
results and other factors. In addition, the stock market in recent years has
experienced extreme price and volume fluctuations that often have been unrelated
or disproportionate to the operating performance of companies. Factors such as
actual or anticipated operating results, growth rates, changes in estimates by
analysts, market conditions in the industry, announcements by competitors,
regulatory actions and general economic conditions will vary over time. As a
result of the foregoing, the Company's operating results and prospects
periodically may be below the expectations of public market analysts and
investors. Any such event would likely result in a material adverse effect on
the price of the Common Stock.

Immediate and Substantial Dilution; Absence of Dividends. The purchasers
of the Common Stock offered hereby will experience immediate dilution of $9.49
per share in the net tangible book value of such shares, because the initial
public offering price is substantially higher than the pro forma net tangible
book value per share. Existing stockholders will receive an increase of $0.79
per share in the pro forma net tangible book value of their shares. In the event
the Company issues additional shares of Common Stock in the future, including
shares which may be issued in connection with future affiliations, purchasers of
Common Stock in this Offering may experience further dilution in the net
tangible book value per share of the Common Stock. See "Dilution." The Company
has never paid any cash dividends and does not anticipate paying cash dividends
on its Common Stock in the foreseeable future. See "Dividend Policy."

Anti-takeover Effect of Certain Provisions. Certain provisions of
OrthAlliance's Certificate, Bylaws and the Delaware General Corporation Law
("DGCL") could delay or impede the removal of incumbent directors and could make
a merger, tender offer or proxy contest involving the Company more difficult, or
could discourage a third party from attempting to acquire control of the
Company, even if such events would benefit the interests of the stockholders. In
particular, OrthAlliance's Certificate provides for a "staggered" Board of
Directors in three classes, which could have the effect of delaying a change in
control of the Company. In addition, although OrthAlliance has no current plans
to issue any preferred stock, the Certificate authorizes the Board of Directors
to issue "blank check" preferred stock of the Company, in one or more series,
without stockholder approval of the issuance and upon such terms and conditions,
and having such rights, privileges and preferences, as the Board of Directors
may determine. See "Description of Capital Stock -- Preferred Stock" and
"Certain Provisions of the Certificate, Bylaws and Delaware Law." Certain of the
Company's senior management personnel have entered into employment agreements
with the Company which contain "change in control" provisions. The "change in
control" provisions may hinder, delay, deter or prevent a tender offer, proxy
contest or other attempted takeover because the covered employees would be able
to terminate their employment (with adequate justification required in certain
circumstances), be paid a severance equal to three times their existing base
compensation, maximum possible cash bonus and any accrued salary, benefits or
reimbursements

12
<PAGE> 14

and thereafter would be free to compete with the Company. See
"Management -- Employment Agreements." The Service Agreements entered into with
the Allied Orthodontists provide that said agreements may be terminated by the
Allied Practices pursuant to a change of control, defined therein, which does
not include transactions approved by the Company's Board of Directors.
OrthAlliance is also subject to Section 203 of the DGCL which prohibits a
publicly held Delaware corporation from engaging in a "business combination" (as
defined in Section 203 of the DGCL) with an "interested stockholder" (defined in
Section 203 of the DGCL, generally, as a person owning 15% or more of the
Company's outstanding voting stock) for a period of three years after the date
of the transaction in which such person became an interested stockholder, unless
certain conditions are met.

13
<PAGE> 15

THE COMPANY

OrthAlliance was organized to create a leading provider of practice
management services to orthodontic practices in the United States. Premier and
USOC, predecessors to OrthAlliance, were formed in 1996 independently of each
other to acquire certain operating assets of and to enter into long-term
management services agreements with orthodontic practices. The management of
Premier and USOC determined to combine the two companies to form the Company.
Prior to the closing of the Offering, Premier and USOC will be merged with and
into OrthAlliance (previously defined as the Merger), and pursuant thereto the
Company will succeed to the rights of Premier and USOC under the agreements with
the Founding Practices. See "Certain Transactions."

Simultaneous with and as a condition to the closing of the Offering,
OrthAlliance will acquire certain operating assets or the stock of entities
holding certain operating assets of the 58 separate Founding Practices in
exchange for cash and shares of Common Stock and will enter into long-term
management services agreements with the Founding Practices (previously defined
as the Acquisitions). The aggregate consideration paid by the Company to the
Founding Practices is approximately $86.0 million, composed of 6,566,618 shares
of Common Stock (assuming $11.00 per share, the mid-point of the estimated
initial public offering price range) and, approximately $13.8 million in cash,
all of which is payable at the closing of the Acquisitions. The aggregate
consideration to be paid for the Founding Practices will not change; however,
the actual number of shares of Common Stock issued to the Founding Practices in
the Acquisitions will be determined by dividing $72.3 million by the initial
public offering price. In the event the price to the public is higher than the
mid-point of the estimated initial public offering price range, the aggregate
number of shares will be reduced accordingly, and in the event the price to the
public is lower, the aggregate number of shares will be increased accordingly.
Cash proceeds from the Offering will be used to pay the cash portion of the
consideration. See "Certain Transactions," "Risk Factors -- Control by Existing
Management and Stockholders" and "-- Substantial Proceeds of Offering Payable to
Affiliates," "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Shares Eligible for Future
Sale" and the unaudited pro forma combined financial statements and the notes
thereto.

The Company maintains its principal executive office at 23848 Hawthorne
Boulevard, Suite 200, Torrance, California 90505, and its telephone number is
(310) 791-5656.

USE OF PROCEEDS

The net proceeds to the Company from the sale of Common Stock offered
hereby are estimated to be approximately $24.9 million (approximately $28.9
million if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $11.00 per share and after
deducting underwriting discounts and other estimated offering expenses payable
by the Company.

The Company intends to use the net proceeds from the Offering as follows:
(i) approximately $13.8 million will be used to pay the cash portion of the
purchase price under the purchase and sale agreements with the Founding
Practices; (ii) approximately $3.2 million will be used to repay certain
indebtedness assumed by the Company in the Merger and the Acquisitions; (iii)
approximately $900,000 will be used to pay accrued consulting fees; and (iv) the
balance will be used for general corporate purposes including financing the
expansion of the Company's business through affiliations with additional
orthodontic practices and the development of satellite offices for the Allied
Practices. Currently, the Company has entered into negotiations to purchase
assets of additional orthodontic entities pursuant to the Company's shelf
registration. The indebtedness to be repaid consists of, among other things,
certain debt incurred by Premier to finance organizational costs and working
capital (the "Premier Note"). The principal amount of the Premier Note is $1.01
million and it accrues interest at a specified prime rate plus one percent
(1.0%). Following completion of the Offering, the principal and interest due and
payable is anticipated to be approximately $1.06 million. See "Certain
Transactions."

Pending application of the net proceeds as described above, the Company
intends to invest the net proceeds in short-term, interest-bearing, investment
grade securities.

14
<PAGE> 16

DIVIDEND POLICY

As a newly formed corporation, the Company has never declared or paid
dividends on its Common Stock or Class B Common Stock. Prior to the
Acquisitions, the Founding Practices, some of which are sole proprietorships, C
corporations or S corporations, made distributions of earnings to their owners
and stockholders, as applicable. The Company expects that future earnings, if
any, will be retained for the growth and development of the Company's business
and, accordingly, the Company does not anticipate that any dividends will be
declared or paid on the Common Stock for the foreseeable future. The
declaration, payment and amount of future dividends, if any, will depend upon
the future earnings, results of operations, financial position and capital
requirements of the Company, among other factors. The Company may borrow funds
under credit agreements which may limit the ability of the Company to pay
dividends. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

DILUTION

As of March 31, 1997, after giving effect to the Merger and Acquisitions,
the pro forma net tangible book value of the Company was $6.5 million, or $0.72
per share. The pro forma net tangible book value per share is determined by
dividing the Company's pro forma net tangible book value (total tangible assets
less total liabilities) by the number of shares of Common Stock and Class B
Common Stock to be outstanding after the Merger and the Acquisitions. After
giving effect to the sale by the Company of the 2,600,000 shares of Common Stock
offered hereby and after deducting underwriting discounts and commissions and
estimated offering expenses, the pro forma net tangible book value of the
Company as of March 31, 1997 would have been $17.6 million, or $1.51 per share.
This represents an immediate increase in net tangible book value of $0.79 per
share to existing stockholders and an immediate dilution in net tangible book
value of $9.49 per share to new investors purchasing shares of Common Stock in
this Offering. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $11.00
Pro forma net tangible book value before Offering......... $0.72
Increase attributable to new investors.................... 0.79
Pro forma net tangible book value after Offering............ 1.51
------
Dilution in net tangible book value to new investors........ $ 9.49
======
</TABLE>

The following table sets forth on a pro forma basis, giving effect to the
Merger and Acquisitions as of March 31, 1997, the number of shares of Common
Stock and Class B Common Stock purchased from the Company, the total
consideration paid to the Company, and the average price per share paid to the
Company by existing stockholders and the new investors purchasing shares of
Common Stock in this Offering:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)......... 9,066,618 77.7% $(7,304,597) (34.3)% $(0.81)
New investors.................... 2,600,000 22.3 28,600,000 134.3 11.00
---------- ----- ----------- -----
Total(2)............... 11,666,618 100.0% $21,295,403 100.0%
========== ===== =========== =====
</TABLE>

- ---------------

(1) Total consideration paid by existing stockholders represents the combined
stockholders' equity of OrthAlliance and the Founding Practices before the
Offering, adjusted to reflect the payment of $13.8 million in cash as
partial consideration for the Acquisitions.

(2) Does not include 602,500 shares of Common Stock issuable upon the exercise
of options for the purchase of Common Stock granted by the Company pursuant
to the Company's stock option plans or the exercise of warrants to purchase
Common Stock. See "Management -- Stock Plans" and "Description of Capital
Stock -- Warrants."

15
<PAGE> 17

CAPITALIZATION

The following table sets forth the current portion of long-term debt and
the total capitalization of the Company as of March 31, 1997 (i) on a pro forma
basis to reflect the Merger and Acquisitions and (ii) on a pro forma as adjusted
basis to give effect to the Merger and Acquisitions, the sale of the 2,600,000
shares of Common Stock offered hereby (assuming an Offering price of $11.00 per
share) and the application of the net proceeds therefrom. The Company had no
developmental activities in 1996 or for the three months ended March 31, 1997;
therefore, no historical financial statements are presented in the table below.
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the OrthAlliance
financial statements and notes thereto and the unaudited combined pro forma
financial statements and the notes thereto included in this Prospectus.

<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
-----------------------------
PRO FORMA
PRO FORMA(1) AS ADJUSTED(2)
------------ --------------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt........................... $ 2,796 $ 651
======= ========
Long-term debt, less current portion........................ 1,000 0
------- --------
Stockholders' equity:
Preferred Stock $.001 par value; 20,000,000 shares
authorized(3); no shares issued and outstanding, pro
forma or as adjusted.................................. -- --
Class A Common Stock, $.001 par value; 70,000,000
shares authorized, one share issued and outstanding at
March 31, 1997(3); 8,816,618 issued and outstanding
pro forma; 11,416,618 issued and outstanding as
adjusted(4)........................................... -- 11
Class B Common Stock, $.001 par value; 250,000 shares
authorized(3), no shares issued and outstanding at
March 31, 1997; 250,000 issued and outstanding pro
forma and as adjusted(4).............................. -- --
Additional paid-in capital............................. 10,768 35,655
Accumulated deficit.................................... (4,261) (18,073)
------- --------
Total Stockholders' equity........................ 6,507 17,593
------- --------
Total capitalization......................... $ 7,507 $ 17,593
======= ========
</TABLE>

- ---------------
(1) See unaudited pro forma combined financial statements included elsewhere in
this Prospectus for a discussion of the assumptions made and adjustments
applied in preparation of this information.

(2) Gives effect to the sale of 2,600,000 shares of Common Stock offered by the
Company at an assumed initial public offering price of $11.00 per share and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds."

(3) Reflects an amendment to the Company's Certificate filed subsequent to March
31, 1997 to increase the authorized capital stock and to designate classes
of common stock.

(4) Does not include 602,500 shares of Common Stock issuable upon the exercise
of outstanding options for the purchase of Common Stock granted under the
Company's stock option plans or the exercise of warrants to purchase Common
Stock. See "Management -- Stock Plans" and "Description of Capital Stock --
Warrants."

16
<PAGE> 18

SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The selected pro forma combined financial information is based upon the
historical combined financial statements of the Founding Practices and the
historical financial statements of the Company and gives effect to the following
as of January 1, 1996 (with respect to the statement of operations data for the
year ended December 31, 1996 and the three months ended March 31, 1997), and as
of March 31, 1997 (with respect to the balance sheet data): (i) the Merger; (ii)
the Acquisitions, and (iii) a provision for federal and state income taxes as if
the Company had been a C corporation during the periods presented. This
information is derived from the unaudited pro forma combined financial
statements of the Company and the related notes thereto included elsewhere in
this Prospectus. The unaudited pro forma financial information does not purport
to represent the financial position or the operating results that would have
been achieved had the Merger and Acquisitions occurred on the dates indicated or
project the financial position or results of operations for any future date or
period.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1996 1997
------------- -------------
PRO FORMA(1) PRO FORMA(1)
------------- -------------
<S> <C> <C>
PRO FORMA STATEMENT OF OPERATIONS DATA(2):
Net revenue(3).............................................. $ 45,637 $ 11,904
Expenses:
Salaries, wages and benefits.............................. 16,912 4,754
Orthodontic supplies and lab.............................. 5,938 1,667
Rent...................................................... 4,134 1,071
Advertising and marketing................................. 1,421 334
General and administrative................................ 9,312 2,368
Depreciation and amortization............................. 886 170
---------- ----------
Total expenses.................................... 38,603 10,364
---------- ----------
Operating income.................................. 7,034 1,540
Interest income (expense), net.............................. -- 11
Gain on sale of assets...................................... 122 5
---------- ----------
Income before provision for income taxes.................... 7,156 1,556
Provision for income taxes........................ 2,719 591
---------- ----------
Net income........................................ $ 4,437 $ 965
========== ==========
Net income per share.............................. $ 0.38 $ 0.08
========== ==========
Number of shares used in net income per share
calculation(1)............................................ 11,716,573 11,716,573
========== ==========
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1997(1)
-----------------------------
PRO FORMA
PRO FORMA(2) AS ADJUSTED(4)
------------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 4,651 $14,738
Total assets................................................ 13,229 21,170
Long-term debt, less current portion........................ 1,000 0
Stockholders' equity........................................ 6,507 17,593
</TABLE>

17
<PAGE> 19

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company. Such statements are only predictions, and the actual
events or results may differ materially from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in "Risk Factors,"
as well as those discussed elsewhere in this Prospectus. The historical results
set forth in this discussion and analysis are not indicative of trends with
respect to any actual or projected future financial performance of the Company.
The following should be read in conjunction with the financial statements and
related notes thereto appearing elsewhere in this Prospectus.

OVERVIEW

OrthAlliance has conducted no significant operations to date but will
acquire as a result of the Acquisitions certain operating assets and, in some
cases, liabilities of the Founding Practices. In addition, OrthAlliance will
enter into either a service agreement ("Service Agreement") or a consulting and
business services agreement ("Consulting Agreement") with each of the Founding
Practices (the Service Agreements and Consulting Agreements are referred to
herein collectively as "Management Agreements"). Under the Service Agreements,
the Company will provide practice management services to the Founding Practices
in exchange for certain management fees. Under the Consulting Agreements, which
allow the Company and the Founding Practice to comply with certain state law
restrictions on practice management, the Company will provide consulting
services in exchange for similar fees.

The Company's revenue will consist substantially of the sum of the fees
paid to OrthAlliance pursuant to the Management Agreements and the reimbursement
of certain operating expenses of the Allied Practices under the Management
Agreements. Expenses incurred by the Allied Practices and required to be paid by
OrthAlliance pursuant to the Management Agreements are fully reimbursable by the
Allied Practices to OrthAlliance. Expenses not required to be paid by
OrthAlliance pursuant to the Management Agreements primarily consist of personal
expenses of the Allied Orthodontists. In general, the Management Agreements
provide for the payment of management fees to the Company based on a negotiated
percentage of the adjusted patient revenues of the Allied Practices. Patient
revenue is recognized as orthodontic services are performed, with approximately
20% being recognized at the time of initial treatment. The balance of the
contract revenue is realized evenly over the remaining treatment period. The 20%
estimated revenue at the initial treatment date is based on the estimated costs
incurred by the practice at that time as compared to the total costs of
providing the contracted services. Additionally, the 20% estimated cost at the
initial treatment date is consistent with industry standards and includes the
estimated costs of diagnosis and treatment plan development, initial treatment
by orthodontic personnel, orthodontic supplies, and associated administrative
services. Adjusted patient revenue under the Management Agreements is net
patient revenue under generally accepted accounting principles, including an
adjustment for uncollectible accounts and other discounts, allowances or
activities that do not generate collectible fees.

The management fee is paid monthly by the Allied Practice through a
settlement process and is payable based on the calculation of adjusted patient
revenues and profit margin. Adjusted patient revenue and profit margin is
calculated on the accrual basis using the revenue recognition criteria noted
above. The fee paid by each Allied Practice to the Company is (i) a variable
percentage of adjusted patient revenue based on numerous factors, including but
not limited to the practice's profitability and revenues, (ii) a fixed
percentage of adjusted patient revenue that provides for annual increases based
on improvement in gross margin (iii) a fixed amount that provides for annual
increases during the term of the Management Agreement. In addition, the
Management Agreements generally are structured so that the Company and the
Allied Practices share the benefits of increased Allied Practice profits
resulting from improved operating efficiencies. The Company receives the
management fee and repayment of any portion of an advance made to an Allied
Practice that is due and payable prior to the Allied Orthodontists receiving any
compensation.

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<PAGE> 20

Pursuant to the Management Agreements, the Company generally is obligated
to provide necessary employees, establish appropriate business systems, perform
payroll and accounting functions, provide billing and collection services,
purchase and maintain inventory, provide certain equipment and furnishings,
arrange legal services unrelated to malpractice litigation, formulate a
marketing plan, manage and organize the Allied Practices records and advise each
Allied Practice regarding practice expansion. In addition, the Company must pay
the operating expenses of each Allied Practice, except for the salaries of the
orthodontists and, in certain states, other professional staff. The Company is
reimbursed for such expenditures by each Allied Practice. In the event that an
Allied Practice lacks sufficient funds to pay its current expenses, the Company
is required to advance funds to the Allied Practice to pay such expenses. Any
such advances will be made in the form of loans to the Allied Practice to be
repaid upon such terms as mutually agreed. The advances will be funded from the
Company's working capital. Repayment of the advance will be made through the
monthly settlement with the Allied Practice which will include, among other
things, the payment of Orthodontic compensation. The Company will also incur
personnel and administrative expenses in connection with maintaining corporate
offices, from which the Company will provide management, administrative,
marketing, development and acquisition services. The Management Agreements are
entered into for an initial term of 20 years, subject to prior termination by
either party in the event the other party (i) becomes subject to bankruptcy
proceedings or (ii) materially breaches the Management Agreement and such party
fails to cure the breach within 90 days. In addition, the Allied Practices may
terminate the Management Agreements upon the occurrence of a change in control
(as defined therein). See "Business -- Agreements with Allied Practices and
Allied Orthodontists."See "Business -- Agreements with Allied Practices and
Allied Orthodontists."

In accordance with Staff Accounting Bulletin ("SAB") No. 48, "Transfers of
Nonmonetary Assets by Promoters or Shareholders," published by the Securities
and Exchange Commission (the "Commission"), the acquisition of the assets and
assumption of certain liabilities of all of the Founding Practices pursuant to
the Acquisitions are accounted for by the Company at the transferors' historical
cost basis, with the shares of Common Stock to be issued in those transactions
being valued at the historical cost of the nonmonetary assets acquired net of
liabilities assumed. The cash consideration will be reflected as a distribution
by the Company to the owners of the Founding Practices. It is currently
anticipated that the Company's future acquisitions of certain of the assets and
liabilities of Allied Practices may result in subsequent annual noncash
amortization charges for intangible assets in the Company's statements of
operations.

The Company intends to implement an aggressive growth strategy focused on
(i) affiliating with additional orthodontic practices that fit the OrthAlliance
model of high quality and strong financial performance; (ii) expanding Allied
Practices by providing capital, support and consultation for satellite office
expansion; (iii) assisting the Allied Practices with their internal growth by
increasing gross revenues through increased patient volume; and (iv) expanding
profit margins through operational efficiencies.

RESULTS OF OPERATIONS

Historical

The Company has conducted no significant operations to date and will not
conduct significant operations until the Acquisitions and the Offering are
completed. OrthAlliance has incurred and will continue to incur various legal,
accounting, travel, personnel and marketing costs in connection with the
Acquisitions and the Offering. From inception through March 31, 1997, USOC and
Premier incurred development costs of $3.6 million and $593,000, respectively.
OrthAlliance did not incur development costs during this period. See the
financial statements, the unaudited pro forma combined financial statements and
the notes related thereto.

Pro Forma

Revenues. It is anticipated that substantially all the Company's revenues
will consist of the sum of the fees received pursuant to the Management
Agreements and the reimbursed operating expenses of the Allied Practices. The
revenues included in the unaudited pro forma combined financial statements are
calculated by applying the terms of the Management Agreements to the historical
financial results of the Founding Practices for the year ended December 31, 1996
and the three months ended March 31, 1997, assuming the Acquisitions had been
completed as of January 1, 1996. Giving effect to the terms of the Management
Agreements and assuming the

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<PAGE> 21

Merger and the Acquisitions had occurred on January 1, 1996, the pro forma
revenues of the Company for the year ended December 31, 1996 and the three
months ended March 31, 1997 would have been $45.6 million and $11.9 million,
respectively.

Expenses. The pro forma expenses for the year ended December 31, 1996 are
based on the expenses incurred by USOC, Premier and the Founding Practices as a
group for the period from corporate inception, in the case of USOC and Premier,
and from January 1, 1996, in the case of the Founding Practices, through
December 31, 1996. The pro forma expenses for the three months ended March 31,
1997 are based on the expenses incurred by USOC, Premier and the Founding
Practices as a group for the three months ended March 31, 1997. A pro forma
adjustment has been made to reflect the incremental costs of the Company
providing management services to the Allied Practices in the first year of
operations, including contractual management salaries. The total pro forma
direct expenses do not reflect cost savings that may result from the
Acquisitions.

Provision for income taxes. Pro forma income taxes assume the Company had
operated as a tax paying entity for the year ended December 31, 1996 and for the
three months ended March 31, 1997, subject to an effective combined state and
federal income tax rate of 38% for the period.

The Company and the Allied Practices are not subject to significant
seasonal variations in operating results. However, the third quarter
traditionally represents a larger number of treatment starts and the fourth
quarter, interrupted by holidays, generally represents fewer office treatments.

LIQUIDITY AND CAPITAL RESOURCES

If the Acquisitions had occurred on March 31, 1997, the Company would have
had pro forma working capital of approximately $4.7 million.

The Company anticipates the primary uses of capital will include
affiliation with orthodontic practices, development of satellite orthodontic
offices of Allied Practices and funding working capital needs of the Company and
the Allied Practices. The Company estimates that it will incur capital
expenditures of approximately $50,000 for the remainder of fiscal 1997. The cost
of developing satellite offices will vary by geographic location; however, it is
currently anticipated to be approximately $250,000 per office. In addition, in
the event any of the Allied Practices lacks sufficient funds to pay its current
expenses, the Company, pursuant to the Management Agreements, is required to
advance funds to such Allied Practice for the purpose of paying such expenses.
Any such advances will be made in the form of loans to the Allied Practices to
be repaid upon such terms as mutually agreed. Such advances will generally bear
interest as negotiated with each Founding Practice and will be repayable over
varying periods of time. The advances will be funded from the Company's working
capital. Repayment of the advance will be made through the monthly settlement
with the Founding and Allied Practices. As part of its growth strategy, the
Company intends to enter into affiliations with additional orthodontic practices
that will involve the payment of cash and Common Stock.

Management believes that the proceeds of the Offering, after application of
the use of proceeds, combined with the Company's anticipated cash flow from
operations will be sufficient to fund the planned capital needs and ongoing
operations of the Company for the next 18 months. Additional capital may be
required by the Company's acquisition program. The Company intends to establish
a credit facility to supplement its anticipated cash flow from operations and
the net proceeds from the Offering. In addition, the Company is concurrently
with the Offering registering 2.5 million additional shares of Common Stock
pursuant to a shelf registration statement, which when combined with the
Company's cash resources will be used to support the Company's planned
acquisition program.

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<PAGE> 22

BUSINESS

GENERAL

OrthAlliance was recently organized to create a leading provider of
practice management services to orthodontic practices in the United States. The
Company will manage the business aspects of the Allied Practices (subject to
applicable state law), thereby allowing Allied Orthodontists to focus on
delivering cost-effective, high quality patient care, and will provide capital
for the development and growth of such practices. The Company will affiliate
with Allied Practices pursuant to long-term management services agreements and
will generate revenues by providing management, marketing and development
services to Allied Practices. The Company intends to aggressively expand its
network of Allied Practices by acquiring certain operating assets of and
entering into long-term management services agreements with additional
orthodontic practices throughout the United States.

The Founding Practices and Their Allied Orthodontists. The Company has
entered into definitive agreements, to be consummated simultaneously with the
closing of this Offering, to acquire certain operating assets of and enter into
long-term management services agreements with 58 Founding Practices, which
include 86 orthodontists operating 154 offices located in 17 states. Management
believes that the Company has distinguished itself from its competitors by
affiliating with the Founding Practices, which management believes are leading
practices in their markets. The Founding Practices were selected based on a
variety of factors, including size, profitability, historical growth and
reputation for high quality care, among local consumers of orthodontic services
and within the orthodontic services industry. Some of the Founding Practices
were referred to the Company by certain Allied Orthodontists. Potential Founding
Practices were subject to peer review which evaluated each practice on the
quality of patient care and the use of effective practice procedures. Management
intends to capitalize on the reputations and relationships of the Founding
Practices and their Allied Orthodontists to assist the Company in affiliating
with additional orthodontic practices. For the year ended December 31, 1996, the
Founding Practices had average adjusted patient revenues of approximately
$1,032,000, compared to average practice revenues for the orthodontic industry
as a whole, estimated by the Company to be approximately $545,000.

Management believes that the Company's management, marketing, recruiting
and growth strategies, as applied to the Founding Practices, will maximize the
Company's revenues. Each Allied Orthodontist of the Founding Practices will
initially be a member of the Company's Board of Advisors, highlighting the
expertise of the Allied Orthodontists of the Founding Practices. The Board of
Advisors will advise management on a broad range of issues, including treatment,
risk management, quality assurance, credentialing, managed care, product
evaluation, professional resources and marketing. The members of the Board of
Advisors will also recommend professional standards for both treatment quality
and delivery of patient care, and provide a peer review process.

Services of the Company. Pursuant to the OrthAlliance model, the Company
provides fee-based management services to its Allied Practices thereby allowing
Allied Orthodontists to concentrate on providing cost effective, high quality
patient care. The Company does not practice orthodontics or dentistry, but
generally acquires certain operating assets of an orthodontic practice, employs
the employees (except orthodontists, and where applicable law requires,
hygienists and dental assistants), and enters into long-term Management
Agreements with the Allied Practices. Where state law allows and upon request by
an Allied Practice, the Company may lease equipment or office space to the
Allied Practices and employ orthodontic assistants for the Allied Practices.

The Company will generate revenues by providing management services to the
Allied Practices, including billing and collections, cash management,
purchasing, inventory management, payroll processing, employee benefits
administration, advertising and marketing, financial reporting and analysis,
productivity reporting and analysis, training, associate orthodontist recruiting
and capital for satellite office development and acquisitions. Management
believes, based on its experience with the Founding Practices and data available
to it, that the Company's emphasis on high quality patient care and its
business, marketing, technological and practice-growth support systems will
appeal to orthodontists inclined to affiliate with the Company.

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<PAGE> 23

THE ORTHODONTIC INDUSTRY

Orthodontics, the art and science of correcting the misalignment of teeth,
historically has been one of the most profitable specialties in dentistry. The
field of orthodontics has evolved greatly since the turn of the century, a
process which management believes will continue. Orthodontic research and
education have aided the development of new materials and techniques of
orthodontic treatment, including the use of computers to help solve complex
cases. In 1994, orthodontists in the United States conducted examinations of
nearly 2.5 million potential new patients and initiated treatment for
approximately 1.5 million patients. The typical orthodontist initiated treatment
for approximately 170 patients in 1994 and maintained approximately 380 active
cases.

The primary target market for orthodontic treatment is children ages 8 to
18. In 1994, approximately 80%, or 1.2 million, of all patients treated were
children. The U.S. Census Bureau estimates that as of July 1, 1996, there were
approximately 37.6 million children and adolescents between the ages of 10 and
19. Management believes that as many as 50% of these children and adolescents
could benefit from orthodontic treatment, presenting an attractive opportunity
for the Company. In addition to the traditional juvenile market, the adult
market has been a rapidly growing market for orthodontic services. Management
believes the market for adults has grown rapidly over the last 15 years as a
result of several factors. Adults today are more conscious about their
appearance, which may be improved by orthodontic treatment they may not have
received as children. Moreover, many adults today are more willing to undergo
orthodontic treatment in light of the development of new orthodontic materials
and techniques that allow the orthodontist largely to conceal the bands and
brackets used during treatment because they match the color of the teeth. Based
on statistics obtained from the 1995 JCO Study, management believes that the
adult market for orthodontic services remains untapped, as the number of adults
who need or want orthodontic treatment substantially exceeds the number of
patients currently seeking treatment. In 1994, standard case fees averaged
approximately $3,500 for children and $3,800 for adults.

Currently, there are approximately 9,000 practicing orthodontists in the
United States, nearly all of whom have graduated from accredited graduate
programs of orthodontics. The industry is highly fragmented, with approximately
90% of the practicing orthodontists acting as sole practitioners and the balance
practicing in multiple-doctor practices (generally two orthodontists) or in
groups affiliated with competitors of the Company. The training and
qualification of an orthodontist is extremely rigorous. Generally, a dentist
must graduate in the top 10% of his or her class at an accredited graduate
school of dentistry, pass national and state board examinations, and complete an
accredited graduate orthodontic program to become an orthodontist. These
programs typically are structured as two- or three-year programs. Each year
about 200 new orthodontists graduate from accredited orthodontic programs.

OPERATING STRATEGY

Management believes that the Company's operating strategy will enable
Allied Practices to compete more effectively and realize significantly greater
profitability than other orthodontic practices, thereby providing an inducement
for additional orthodontists to affiliate with the Company. Key elements of the
Company's operating strategy include:

Emphasizing Quality Patient Care. Management believes that the services
and support it provides its Allied Orthodontists will positively impact the
level of patient care by increasing the Allied Orthodontists' time to
concentrate on patient care. Management believes that the primary hindrances to
consistent delivery of quality patient care are (i) the discrepancy in
qualifications among practicing orthodontists and (ii) the amount of time each
orthodontist spends on patient care. The qualifications of providers of
orthodontic services vary from general dentists who have taken weekend courses
in orthodontics to graduates of accredited three-year programs. Nearly all
Allied Orthodontists affiliated with the Founding Practices are graduates of
accredited orthodontic programs. In addition, the Company will establish
clinical care advisory committees consisting of Allied Orthodontists who will
meet periodically to formulate quality assurance programs, to perform peer
review studies, and to consult with each other on current treatments, techniques
and issues. Furthermore, recent orthodontic graduates recruited by the Company
will be required (in most cases) to complete a mentoring program pursuant to
which such graduates will provide treatment under the supervision and guidance
of an experienced Allied Orthodontist for a period of time to refine their
skills before assuming primary responsibility for patient care at a satellite
office of an Allied Practice.

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<PAGE> 24

Capitalizing on the Best Demonstrated Practices of Allied
Orthodontists. The Company believes that one of its most valuable practice
management services will be its ability to identify practice-level strategies
that have proven successful for individual Allied Practices and share this
information among other Allied Practices. Management will routinely evaluate the
policies and procedures of the Allied Practices, including such critical areas
as treatment quality, delivery of patient care, practice-building, marketing,
patient financing programs and expense control. The Company will provide Allied
Orthodontists with comparative operating and financial data that will enable
Allied Orthodontists to detect areas of their practices that could be improved.
The Company will provide its own analysis of such operating and financial data
and recommend changes to improve performance. The Company expects that a primary
means of identifying and implementing solutions to particular practice issues
will be to consult with Allied Practices that have had demonstrated success in a
certain area. The Company generally will seek to facilitate communication among
Allied Practices through periodic conferences and meetings and, ultimately,
through a proprietary intranet system.

Achieving Operating Efficiencies and Economies of Scale. The Company
intends to implement a variety of operating procedures and systems to improve
the productivity and profitability of each orthodontic practice which becomes an
Allied Practice and to achieve economies of scale. The Company will implement
centralized payroll processing, inventory control and national group purchasing
contracts. The Company plans to implement appropriate credit and collection
policies which will accommodate specific needs of the target market of each
Allied Practice. Management believes that patient flow and work flow could be
enhanced by physical improvements in designs to facilities, which should result
in an increase in the number of patients seen and an increase in employee and
orthodontist productivity. If such physical improvement in design is supported
by an adequate return on investment, the Allied Practice and the Company may
undertake such design changes. Operating efficiencies and economies will be
instituted on a per market or per Allied Practice need basis after thorough
analysis, including review of work flow, patient flow, aged accounts receivable
history, facilities, employee work load and productivity, and employee and
patient satisfaction.

Increasing the Affordability of Orthodontic Care through Flexible Payment
Plans. The Company will assist Allied Practices in developing and implementing
payment plans designed to make orthodontic services more affordable to
prospective patients, thereby making orthodontic services available to a larger
segment of the population in their respective markets. Many of the Founding
Practices have historically received a down payment of approximately 20% of the
total cost of services, which is typical in the orthodontics industry and is
based on the costs incurred by an orthodontic practice at the time treatment is
initiated. Recognizing that orthodontic services are largely discretionary and
that a significant down payment is often a deterrent to prospective patients,
the Company believes that flexible payment plans are an effective means of
increasing patient volume. Management believes that the markets in which Allied
Practices are located are different and payment plans should be tailored to
respond to the various market demands and opportunities. The Company will make
general recommendations to all Allied Practices with respect to instituting
flexible payment plans and will develop and implement market-tailored plans upon
the request of individual Allied Practices. In addition, the Company will
provide the working capital necessary for the Allied Practices to implement
flexible payment plans which may result in the reduction or elimination of down
payments.

Stimulating Demand in Local Markets Through Aggressive Marketing. In
consultation with and upon approval of the Allied Practices, the Company intends
to develop and implement aggressive and innovative marketing plans to augment
each Allied Practice's referral and other marketing systems currently in place.
Management believes that the orthodontic industry has not taken advantage of the
gains that can be achieved through strategic direct marketing and intends to,
upon request of an Allied Practice, implement aggressive direct marketing
campaigns. In addition, certain of the Founding Practices have developed
referral systems with local dentists, to achieve above-average practice revenues
and growth. Upon the request of an Allied Practice and in appropriate markets,
the Company will attempt to reach potential patients through print, local
television and radio advertising.

GROWTH STRATEGY

Management believes the continued growth of the Founding Practices and the
financial support for the development of new Allied Practices are key components
of the future success of the Company. To increase the

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<PAGE> 25

Company's revenues and profits and gain market share, management intends to
initiate an aggressive growth strategy designed to increase the number of Allied
Practices and Allied Orthodontists over time. Management's expansion strategy
includes:

Affiliations with Orthodontic Practices. Management believes that the
Company's target market for affiliations includes approximately half of the
orthodontic practices in the United States (approximately 4,500 practices),
because these practices fit the OrthAlliance model of high quality and
opportunity for revenue and earnings growth. Management believes that
affiliation will be an attractive option for many orthodontists because the
Company intends to (i) provide the capital to open and integrate new orthodontic
offices into existing Allied Practices, (ii) identify and recruit qualified
associate orthodontists for the Allied Practices, (iii) design and offer
business and clinical systems for each Allied Practice, (iv) with the approval
of the Allied Orthodontist, hire the necessary business and non-orthodontic
personnel for each new Allied Practice, (v) help increase each Allied Practice's
market share and the number of new patients seen by recommending successful
marketing and advertising strategies, and (vi) reduce the time Allied
Orthodontists spend on administrative and business related tasks, allowing them
to focus on delivering quality patient care. The Company has filed a shelf
registration statement on Form S-4 for shares of Common Stock to be used in
connection with future affiliations with Allied Practices (the "Shelf
Registration"). The terms of such affiliations will be negotiated at the time of
any such affiliation and any shares of Common Stock registered pursuant to the
Shelf Registration transferred in exchange for assets of an Allied Practice will
be valued at the average of the closing trading price for the five consecutive
trading days ending two days prior to the closing of such affiliation.

Developing Orthodontic Satellite Offices. Where management determines
market demand will support practice expansion, the Company will assist Allied
Practices in developing satellite offices to be integrated into Allied Practices
to increase market share and revenues. The Company intends to provide capital
for practice expansion, market research, site selection, office design and
marketing support for satellite office development. Management believes the
Company's recruiting strategy complements growth through the addition of
satellite offices. Experienced associate orthodontists and recently graduated
orthodontists, who have completed a mentoring program, would be well suited to
assume primary responsibility for patient care at newly-established satellite
offices. See "-- Allied Practice Operations and Locations."

Internal Growth through Improved Operating Efficiencies. A fundamental
element of management's growth strategy is internal Allied Practice growth
through improving each practice's operating efficiencies. The Company intends to
offer a variety of operating procedures and systems to improve the productivity
and profitability of the Allied Practices. The Company's operating systems and
strategies, together with its recruiting, training, marketing and business
management services should allow Allied Orthodontists to focus their attention
on providing patient care, resulting in increased patient flow and enhanced
revenues. The Company plans to implement payroll processing, employee benefits
administration, financial reporting and analysis, inventory management and
national group purchasing discounted contracts and intends to implement
appropriate credit and collection policies which accommodate specific needs of
the general target markets of each Allied Practice. Operating efficiencies and
economies will be instituted on a per market or per Allied Practice need basis
after thorough analysis, including review of work flow, patient flow, aged
accounts receivable history, facilities, employee work load and productivity,
employee satisfaction and patient satisfaction.

ALLIED PRACTICE OPERATIONS AND LOCATIONS

Payment Plan; Case Fees. At the initial orthodontic treatment, the patient
signs a contract outlining the terms of the treatment, including the anticipated
length of treatment and the total fees. Each Allied Orthodontist determines the
appropriate fee to charge for services to patients based upon market conditions
in the area served by that Allied Orthodontist. Generally, the amount of fees
charged by the Allied Orthodontists are independent of the patient's source of
payment. The number of required monthly payments is estimated at the beginning
of the case and generally corresponds to the anticipated number of months of
treatment. Depending on the patient's credit history, the down payment will
range from a substantial down payment to no down payment. Patients are typically
required to pay equal monthly installments although each Allied Practice will
offer a payment plan tailored to its market and patients.

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<PAGE> 26

If the treatment period exceeds the period originally estimated by the
orthodontist, the patient and the Allied Orthodontist will determine whether
payment for additional treatment will be required. If the treatment is completed
prior to the scheduled completion date, the patient is required to pay the
remaining balance of the contract. If a patient terminates the treatment prior
to the completion of the treatment period, the patient is required to pay the
balance due for services rendered to date.

Other payment plans with lower monthly payments are available for patients
who have insurance coverage for the treatment. Approximately 40% of the patients
treated at the Allied Practices have some form of orthodontic insurance
coverage. Payments for patients with insurance may be lower, depending upon the
amount of the fee paid on behalf of the patient by insurance policies. For
patients with insurance coverage, the portion of the fee not covered by
insurance is paid by the patient and is not waived or discounted by the Allied
Practice.

Information Systems ("IS"). The Company plans to implement a comprehensive
IS strategy over the next several years. The Company will implement a
communications and data transmission program utilizing a proprietary intranet
system and commercially available integration technology. Typically, an
orthodontic practice utilizes two types of systems. The first system is the
accounting and general ledger system and the second is the production system.
The accounting and general ledger system will be implemented promptly upon the
Allied Practice's affiliation with the Company. The production system, which
provides patient and practice management functions, will take more time to
implement. While it is the Company's stated objective to protect the computer
system and applications investment of each Allied Practice, management intends
to use a combination of integration and interface technologies to tie together
the disparate systems.

Purchasing. The Company plans to coordinate quantity discounts of
equipment, office furniture, inventory and supplies for the Allied Practices in
order to reduce per unit costs. In addition, the Company will negotiate
arrangements with other suppliers, such as casualty insurance carriers, that
should provide cost savings to the Allied Practices.

Locations. Upon consummation of the Acquisitions, the Company will provide
management services to the following locations:

<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF
STATE ORTHODONTISTS(1) OFFICES CITIES
- ----- ---------------- --------- ---------
<S> <C> <C> <C>
Alabama............................................ 3 3 3
Arizona............................................ 2 2 1
California......................................... 15 21 17
Florida............................................ 18 32 25
Georgia............................................ 18 37 26
Indiana............................................ 9 19 17
Kentucky........................................... 2 6 6
Michigan........................................... 1 2 2
Minnesota.......................................... 2 2 2
Mississippi........................................ 2 6 6
North Carolina..................................... 1 1 1
Pennsylvania....................................... 2 3 3
South Carolina..................................... 3 5 5
Tennessee.......................................... 2 3 3
Texas.............................................. 4 8 8
Utah............................................... 2 2 2
Virginia........................................... 2 2 2
-- --- ---
Total.................................... 88 154 129
== === ===
</TABLE>

- ---------------

(1) Two of the orthodontists have offices in two different states.

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AGREEMENTS WITH ALLIED PRACTICES AND ALLIED ORTHODONTISTS

Each Allied Practice has entered into three material agreements in
connection with the Acquisitions: (i) an acquisition agreement, which may be in
the form of a purchase and sale agreement whereby OrthAlliance agrees to acquire
certain of the assets or stock of an entity holding certain assets of the Allied
Practice, or an agreement and plan of reorganization, whereby the Allied
Practice transfers certain assets to OrthAlliance; (ii) either a Service
Agreement or a Consulting Agreement (depending upon the applicable regulatory
requirements), whereby OrthAlliance agrees to provide management or consulting
services to the Allied Practice; and (iii) an Employment Agreement between the
Allied Practice and each related Allied Orthodontist who is an equity holder in
the Allied Practice or who provides orthodontic services through such practice
for more than ten days each month.

Acquisition Agreements. The Company will acquire certain operating assets
or stock of each Allied Practice pursuant to an asset purchase and sale
agreement, an agreement and plan of reorganization or a stock purchase and sale
agreement. Each asset purchase and sale agreement generally provides for the
sale by the Allied Practice of its equipment, licenses (to the extent assignable
by law), inventory, accounts receivable, furniture and other personal property,
or some combination thereof based on applicable state laws or regulations, in
exchange for consideration based on the Allied Practice's adjusted patient
revenue (defined below), up to 20% of which is generally payable in cash, with
the remainder payable in shares of Common Stock. The aggregate consideration
paid by the Company in connection with the Acquisitions is approximately $86.0
million. Certain liabilities of the Allied Practices have been assumed totaling
$3.2 million. See "Certain Transactions." Each stock purchase and sale agreement
generally provides for the exchange of the stock of an entity holding certain
assets of the Allied Practice by its stockholders and the payment of
consideration to its stockholders, which consideration is generally the same as
the consideration being paid pursuant to the asset purchase and sale agreements.

Each agreement and plan of reorganization generally provides for the
transfer of certain assets of the Allied Practice to OrthAlliance, the
cancellation or retirement of each share of stock in an entity holding certain
assets of the Allied practice, and the payment of consideration to the
shareholders of such entity, which consideration is generally the same as the
consideration being paid pursuant to the asset purchase and sale agreements.
Each asset purchase and sale agreement, stock purchase and sale agreement and
agreement and plan of reorganization provides for certain incidental
registration rights with respect to the shares of Common Stock paid to the
Allied Practice or the Allied Orthodontist, as the case may be. See "Description
of Capital Stock -- Registration Rights."

Service Agreements. The parties to each Service Agreement include the
Company, as successor through the Merger, and the Allied Practice, which
typically is a professional corporation or association owned by the related
Allied Orthodontist. Each Service Agreement generally requires the Company to
perform the following services for the Allied Practices: provide and maintain
specified furnishings and equipment; provide necessary employees (except
orthodontists and, where applicable law requires, hygienists and dental
assistants); establish appropriate business systems; purchase and maintain
inventory; perform payroll and accounting functions; provide billing and
collection services with respect to patients, insurance companies, and
third-party payors; arrange all legal services not related to malpractice
litigation; design and execute a marketing plan; advise with respect to new
office locations; and manage and organize the Allied Practice's files and
records, including patient records where permitted by applicable law. In the
event that the Allied Practice lacks sufficient funds to pay its current
expenses, the Company is also required to advance funds to the Allied Practice
for the purpose of paying such expenses. Any such advances will be made in the
form of loans to the Allied Practice to be repaid upon such terms as mutually
agreed. Such advances will generally bear interest as negotiated with each
Allied Practice and will be repayable over varying periods of time. The advances
will be funded from the Company's working capital. Repayment of the advance will
be made through the monthly settlement with the Allied Practices.

In exchange for performing the services described above, the Company
generally receives a service fee equal to either a variable percentage of the
Allied Practice's adjusted patient revenue based on such practice's
profitability, revenues, or other factors, or a fixed percentage of adjusted
patient revenue that provides for annual increases based on the reduction of an
Allied Practice's annual overhead percentage. The Company receives the

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<PAGE> 28

service fee and repayment of any portion of an advance made to an Allied
Practice that is due and payable prior to the Allied Orthodontist receiving any
compensation.

The term of each Service Agreement is 20 years, subject to prior
termination by either party in the event the other party becomes subject to
voluntary or involuntary bankruptcy proceedings or materially breaches the
agreement, subject to a cure period. In addition, the Allied Practices may
terminate the Service Agreements upon the occurrence of a change of control (as
defined therein). A transaction approved by the Company's Board of Directors is
not a change of control transaction. Upon the expiration or termination of the
Service Agreement, the Allied Practice may, and in certain circumstances must,
repurchase for cash (at book value) certain assets, including all equipment, and
assume certain liabilities of the Company related to the Allied Practice.

Each Service Agreement is generally not assignable by either party thereto
without the written consent of the other party; however, the Company may assign
the Service Agreement without the Allied Practice's consent to any entity under
common control with the Company. The Company and the Allied Practice agree to
indemnify each other for costs and expenses incurred by such other party that
are caused directly or indirectly by, as the case may be, the Company's or the
Allied Practice's intentional or negligent acts or omissions. In the case of the
Allied Practice's obligation to indemnify the Company, such obligation also
applies to intentional or negligent acts and omissions occurring prior to the
date of the Service Agreement.

Consulting Agreements. The parties to each Consulting Agreement include
the Company, as successor through the Merger, and the Allied Practice. Certain
provisions of the Consulting Agreement are substantially similar to the Service
Agreement, including provisions relating to the Company's obligation to loan
funds to the Allied Practice in the event the Allied Practice is unable to pay
its current expenses, termination of the Consulting Agreement, repurchase of
assets and assumption of liabilities by the Allied Practice upon expiration or
termination, assignment, and indemnification.

The services provided by the Company to the Allied Practice under each
Consulting Agreement generally include consulting with respect to equipment and
office needs; preparing staffing models appropriate for an Allied Practice;
advising and training with respect to business systems; purchasing and
maintaining inventory; advising with respect to and providing or arranging
accounting and bookkeeping services; advising with respect to developing a
marketing plan; assessing the financial feasibility of establishing new offices;
providing billing and collection services; and assisting the Allied Practice in
organizing and developing filing and recording systems.

In exchange for such services, the Company receives a consulting fee equal
to (i) a variable percentage of adjusted patient revenue based on the Allied
Practice's profitability and revenues, (ii) a fixed percentage of adjusted
patient revenue that provides for annual increases based on the reduction of an
Allied Practice's annual overhead percentage, or (iii) a fixed amount that
provides for annual increases during the term of the Consulting Agreement.

Pursuant to both the Service Agreements and Consulting Agreements, the
Company's Allied Orthodontists maintain full control over and ownership of their
orthodontic practices, determine which personnel will be affiliated with the
Allied Practices and set their own standards of practice to promote quality
orthodontic care. The Company does not engage in the practice of orthodontics or
dentistry. Each Allied Orthodontist is responsible for compliance of his or her
Allied Practice with state and local regulations applicable to the practice of
orthodontics and with licensing or certification requirements. Each Allied
Orthodontist determines the fees to be charged for services provided to patients
and each Allied Practice executes payor contracts. In addition, each Allied
Orthodontist acquires and pays for malpractice insurance coverage.

Employment Agreements. Each Allied Orthodontist who is or becomes an
equity holder in an Allied Practice or who provides orthodontic services through
an Allied Practice for more than 10 days a month is required to execute an
employment agreement with the Allied Practice. Each employment agreement
generally provides that the Allied Orthodontist will perform professional
services for the Allied Practice for a period of five years, subject to prior
termination, (i) for cause by the Allied Practice (which generally means death,
incapacity, willful misconduct, conviction for a felony, or chronic alcoholism
or drug addiction), (ii) by the Allied Orthodontist in the event of a material
breach by the Allied Practice, and (iii) by the Allied Orthodontist in the event
of the Company's bankruptcy. The Allied Orthodontist agrees that following
termination or expiration of

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<PAGE> 29

the employment agreement, he or she will not compete for a period of two years
in the market in which the Allied Practice operates an office and will limit the
methods of advertising in the area in which an Allied Practice is located.

GOVERNMENT REGULATION

General. The field of orthodontics is highly regulated, and there can be
no assurance that the regulatory environment in which the Company operates will
not change significantly in the future. In general, regulation of healthcare
companies is increasing. Every state imposes licensing requirements on
individual orthodontists and on facilities operated by and services rendered by
orthodontists. In addition, federal and state laws regulate health maintenance
organizations and other managed care organizations for which orthodontists may
be providers. In connection with the entry into new markets, the Company, Allied
Practices and Allied Orthodontists may become subject to compliance with
additional regulations.

The operations of the Allied Practices must meet federal, state and local
regulatory standards in the areas of safety and health. Historically, compliance
with those standards has not had any material adverse effect on the operations
of the Founding Practices. Based on its familiarity with the historical
operations of the Founding Practices and the activities of the Company's Allied
Orthodontists, management believes that the Allied Practices are in compliance
in all material respects with all applicable federal, state and local laws and
regulations relating to safety and health.

State Legislation. The laws of several states prohibit orthodontists from
splitting fees with non-orthodontists. Furthermore, many states prohibit
nonorthodontic entities from practicing orthodontics, employing orthodontists,
or in some circumstances, employing orthodontic assistants. The laws of some
states prohibit advertising orthodontic services under a trade or corporate name
and require that all advertising be in the name of the orthodontist. A number of
states also regulate the content of advertisement of orthodontic services and
the use of promotional gift items. A number of states limit the ability of a
non-licensed dentist or non-orthodontist to own equipment or offices used in an
orthodontic practice. Some of these states allow leasing of equipment and office
space to an orthodontic practice, under a bona-fide lease, if the equipment and
office remain in the complete care and custody of the orthodontist. Management
believes, based on its familiarity with the historical operations of the
Founding Practices, the activities of the Company's Allied Orthodontists and
applicable regulations, that the Company's current and planned activities do not
constitute the prohibited practices contemplated by these statutes and
regulations. There can be no assurance, however, that future interpretations of
such laws, or the enactment of more stringent laws, will not require structural
and organizational modifications of the Company's initial relationships with its
Allied Orthodontists or the operation of the Allied Practices. In addition,
statutes in some states could restrict expansion of Company operations in those
jurisdictions. The Company either enters into a Service Agreement or Consulting
Agreement depending upon applicable state regulations.

Regulatory Compliance. The Company monitors developments in laws and
regulations relating to the practice of orthodontics and dentistry. The Company
may be required to modify its agreements, operations and marketing strategies
from time to time in response to changes in the business and regulatory
environment. The Company intends to structure all of its agreements, operations
and marketing in accordance with applicable law, although there can be no
assurance that its arrangements will not be successfully challenged or that
required changes may not materially affect the Company's business, financial
condition and results of operations.

COMPETITION

The Company anticipates facing substantial competition from other entities
as OrthAlliance seeks to affiliate with additional orthodontic practices. The
Company is aware of several practice management companies that are focused in
the area of orthodontics. Additional entities may enter this market and compete
with the Company. Certain of these competitors have greater financial or other
resources than the Company.

The business of providing orthodontic services is highly competitive in
each market in which the Founding Practices and other practices operate.
Founding Practices compete with orthodontists who maintain single offices or
operate a single satellite office, as well as with orthodontists that maintain
group practices or operate in multiple offices. Founding Practices also compete
with general dentists and pedodontists who provide certain

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<PAGE> 30

orthodontic services, some of whom have more established practices. The
provision of orthodontic services by such dentists and pedodontists has
increased in recent years. There can be no assurance that the Company or the
Allied Practices will be able to compete effectively within their markets.

EMPLOYEES

Upon completion of the Acquisitions and the Merger, OrthAlliance will
employ an aggregate of approximately 565 full-time employees. None of the
Company's employees are represented by a collective bargaining agreement.
OrthAlliance considers its relationship with its employees to be good.

PROPERTIES

The Company leases approximately 1,700 square feet of office space in
Torrance, California for its headquarters and approximately 500 square feet of
office space in its Atlanta, Georgia office.

INTELLECTUAL PROPERTY

OrthAlliance has applied for federal registration of the service mark
"OrthAlliance." Management intends to utilize the service mark, as allowed by
applicable law, in the Company's marketing and advertising campaigns in order to
associate the name OrthAlliance with a reputation for nationwide quality
orthodontic care.

LITIGATION AND INSURANCE

The Company does not have any pending litigation that if adversely
determined would have a material adverse effect on the Company. The Allied
Practices provide orthodontic services to the public and are exposed to the risk
of professional liability and other claims. Such claims, if successful, could
result in substantial damage awards to the claimants that may exceed the limits
of any applicable insurance coverage. Although the Company does not control the
practice of orthodontics by the Allied Practices, it could be asserted that the
Company should be held liable for malpractice of an Allied Orthodontist.

The Company maintains liability insurance for itself and it is anticipated
that, where permitted by applicable law and insurers, the Company will be named
as an additional insured under the policies of the Allied Practices. There can
be no assurance that any claims against the Company or any of the Allied
Practices will not be successful, or if successful, will not exceed the limits
of available insurance coverage or that such coverage will continue to be
available at acceptable rates.

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<PAGE> 31

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to the
directors and executive officers of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
<S> <C> <C>
Sam Westover.................................... 41 President, Chief Executive Officer and
Director
Robert S. Chilton............................... 39 Chief Financial Officer
P. Craig Hethcox................................ 45 Chief Operating Officer
Paul H. Hayase.................................. 42 Senior Vice President -- Human Resources,
General Counsel and Secretary
Randall K. Bennett, D.D.S., M.S................. 41 Director
Douglas D. Durbin, D.M.D., M.S.D................ 42 Director(1)
Randall A. Schmidt, D.D.S., M.S.D............... 40 Director(1)
W. Dennis Summers............................... 48 Director(1)
Craig L. McKnight............................... 46 Director(1)
U. Bertram Ellis, Jr............................ 43 Director(1)
Jonathan E. Wilfong............................. 48 Chairman of the Board of Directors and
Consultant
</TABLE>

- ---------------

(1) Dr. Durbin, Dr. Schmidt, Mr. Summers, Mr. McKnight and Mr. Ellis will be
elected to serve as Directors immediately preceding consummation of the
Acquisitions.

Sam Westover has served as a Director, President and Chief Executive
Officer of OrthAlliance since October 1996. From August 1993 until July 1996,
Mr. Westover served as President and Chief Executive Officer of Systemed Inc., a
pharmacy benefit management company, where he also served as a Director from
July 1992 until February 1997. From January 1993 until August 1993, Mr. Westover
served as Senior Vice President, Chief Financial Officer and Treasurer of
Wellpoint Health Networks Inc., a health insurance company. Prior to joining
Wellpoint, Mr. Westover served as Chief Financial Officer and Senior Vice
President, Corporate Financial Services of Blue Cross of California, a position
to which he was named in May 1990.

Robert S. Chilton has served as Chief Financial Officer of OrthAlliance
since May 1997. From April 1994 until May 1997, Mr. Chilton served as Vice
President/Controller of E & S Ring Management Corporation, a real estate
management firm. Mr. Chilton was Controller of Karl Storz Endoscopy-America,
Inc., a medical device manufacturer and distributor, from October 1987 until
April 1994. Mr. Chilton is a certified public accountant, and from February 1985
to October 1987 was employed by KPMG Peat Marwick.

P. Craig Hethcox will become Chief Operating Officer of OrthAlliance upon
the consummation of the Acquisitions. From January 1997 to the date of the
Merger, Mr. Hethcox has served as Chief Executive Officer of USOC. From July
1994 to December 1996, he served as Chief Operating Officer for Equimed, Inc.,
where he directed the corporate operations for sixty-five ophthalmology,
oncology and surgical center entities. From 1988 to June 1994, Mr. Hethcox
served as Vice President of Operations for Medical Care America, where he was
responsible for the operations of the then largest practice management company
with surgical centers. Mr. Hethcox also held senior management positions with
Medical Corporation of America, Inc., and Omni Eye Services, Inc., both
ophthalmology practice management operations, and was Chief Executive Officer of
Lakeside Community Hospital.

Paul H. Hayase has served as Senior Vice President -- Human Resources,
General Counsel and Secretary of OrthAlliance since October 1996. From August
1995 until January 1997, Mr. Hayase served as Vice President -- Human Resources,
General Counsel and Secretary of Systemed Inc. Mr. Hayase served as Senior
Counsel of Ralphs Grocery Company, a supermarket chain in California, from
November 1993 to August 1995. From January 1985 to November 1993, Mr. Hayase
served as Senior Vice President, General Counsel of Knapp Communications
Corporation, a magazine publishing company.

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<PAGE> 32

Randall K. Bennett, D.D.S., M.S. has served as a Director of OrthAlliance
since its inception. He has practiced orthodontics in Salt Lake City, Utah since
1989. He practiced in Beverly Hills, California from 1988 to 1989. Dr. Bennett
graduated from Loma Linda University in 1988 with an M.S. degree in orthodontics
and from the University of Alberta in 1981 with a D.D.S. degree.

Douglas D. Durbin, D.M.D. has agreed to serve and will be elected a
Director of OrthAlliance immediately preceding the consummation of the
Acquisitions. Dr. Durbin has served as President of The Kentucky Center for
Orthodontics and Dento-Facial Orthopedics, a Founding Practice, since 1983, and
manages six practice locations and 20 employees. Dr. Durbin is a member of the
American Association of Orthodontists, the American Dental Association and the
Kentucky Association of Orthodontists, a Diplomate of the American Board of
Orthodontics and has served as Secretary, Treasurer, and President of the
Bluegrass Dental Society. Dr. Durbin graduated from the University of Kentucky
College of Dentistry with a D.M.D. degree in 1978. He received his M.S.D. and
Certificate in Orthodontics from the University of Kentucky College of Dentistry
in 1983.

Randall A. Schmidt, D.D.S., M.S.D. has agreed to serve and will be elected
a Director of OrthAlliance immediately preceding the consummation of the
Acquisitions. Dr. Schmidt has been in the practice of orthodontics since 1983 in
northwest Indiana, where he is a co-owner of Orthodontic Affiliates, P.C., a
Founding Practice. Dr. Schmidt is a member of the American Association of
Orthodontists, American Dental Association and the Indiana Society of
Orthodontists. Dr. Schmidt graduated from Indiana University in 1981 with a
D.D.S. degree. He received his M.S.D. and Certificate in Orthodontics from
Indiana University in 1983.

W. Dennis Summers has agreed to serve and will be elected a Director of
OrthAlliance immediately preceding the consummation of the Acquisitions. Since
1984, Mr. Summers has served as a principal of Roberts, Isaf & Summers, P.C.
(and its predecessor by merger), a law firm located in Atlanta, Georgia. Mr.
Summers specializes in corporate and business matters.

Craig L. McKnight has agreed to serve and will be elected a Director of
OrthAlliance immediately preceding the consummation of the Acquisitions. Since
March 1995, Mr. McKnight has served as Executive Vice President of Magellan
Health Services ("Magellan"), which was previously known as Charter Medical
Corporation, and since October 1995 Mr. McKnight has also served as Chief
Financial Officer of Magellan. From June 1994 to March 1995, Mr. McKnight was
the Partner-in-Charge of the Philadelphia Health Care Practice of Coopers &
Lybrand, L.L.P. Prior to June 1994, Mr. McKnight was responsible for the Health
Care Practice of Coopers & Lybrand, L.L.P. in California.

U. Bertram Ellis, Jr. has agreed to serve and will be elected a Director of
OrthAlliance immediately preceding the consummation of the Acquisitions. Since
April, 1996, Mr. Ellis has served as President, Chief Executive Officer and
Chief Operating Officer of Broadcast Development Corporation. Mr. Ellis has
served as Chairman and Chief Executive Officer of IXL Holdings ("IXL"). Mr.
Ellis founded and served as President & Chief Executive Officer of Ellis
Communications, a media company ("ECI"), from 1993 to 1996. From 1986 until
1992, Mr. Ellis served as the President/Chief Executive Officer/Chief Operating
Officer of Act III Broadcasting, a broadcast group of eight Fox-affiliate
stations. Mr. Ellis serves as a director on the boards of NOVA Information
Systems, Inc., Promus Hotel Corporation, Endeavor Technologies, Inc., First
Union National Bank of Georgia and Upper Chattahoochee RiverKeeper.

Jonathan E. Wilfong has served as Chairman of the Board of Directors of
OrthAlliance since May 1997. Mr. Wilfong has served as an executive consultant
to OrthAlliance since its inception and has served as consultant to USOC since
June 1996. Mr. Wilfong is the founder and a principal of Newfound Capital
Associates, an investment banking advisory firm founded in 1996 that specializes
in advising high growth businesses on capital formation strategies and
acquisition transactions. Mr. Wilfong is a Certified Public Accountant, and from
1983 to 1996 was a partner with Price Waterhouse LLP in Atlanta, Georgia and
Greenville, South Carolina.

BOARD OF DIRECTORS

The Company's Board of Directors is divided into three classes which
consist, as nearly as practicable, of one-third of the total number of directors
serving on the Board of Directors. The Board of Directors will have up

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<PAGE> 33

to nine members and is currently composed of three members and immediately prior
to consummation of the Acquisition will increase to eight members, as named
herein. The members of each class serve staggered three-year terms following the
initial terms of such classes. The initial terms of Class I, Class II and Class
III directors expire at the annual stockholders' meetings in 1998, 1999 and
2000, respectively. Dr. Durbin and Mr. Summers will be members of Class I; Dr.
Bennett is a member and Dr. Schmidt and Mr. Ellis will be members of Class II;
and Messrs. Westover and Wilfong are members and Mr. McKnight will be a member
of Class III.

BOARD COMMITTEES

The Board of Directors has established an Executive Committee, a Nominating
Committee, an Audit Committee and a Compensation Committee. Messrs. Westover and
Wilfong and Drs. Bennett and Durbin will serve on the Executive Committee. Mr.
Wilfong and Dr. Bennett will each serve on the Audit Committee and the
Compensation Committee. Messrs. Summers, Westover and Wilfong will serve on the
Nominating Committee. The Executive Committee is authorized by the Board of
Directors to take all action which may be delegated by the Board of Directors
under the DGCL. The Nominating Committee recommends candidates for election to
the Company's Board of Directors, examines the performance of incumbent
Directors and makes recommendations concerning the retention of such Directors.
The Audit Committee recommends the annual appointment of the Company's auditors,
with whom the Audit Committee reviews the scope of audit and non-audit
assignments and related fees, accounting principles used by the Company in
financial reporting and the adequacy of the Company's internal control
procedures. The 1997 Employee Stock Plan and the 1997 Non-Employee Director
Stock Plan are administered by the Compensation Committee. The Compensation
Committee also has the responsibility for reviewing and approving salaries,
bonuses, and other compensation and benefits of executive officers, and advising
management regarding benefits and other terms and conditions of compensation.

DIRECTOR COMPENSATION

Members of the Board of Directors are reimbursed for their out-of-pocket
expenses for each meeting attended but otherwise serve without cash
compensation. The Company has adopted the 1997 Non-Employee Director Stock Plan,
pursuant to which each non-employee director (the "Outside Directors") receives
an automatic grant to purchase 5,000 shares of Common Stock upon his or her
election to the Board and, if serving as an Outside Director following the
annual meeting each year, an additional grant for the purchase of 5,000 shares
of Common Stock. See "-- Stock Plans -- 1997 Non-Employee Director Stock Option
Plan."

EXECUTIVE COMPENSATION

OrthAlliance was incorporated in October 1996 and did not conduct any
operations prior to that time. The Company anticipates that during fiscal 1997
its President and Chief Executive Officer and the three other most highly
compensated executive officers who are anticipated to receive annualized
compensation in excess of $100,000 will be, respectively, Messrs. Westover,
Hethcox, Hayase and Chilton. Their expected annualized base salaries for 1997
are $250,000, $185,000, $165,000 and $135,000, respectively. See "-- Employment
Agreements."

EMPLOYMENT AGREEMENTS

Prior to the Merger, the Company will enter into employment agreements with
Messrs. Westover, Hethcox and Hayase providing for annual base salaries of
$250,000, $185,000 and $165,000, respectively, with each person being eligible
for a cash bonus of up to 30% of his base salary. Additionally, the agreements
provide for the grant of options for the purchase of Common Stock to each of
Messrs. Westover, Hethcox and Hayase for 300,000, 100,000 and 75,000 shares of
Common Stock, respectively, and such options will vest (i) 20% on the closing of
the Offering and (ii) 20% on the anniversary of such date for each of the next
four years. These options expire ten years from the date of grant. Each
employment agreement contains a provision that if the employee is terminated
within a twelve-month period following a change in control of the Company (as
defined therein), the Company will pay such person three times the sum of (i)
his annual base compensation, (ii) the maximum possible cash bonus for such
year, and (iii) any accrued salary, benefits or reimbursements.

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<PAGE> 34

The Company has entered into a letter agreement with Mr. Chilton providing
for an annual base salary of $135,000, and a cash bonus of up to 30% of his
annualized base salary. Additionally, the Company has granted Mr. Chilton an
option for the purchase of 50,000 shares of Common Stock, with a vesting
schedule consistent with the vesting schedule for Messrs. Westover, Hethcox and
Hayase discussed above.

All options for the purchase of Common Stock granted to management
personnel discussed herein have an exercise price equal to the price of the
Common Stock to the public in the Offering.

STOCK PLANS

OrthAlliance has adopted the 1997 Employee Stock Plan and the 1997
Non-Employee Director Stock Plan (together, the "Stock Plans"). The Company
intends to register the shares of Common Stock issuable upon exercise of options
granted under the Stock Plans and, upon registration, such shares will be
eligible for resale in the public market, subject to applicable rules and
regulations of the Securities Act.

1997 Employee Stock Plan. The Board of Directors has adopted and the
stockholder has approved the Company's 1997 Employee Stock Plan (the "Employee
Plan"). Awards under the Employee Plan are to be determined by the Compensation
Committee and granted to officers and employees of the Company in the form of
non-qualified or incentive stock options. The Employee Plan may be terminated by
the Board of Directors at any time.

A total of 1,000,000 shares of Common Stock are reserved for issuance
pursuant to the Employee Plan, subject to anti-dilution provisions. As of May
14, 1997, options for the purchase of 600,000 shares of Common Stock had been
granted to certain officers of the Company at an exercise price equal to the
price to the public in the Offering, which options vest 20% upon the closing of
the Offering with the balance vesting 20% on the first through fourth
anniversary dates of the date of this Prospectus. These options expire ten years
from the date of grant. See "Management -- Employment Agreements."

1997 Non-Employee Director Stock Option Plan. The Board of Directors has
adopted and the stockholder has approved the 1997 Non-Employee Director Stock
Option Plan (the "Non-Employee Director Plan"). Awards under this plan are to be
granted to non-employee directors ("Outside Directors") of the Company. The plan
is intended to allow Outside Directors receiving grants to be Non-Employee
Directors, as defined in Rule 16b-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), with respect to the Company's Stock Plans and,
accordingly, is intended to be self-governing with respect to the Outside
Directors.

A total of 200,000 shares of Common Stock are reserved for issuance to the
Outside Directors pursuant to the Non-Employee Director Plan. Each person who is
elected or appointed as an Outside Director will be automatically granted an
option to purchase 5,000 shares of Common Stock at the time of his or her
election or appointment. Commencing in 1998, each person who continues to serve
as an Outside Director following the annual meeting each year will receive an
option to purchase 5,000 shares of Common Stock. Options issued to Outside
Directors pursuant to this plan will be non-qualified stock options, and will
expire ten years from the date of grant. The exercise price of such options
shall be equal to the average closing bid price for the ten trading days before
the Company's annual meeting of stockholders for the annual grants and for the
ten trading days before election for the initial grants. Options issued to
Outside Directors become exercisable on the first anniversary of the date of
grant.

Administration of the Stock Plans. The Employee Plan is administered by
the Compensation Committee of the Board of Directors. The Non-Employee Director
Plan is intended to be self-governing. With respect to the Employee Plan, the
Compensation Committee determines the persons to whom, and the times at which,
awards are granted, the types of awards granted, certain amendments to the plan
(as permitted) and all other related terms and conditions of the awards, subject
to the terms, conditions and limitations set forth therein. Under the Employee
Plan, the Compensation Committee must consist of at least two directors, and
with respect to grants of options or awards to any persons subject to Section 16
of the Exchange Act, the Compensation Committee must consist of at least two
directors who are Non-Employee Directors under Rule 16b-3.

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LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under Section 145 of the Delaware General Corporation Law (the "DGCL"), a
corporation may indemnify any of its directors and officers against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with a threatened,
pending or completed action, suit or proceeding brought against such officer or
director by reason of the fact that he or she is or was a director or officer
(i) if any such person acted in good faith and in a manner reasonably believed
to be in or not opposed to the best interests of the corporation and (ii) in
connection with any criminal action or proceeding if such person had no
reasonable cause to believe such conduct was unlawful. In actions brought by or
in the right of the corporation, however, Section 145 provides that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable for negligence or misconduct
in the performance of such person's duty to the corporation unless, and only to
the extent that, the Court of Chancery of the State of Delaware or the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in review of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.

The Company's Certificate provides that no director of the Company shall be
liable for breach of fiduciary duty as a director except for (i) any breach of
the director's duty of loyalty to the Company or its stockholders; (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law; (iii) for willful or negligent violations of certain
provisions of the DGCL imposing certain requirements with respect to stock
repurchases, redemptions and dividends; or (iv) any transaction from which the
director derived an improper personal benefit. Pursuant to the Company's
Certificate and Bylaws, the Company is obligated to indemnify each of its
directors and officers to the fullest extent permitted by the DGCL. In addition,
the Bylaws obligate the Company to purchase and maintain insurance on behalf of
any director or officer of the Company against any liability asserted against
and incurred by such director or officer, whether or not the Company would have
the power to indemnify such officer or director against such liability under the
provisions of the DGCL.

COMPENSATION COMMITTEE INTERLOCKS

The Company had no Compensation Committee prior to May 1997. Prior thereto,
the Board of Directors of the Company, and of USOC and Premier, respectively,
determined executive compensation. No executive officer of the Company serves as
a member of a compensation committee or as a director of any entity of which any
of the Company's directors serve as an executive officer.

CERTAIN TRANSACTIONS

USOC and Premier will complete the Merger prior to the consummation of the
Acquisitions of the Founding Practices. The Company was created as a shell
corporation to be activated in connection with the Offering. Prior to the
Merger, the sole stockholder of the Company held a minority interest in Premier,
there were two common investors between USOC and Premier, and there were no
common owners between USOC and the Company. USOC and Premier are considered
promoters; therefore, the merger will be treated as part of the Staff Accounting
Bulletin No. 48, "Transfers of Nonmonetary Assets by Promoters and Shareholders"
transaction with the Founding Practices that will result in carryover basis of
assets and liabilities of USOC and Premier. In the Merger, the outstanding
capital stock of USOC and Premier will be automatically converted into an
aggregate of 2,250,000 shares of Common Stock and 250,000 shares of Class B
Common Stock. The stockholders of USOC and Premier shall receive 70% and 30%,
respectively, of the Common Stock and Class B Common Stock issued as
consideration in the Merger.

The directors, executive officers and five percent or greater beneficial
owners of the Company will receive total consideration pursuant to the Merger
(excluding any consideration that may be received indirectly through POV LLC, as
described below) as follows: Mr. Westover, 242,918 shares of Common Stock and
26,991 shares of Class B Common Stock; Mr. Hayase, 40,479 shares of Common Stock
and 4,498 shares of Class B Common Stock; Dr. Bennett, 175,438 shares of Common
Stock and 19,493 shares of Class B Common Stock; Dr. Durbin, 9,558 shares of
Common Stock and 1,062 shares of Class B Common Stock; Dr. Schmidt, 24,214
shares of Common Stock and 2,690 shares of Class B Common Stock; Mr. Wilfong
143,372 shares of Common Stock and 15,930 shares of Class B Common Stock; and
Dr. Pickron, 824,686 shares of Common Stock and 91,632 shares of Class B Common
Stock.

34
<PAGE> 36

Simultaneous with and as a condition to the closing of the Offering,
OrthAlliance will close the Acquisitions pursuant to which it will acquire
certain operating assets of or the stock of an entity holding certain assets of
the 58 separate Founding Practices in exchange for cash and shares of Common
Stock and enter into Management Agreements with the Founding Practices. The
aggregate consideration to be paid by OrthAlliance to the Founding Practices is
approximately $86.0 million, consisting of 6,566,618 shares of Common Stock
(assuming an initial public offering price of $11.00 per share, the mid-point of
the estimated initial public offering price range) and approximately $13.8
million in cash, all of which is payable upon closing of the Acquisitions. The
aggregate consideration to be paid for the Founding Practices will not change;
however, the actual number of shares of Common Stock issued to the Founding
Practices will increase or decrease depending upon the public offering price of
the Common Stock in the Offering. The exact number of shares will be determined
by dividing $72.3 million by the price to the public in the Offering. The cash
portion of the consideration will be paid from proceeds received by the Company
in the Offering. Drs. Bennett, Durbin and Schmidt, all of whom are or will be
directors of the Company, and Dr. Pickron, a beneficial owner of more than 5% of
the Common Stock following completion the Acquisitions, will receive 178,345,
182,080, 185,015 and 363,091 shares of Common Stock, respectively, and 19,493,
1,062, 2,690 and 93,563 shares of Class B Common Stock, and $490,447, $222,542,
$165,251 and $998,501 in cash, respectively, as a result of the Acquisitions.
The consideration that the Company has agreed to pay each of the Founding
Practices of Drs. Pickron, Durbin, Schmidt and Bennett under the affiliation
agreements was calculated in the same manner as the consideration for each of
the other Founding Practices.

In January 1997, Premier Orthodontic Ventures, LLC, a limited liability
company ("POV LLC"), loaned approximately $1 million to Premier, and in
connection with the Merger, the promissory note evidencing this debt obligation
(the "Premier Note") will become the obligation of OrthAlliance. POV LLC will
receive, out of proceeds of the Offering, an aggregate of approximately $1.06
million, which includes repayment of the principal amount of the Premier Note
and accrued interest of approximately $50,000. In addition, POV LLC owns 72% of
the outstanding common stock of Premier. Dr. Bennett and Messrs. Westover,
Hayase and J. Dalton Gerlach, a Senior Vice President - Development of the
Company, own Class A membership interests in POV LLC of 33.3%, 44.4%, 11.1% and
11.1%, respectively. Mr. Gerlach owns approximately 19% of the Class B
membership interests in POV LLC. In consideration of the redemption of their
membership interests in POV LLC, each Class B member will receive his invested
amount (which is approximately $1.0 million in the aggregate) plus interest at
6% and a number of shares of Common Stock equal to two times such member's
invested amount. The exact number of shares of Common Stock will be determined
by the price to the public in the Offering. The Class A members will be entitled
to a pro rata distribution of the remaining assets of POV LLC after the
interests of the Class B members have been redeemed.

Premier has succeeded to the obligations of POV LLC with regards to certain
letter agreements with each of Messrs. Westover, Hayase and Gerlach which
provide that OrthAlliance as the successor to Premier must pay such persons
consulting fees of $233,960, $140,376 and $147,897, respectively, upon the
closing of the Offering. See "Use of Proceeds."

USOC entered into a consulting agreement with Newfound Capital Associates
("Newfound") and Newfound's President, Mr. Wilfong. OrthAlliance succeeds to the
rights and obligations of USOC under the consulting agreement through the
Merger. In addition, Mr. Wilfong entered into a separate consulting agreement
with OrthAlliance. Mr. Wilfong agreed to provide financial and general business
services to the Company, and the Company has agreed to pay Mr. Wilfong
consulting fees of $300,000 for such services, of which $250,000 is payable upon
completion of the Offering and will be paid from proceeds received in the
Offering. See "Use of Proceeds." The payment of this consulting fee is directly
related to the services performed by Mr. Wilfong in connection with the
Offering. These fees will be expensed in the second and third quarter of 1997.
Pursuant to these consulting agreements and in addition to the consulting fee,
the Company issued to Mr. Wilfong (i) 143,372 shares of Common Stock and 15,930
shares of Class B Common Stock, and (ii) warrants to purchase 318,750 shares of
Common Stock with an exercise price per share equal to the initial public
offering price with respect to 150,000 shares and equal to the initial public
offering price net of the underwriting discount with respect to 168,750 shares
of Common Stock, exercisable for a five-year term commencing on the date of this
Prospectus. Mr. Wilfong will continue to provide consulting services to the
Company until the earlier of the termination of the consulting agreements on
September 30, 1997 or the occurrence of other specified events. Pursuant to the
terms of the stock purchase warrants, Mr. Wilfong has certain incidental
registration rights for the registration of the shares of Common Stock
underlying the warrants. See "Description of Capital Stock -- Registration
Rights."

USOC entered into a consulting agreement with Premier Management, Inc.
("PMI") and PMI's President, Robert D. Garces. The Company succeeds to the
rights and obligations of USOC under the consulting agreement

35
<PAGE> 37

through the Merger. Under his consulting agreement, Mr. Garces has agreed to
provide financial and general business services to the Company, and the Company
has agreed to pay Mr. Garces a consulting fee of $100,000 for such services,
payable upon completion of the Offering and from the proceeds of the Offering.
The payment of this consulting fee is directly related to services performed by
Mr. Garces in connection with the Offering. These fees will be expensed in the
second and third quarter of 1997. In addition to the consulting fee, the Company
issued to Mr. Garces (i) 60,535 shares of Common Stock and 6,726 shares of Class
B Common Stock, and (ii) a warrant to purchase 56,250 shares of Common Stock
with an exercise price equal to the initial public offering price net of the
underwriting discount, exercisable for a five-year term commencing on the date
of this Prospectus. Mr. Garces will continue to provide services until the
earlier of the termination of the consulting agreement on September 30, 1997 or
the occurrence of other specified events. Pursuant to the terms of the stock
purchase warrant, Mr. Garces has certain incidental registration rights for the
registration of the shares of Common Stock underlying the warrants. See
"Description of Capital Stock -- Registration Rights."

USOC entered into an employment agreement with Mr. Hethcox providing for
the payment of $18,000 per month and the issuance of warrants to purchase 50,000
shares of USOC's common stock. Mr. Hethcox will have received $108,000 at the
time of the Offering. OrthAlliance will assume through the Merger the obligation
of USOC to Mr. Hethcox and will issue replacement warrants to purchase 50,000
shares of Common Stock at an exercise price of $0.01 a share, exercisable for a
five-year term commencing on the date of this Prospectus.

Certain of the Allied Orthodontists, including Dr. Schmidt, will receive
stock purchase warrants for referring other Allied Orthodontists to the Company.
Dr. Schmidt will receive a warrant to purchase 31,600 shares of Common Stock
with an exercise price per share equal to the initial public offering price,
exercisable for a five-year term commencing on the date of this Prospectus.

At the direction of the Company's executive officers, certain Allied
Orthodontists may be paid fees for: (i) preparing educational and seminar
materials for the Company, (ii) consulting with other Allied Orthodontists on
matters requested by management, (iii) identifying and performing due diligence
on additional orthodontic practices which may affiliate with the Company, and
(iv) other matters requested from time to time by management in the normal
course of operating the Company's business. It is not presently known by
management which Allied Orthodontists will be requested to perform such services
in the future and, therefore, management does not know the amount of fees or the
Allied Orthodontists to whom such fees may be paid.

Dr. Pickron received cash compensation from USOC in 1996 totalling $150,000
for serving as its Chief Executive Officer.

The following table provides certain information concerning the Founding
Practices:

36
<PAGE> 38

<TABLE>
<CAPTION>
CONSIDERATION TO BE RECEIVED:
DEBT AND --------------------------------------
ASSETS TO BE LIABILITIES CASH VALUE OF NUMBER OF
FOUNDING PRACTICE: CONTRIBUTED(1) ASSUMED DISTRIBUTION SHARES(2) SHARES(2)
- ------------------ -------------- ----------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
George T. Mitchell, D.D.S.,
P.C............................. 23,423 4,283 140,535 562,141 51,104
Winston C. Morris, D.M.D., P.A.... 102,240 37,270 177,912 711,650 64,695
R. O. Parsons, D.M.D., M.S.D.,
P.C............................. 656,840 33,418 633,223 2,532,891 230,263
Ben B. Pence, D.M.D., P.C......... 9,940 28,355 292,378 1,169,513 106,319
Ronald G. Philipp, D.M.D., P.A.... 4,360 38,291 77,306 695,751 63,250
Dr. R. N. Pickron, P.C............ 1,354,561 387,619 1,288,388 5,153,553 468,505
Richard L. Rothstein, D.M.D.,
P.A............................. 230,596 18,624 240,764 963,057 87,551
Thomas G. Rykovich, D.D.S.,
P.C............................. (855) 20,453 76,690 690,214 62,747
Victor S. Sands, D.D.S., P.C...... 1,390 9,474 593,084 2,372,337 215,667
OA Equipment, Inc................. 437,275 129,335 324,022 3,990,512 362,774
Gregory P. Scott, D.D.S., P.A..... 17,268 9,753 144,527 818,984 74,453
ABS, P.C.......................... 82,617 3,584 176,615 706,460 64,224
Gerald N. Smernoff, D.D.S.,
Ltd............................. 99,601 0 268,228 1,072,913 97,538
Douglas E. Smith, D.D.S., P.C..... 226,740 27,044 416,366 1,665,465 151,406
D. B. Snead, D.M.D., P.A.......... (40,748) 83,127 142,624 570,495 51,863
Gilbert H. Snow, D.D.S., Inc...... 126,846 33,332 624,200 2,496,799 226,982
Mark D. Thebaut, D.D.S., P.C...... 55,246 36,317 162,423 692,434 62,949
Trawick Orthdontic Center, P.A.... 52,593 15,664 0 1,178,687 107,153
Baron V. Whateley, D.D.S., M.S.,
P.C............................. 2,778 19,442 118,257 473,027 43,002
Mark A. Yaffey, D.D.S., P.A....... 76,053 68,606 193,084 772,336 70,212
Goldstein, Yurfest & Burns,
D.D.S., P.C..................... 217,691 6,745 246,733 986,933 89,721
Randall K. Bennett, D.D.S., M.S... 11,463 13,946 490,447 1,961,790 178,345
Kenneth Brehnan, D.D.S............ (47,077) 18,575 335,548 1,342,192 122,017
John W. Bryant, D.D.S., A
Professional Corporation........ (21,017) 0 142,053 568,215 51,656
Raymond Fortson, D.D.S............ 73,069 30,568 0 1,579,444 143,586
Joseph W. Gray, D.D.S., M.S.,
Inc............................. (104,616) 42,079 364,574 1,458,297 132,572
Gregg G. Hipple, D.D.S., M.S.,
Ltd............................. (96,338) 0 0 2,301,200 209,200
Robert E. Hirschfield, D.D.S.,
P.A............................. 156,438 44,300 418,714 1,674,855 152,260
Joseph C. Jackson, Jr., D.D.S.,
P.A............................. 209,382 6,544 213,603 854,411 77,674
Orthodontic Associates............ 23,966 23,966 311,844 1,247,375 113,398
Joel Martinez, D.D.S., Inc........ 183,505 28,599 302,855 1,211,420 110,129
B. C. McConnell, Jr., D.D.S.,
P.A............................. 172,999 49,965 287,017 1,148,068 104,370
Raymond A. McLendon, D.D.S.,
P.C............................. 250,940 33,523 0 484,098 44,009
Brian J. Nettleman, D.D.S......... (19,335) 25,543 281,345 1,125,379 102,307
Robert C. Penny, D.D.S., M.S.,
Inc............................. 10,251 16,904 232,415 929,662 84,515
A. Paul Serrano, D.D.S., P.C...... 86,519 64,322 470,048 1,880,193 170,927
Lesley O. Starnes, D.D.S., M.S.... 67,946 21,174 211,628 846,511 76,956
Keith J. Stewart, D.D.S., P.C..... (5,487) 39,885 0 1,178,627 107,148
Cary A. Williams, D.M.D., P.A..... (91,305) 20,829 280,809 1,123,237 102,114
---------- ---------- ----------- ----------- ---------
Total................... $6,649,597 $2,145,351 $13,811,597 $72,232,799 6,566,618
========== ========== =========== =========== =========
</TABLE>

- ---------------

(1) Assets to be contributed reflects the historical book value of the assets of
each practice, including their patient receivable balance, net of
prepayments as of December 31, 1996.

(2) Assumes an initial Offering price of $11.00, the mid-point of the estimated
initial public offering price range.

37
<PAGE> 39

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock and Class B Common Stock as of the date of this
Prospectus, and as adjusted to reflect the consummation of this Offering, by (i)
each person who is known by the Company to be the beneficial owner of more than
five percent (5%) of the outstanding shares of the Common Stock or Class B
Common Stock, (ii) each director and named executive officer of the Company and
(iii) all directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
SHARES OF PERCENT OF
SHARES OF PERCENT OF COMMON STOCK CLASS B CLASS B
COMMON STOCK BENEFICIALLY OWNED COMMON STOCK COMMON STOCK
BENEFICIALLY ------------------------------------- BENEFICIALLY BENEFICIALLY
NAME OWNED(1)(2) PRIOR TO OFFERING(2) AFTER OFFERING OWNED OWNED
- ---- ------------ -------------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sam Westover.............. 242,918 2.8% 2.1% 26,991 10.8%
Robert S. Chilton......... -- -- -- -- --
P. Craig Hethcox(3)....... * * * -- --
Paul H. Hayase............ * * * 4,498 1.8
Dr. Randall K. Bennett.... 353,783 4.0 3.1 19,493 7.8
Dr. Douglas D. Durbin..... 191,638 2.2 1.7 * *
Dr. Randall A.
Schmidt(4).............. 240,829 2.7 2.1 2,690 1.1
W. Dennis Summers......... -- -- -- -- --
Jonathan E. Wilfong(5).... 462,122 5.1 3.9 15,930 6.4
Dr. Robert N.
Pickron(6).............. 1,187,777 13.5 10.4 91,632 36.7
Craig L. McKnight......... -- -- -- -- --
U. Bertram Ellis, Jr...... -- -- -- -- --
All directors and
executive officers as a
group (12 persons)...... 1,699,456 14.7 14.4 83,741 33.5
</TABLE>

- ---------------

* Less than one percent of the outstanding class of common stock.

(1) Unless otherwise indicated, each of the stockholders listed has sole voting
and investment power with respect to the shares of Common Stock or Class B
Common Stock beneficially owned by such stockholder. Shares of Common Stock
subject to options or warrants exercisable within 60 days are deemed
outstanding for computing the percentage of ownership of the option holder.
The address of all persons listed, except Mr. Wilfong and Dr. Pickron, is
23848 Hawthorne Boulevard, Suite 200, Torrance, California 90505 unless
otherwise indicated.
(2) Reflects the consummation of the Merger.

(3) Includes 50,000 shares of Common Stock subject to the exercise of a warrant.

(4) Includes warrants for the purchase of 31,600 shares of Common Stock.

(5) The business address of Mr. Wilfong is 536 Manor Ridge Drive, N.W., Atlanta,
Georgia 30305. Includes 318,750 shares of Common Stock subject to the
exercise of warrants.

(6) The business address of Dr. Pickron is 3294 Medlock Bridge Road, Building A,
Norcross, Georgia 30092. Includes an aggregate of 170,000 shares held in
separate trusts by a third party trustee for the benefit of each of Dr.
Pickron's children and a niece. Dr. Pickron disclaims beneficial ownership
of the 170,000 shares held in such trusts.

38
<PAGE> 40

DESCRIPTION OF CAPITAL STOCK

The following summary is based upon OrthAlliance's Certificate and Bylaws,
which are included as exhibits to the Registration Statement of which this
Prospectus forms a part. The following discussion is qualified in its entirety
by reference to such exhibits.

AUTHORIZED AND OUTSTANDING CAPITAL STOCK

Pursuant to the Certificate, the Company has authority to issue 90,250,000
shares of capital stock, consisting of 70,000,000 shares of Common Stock, par
value $.001 per share, 250,000 shares of Class B Common Stock, par value $.001
per share, and the Board of Directors of the Company has authority (without
action by the stockholders) to issue 20,000,000 shares of preferred stock, par
value $.001 per share, in one or more classes or series and to determine the
voting rights, preferences as to dividends and in liquidation, and conversion
and other rights of each such series (the "Preferred Stock"). As of the
completion of the Merger and the Acquisitions, there will be 8,816,618 shares of
Common Stock and 250,000 shares of Class B Common Stock issued and outstanding.
The Company has no current plans to issue any shares of Preferred Stock.

The rights of the holders of Common Stock and Class B Common Stock
discussed below are subject to such rights as the Board of Directors may
hereafter confer on the holders of Preferred Stock; accordingly, rights
conferred on holders of Preferred Stock that may be issued in the future under
the Certificate may have a material adverse effect on the rights of holders of
Common Stock and Class B Common Stock.

COMMON STOCK AND CLASS B COMMON STOCK

The Common Stock and the Class B Common Stock and the rights, powers and
limitations thereof are identical, except as described below.

Voting Rights. Each holder of shares of Common Stock and Class B Common
Stock shall be entitled to attend all special and annual meetings of the
stockholders of the Company and, share-for-share and without regard to class,
together with the holders of all other classes of stock entitled to attend such
meetings, to cast one vote for each outstanding share of Common Stock or Class B
Common Stock so held upon any matter properly considered and acted upon by the
stockholders, voting together as a single class, except as otherwise required by
law.

Liquidation Rights. In the event of any dissolution, liquidation, or
winding up of the Company, whether voluntary or involuntary, the holders of the
Common Stock and holders of any class or series of stock entitled to participate
therewith as to the distribution of assets (including the Class B Common Stock),
shall be entitled to participate in the distribution of any assets of the
Company remaining after the Company shall have paid, or provided for payment of,
all debts and liabilities of the Company and after the Company shall have paid,
or set aside for payment, to the holders of any class of stock having preference
over the Common Stock and the Class B Common Stock in the event of dissolution,
liquidation or winding up, the full preferential amounts, if any, to which they
are entitled.

Dividends. Dividends may be paid on the Common Stock and the Class B
Common Stock and on any class or series of stock entitled to participate
therewith as to dividends, but only when and as declared by the Board of
Directors. Holders of Common Stock and Class B Common Stock will participate as
one class with respect to any dividends declared and paid on the Common Stock.

Other Rights. The Certificate does not give holders of Common Stock
preemptive or other subscription or conversion rights. Shares of Class B Common
Stock are subject to the conversion provisions described below. The shares of
Class B Common Stock are not transferable, except to a holder's spouse, parents,
siblings, lineal descendants, a trust for the benefit of any such persons or as
determined by will or the laws of descent.

Conversion Rights of Class B Common Stock. Each share of Class B Common
Stock shall automatically convert into Common Stock (i) at the ratio of six
shares of Common Stock for each share of Class B Common Stock upon the
attainment of the Conversion Prices or (ii) if not converted pursuant to
subparagraph (i), on a one-for-one basis upon the sixth anniversary of the date
of this Prospectus. The shares of Class B Common Stock

39
<PAGE> 41

convertible pursuant to subparagraph (i) above will convert in five increments
of up to 50,000 shares of Class B Common Stock (20% of the total number of
shares of Class B Common Stock issued) upon the attainment of each of the five
specified Conversion Prices. Upon each such conversion, each holder of Class B
Common Stock will be deemed to have converted a pro rata share of such Class B
Common Stock then outstanding. The Conversion Prices shall be established at
premiums to the initial public offering price, and will be deemed to have been
achieved at the end of the trading day on which the average closing price of the
Common Stock for the preceding 20 consecutive trading days exceeds such
Conversion Price. The closing prices will be those reported on the Nasdaq
National Market, or such other reported over-the-counter market or an exchange,
as applicable. The initial Conversion Price is equal to 150% of the price to
public in the Offering, and each of the subsequent Conversion Prices is equal to
120% of the preceding Conversion Price. Therefore, assuming the price to public
in the Offering is the mid-point of the estimated initial public offering price
range ($11.00), the five Conversion Prices at which up to 50,000 shares of the
outstanding Class B Common Stock shall be automatically converted to Common
Stock are $16.50, $19.80, $23.76, $28.51 and $34.22, respectively. Upon each
conversion, all fractional shares shall be paid in cash based upon the 20
consecutive trading day average closing price. In the event that there are any
shares of Class B Common Stock outstanding on the sixth anniversary of the date
of this Prospectus, all such shares shall automatically convert into an equal
number of shares of Common Stock. The holders of the Class B Common Stock may
convert each share of Class B Common Stock into one share of Common Stock at any
time after 180 days from the date of this Prospectus but prior to the sixth
anniversary date of this Prospectus.

PREFERRED STOCK

The Certificate authorizes the Board of Directors, from time to time and
without any stockholder action or approval, to provide for the issuance of up to
20,000,000 shares of Preferred Stock, in one or more series, and to fix the
relative rights and preferences of the shares, including voting powers, dividend
rights, liquidation preferences, redemption rights and conversion privileges. As
of the date hereof, the Board of Directors has not provided for the issuance of
any series of such Preferred Stock, and there are no agreements or
understandings for the issuance of any such Preferred Stock. Because of its
broad discretion with respect to the creation and issuance of Preferred Stock
without stockholder approval, the Board of Directors could adversely affect the
voting power of the holders of Common Stock and Class B Common Stock and, by
issuing shares of Preferred Stock with certain voting, conversion and/or
redemption rights, could discourage any attempt to obtain control of the
Company.

WARRANTS

Warrants for the purchase of 602,500 shares of Common Stock have been
issued and are outstanding or will be issued pursuant to the Merger. The
exercise price per share pursuant to each of the warrants is equal to (i) the
initial public offering price in the Offering, (ii) the initial public offering
price net of underwriting discount, or (iii) $0.01 per share. For a more
detailed discussion of such warrants, see "Certain Transactions" and
"Underwriting."

REGISTRATION RIGHTS

The Founding Practices have contracted to receive shares of Common Stock
upon the closing of the Acquisitions pursuant to the terms and conditions of the
acquisition agreements between OrthAlliance and each Founding Practice. Such
agreements set forth certain incidental registration rights for the Founding
Practices, whereby the Company is obligated to use reasonable efforts to
register shares issued as consideration to a Founding Practice if the Company
initiates a public offering and files a registration statement in connection
therewith anytime within 24 months of the closing of the acquisition of the
operating assets or capital stock of the Founding Practice; provided, however,
that such registration rights are subject to any terms, conditions or
limitations required by any underwriter retained by the Company in connection
with such underwritten public offering, and such registration rights may not be
exercised in connection with a registration statement filed by the Company in
connection with the registration of shares issued pursuant to (i) an employee
stock purchase or option plan or (ii) any acquisition or proposed acquisition by
the Company. Each Founding Practice shall bear its

40
<PAGE> 42

proportionate share of underwriters' commissions and discounts, and shall bear
the costs and fees of attorneys and accountants it retains.

The holders of shares of Common Stock issued upon the exercise of the
warrants issued to Mr. Wilfong, Mr. Garces and J. C. Bradford & Co. (the
"Registration Rights Warrants") have associated incidental registration rights
pursuant to which the Company is obligated to use reasonable efforts to register
such shares if the Company initiates a public offering and files a registration
statement in connection therewith after the date of this Prospectus, excluding
the registration of shares issued pursuant to (i) an employee stock purchase or
option plan or (ii) any acquisition or proposed acquisition by the Company. The
fees and costs of any registration of Common Stock issued pursuant to the
exercise of the Registration Rights Warrants will be borne by the Company.

CERTAIN PROVISIONS OF THE CERTIFICATE, BYLAWS AND DELAWARE LAW

Classification of Board of Directors. The Certificate and the Bylaws of
the Company divide the Board of Directors into three classes, designated Class
I, Class II and Class III, respectively, each class to be as nearly equal in
number as possible. The terms of Class I, Class II and Class III directors will
expire at the 1998, 1999 and 2000 annual meetings of stockholders, respectively,
and in all cases directors elected will serve until their respective successors
are elected and qualified. At each annual meeting of stockholders, directors
will be elected to succeed those in the class whose terms then expire, with each
director so elected to serve for a term expiring at the third succeeding annual
meeting of stockholders after such director's election, and until the director's
successor is elected and qualified. Thus, directors elected stand for election
only once in three years.

Additional Directorships, Vacancies and Removal of Directors. The Bylaws
of the Company provide that the Board of Directors shall consist of up to nine
members. The Certificate and the Bylaws authorize the Board of Directors to
create additional directorships and abolish any vacant directorships.
Newly-created directorships and vacancies may be filled by a majority of
directors then in office to hold office until the next annual meeting of
stockholders, and until their successors shall be elected and qualified. In
addition, in accordance with the DGCL provisions pertaining to a company whose
Board of Directors is classified, the Company's Certificate and Bylaws provide
that directors may be removed only for cause by vote of the holders of a
majority of the shares entitled to vote at an election of directors.

Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The Bylaws require an advance notice procedure for the nomination,
other than by or at the direction of the Board of Directors or the Nominating
Committee thereof, of candidates for election as directors (the "Nomination
Procedure"), as well as for other stockholder proposals to be considered at
annual stockholders' meetings. Notice to the Company from a stockholder who
proposes to nominate a person at a meeting for election as a director generally
must be given not less than 120 nor more than 150 days prior to the anniversary
of the date notice of the annual meeting of stockholders was given in the
preceding year and must contain: (i) the name and record address of the
stockholder who intends to make the nomination; (ii) the name, age and residence
address of the nominee; (iii) the principal occupation or employment of the
nominee; (iv) the class, series and number of shares held of record,
beneficially and by proxy, by the stockholder and the nominee as of the record
date of such meeting (if such record date is publicly available) and as of the
date of such notice; and (v) such other information relating to the nominee
proposed by such stockholder as is required to be included if the Company is
then subject to Regulation 14A under the Securities Exchange Act of 1934,
including the written consent of each nominee to be named in the proxy statement
and to serve as a director of the Company if so elected. The presiding officer
of the meeting may refuse to acknowledge the nomination of any person not made
in compliance with the Nomination Procedure. Similar advance notice must be
given of any other proposed business which a stockholder proposes to bring
before an annual meeting of stockholders. Such notice must contain (i) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (ii) the name and record
address of the stockholder proposing such business, (iii) the class, series and
number of shares of the Company's stock which are held of record, beneficially
and by proxy by the stockholder as of the record date of such meeting (if such
record date is publicly available) and as of the date of such notice, (iv) a
description of all arrangements or understandings between the stockholder and
any other person or persons (naming such person or persons) in connection with
the proposing of such business by the stockholder, and (v) any material interest
of the stockholder in such business. The purpose of requiring advance notice is
to afford the Board of Directors an

41
<PAGE> 43

opportunity to consider the qualifications of the proposed nominees or the
merits of other stockholder proposals and, to the extent deemed necessary or
desirable by the Board of Directors, to inform stockholders about those matters.
Although the advance notice provisions do not give the Board of Directors any
power to approve or disapprove of stockholder nominations or proposals for
action by the Company, they may have the effect of precluding a contest for the
election of directors or the consideration of stockholder proposals if the
procedures established by the Bylaws are not followed and the effect of
discouraging or deterring a third party from conducting a solicitation of
proxies to elect its own slate of directors or to approve its own proposals,
without regard to whether consideration of such nominees or proposals might be
harmful or beneficial to the Company and its stockholders.

Statutory Business Combination Provision. Section 203 of the DGCL prevents
an "interested stockholder" (defined in Section 203, generally, as a person
owning 15% or more of a corporation's outstanding voting stock) from engaging in
a "business combination" (as defined in Section 203) with a publicly-held
Delaware corporation for three years following the date such person became an
interested stockholder unless (i) before such person became an interested
stockholder, the board of directors of the corporation approved the transaction
in which the interested stockholder became an interested stockholder or approved
the business combination; (ii) upon consummation of the transaction that
resulted in the interested stockholder's becoming an interested stockholder, the
interested stockholder owns at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers of the corporation and by employee stock plans
that do not provide employees with the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer);
or (iii) following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of directors of
the corporation and authorized at a meeting of stockholders by the affirmative
vote of the holders of two-thirds of the outstanding voting stock of the
corporation not owned by the interested stockholder.

Anti-takeover Effects. The foregoing provisions of the Certificate and
Bylaws and DGCL could discourage potential acquisition proposals and could delay
or prevent a change in control of the Company. These provisions are intended to
enhance the continuity and stability of the Board of Directors and the policies
formulated by the Board of Directors and to discourage certain types of
transactions that may involve an actual or threatened change in control of the
Company. These provisions are also designed to reduce the vulnerability of the
Company to an unsolicited acquisition proposal and to discourage certain tactics
that may be used in proxy fights. However, such provisions may discourage third
parties from making tender offers for the Company's shares. As a result, the
market price of the Common Stock may not benefit from any premium that might
occur in anticipation of a potential or actual change in control. Such
provisions also may have the effect of preventing changes in the management of
the Company.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is NorWest Shareowner
Services.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has not been any public market for securities
of the Company. No prediction can be made as to the effect, if any, that market
sales of shares of Common Stock or the availability of shares of Common Stock
for sale will have on the market price prevailing from time to time. Sales of
substantial amounts of Common Stock of the Company in the public market after
the restrictions described below lapse could adversely affect the prevailing
market price and the ability of the Company to raise equity capital in the
future.

Upon completion of the Offering, the Company will have 11,416,618 shares of
Common Stock and 250,000 shares of Class B Common Stock outstanding. Of these
shares, the 2,600,000 shares of Common Stock (2,990,000 shares if the
Underwriters' over-allotment option is exercised in full) sold in the Offering
will be freely tradeable without restriction or limitation under the Securities
Act, except for shares purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act (which may generally be sold only
in compliance with Rule 144).

42
<PAGE> 44

The Founding Practices have contracted to receive 6,566,618 shares of
Common Stock (assuming an initial public offering price of $11.00) upon the
closing of the Acquisitions in consideration for certain assets of the Founding
Practices and entering into Management Agreements. Such shares have incidental
registration rights pursuant to the purchase and sale agreements between the
Founding Practices and OrthAlliance, whereby the Company is obligated to use
reasonable efforts to register shares issued as consideration to a Founding
Practice if the Company undertakes a public offering and files a registration
statement in connection therewith any time within 24 months of the closing of
the acquisition of the operating assets of the Founding Practice; provided,
however, that such registration rights are subject to any terms, conditions and
limitations required by any underwriter retained by the Company in connection
with such underwritten public offering, and such registration rights may not be
exercised in connection with registration statements filed by the Company in
connection with the registration of shares issued pursuant to (i) employee stock
purchase or option plans or (ii) any acquisition or proposed acquisition by the
Company.

The shares of Common Stock received by the Founding Practices, the
remaining 2,250,000 issued and outstanding shares of Common Stock and the
250,000 issued and outstanding shares of Class B Common Stock are deemed
"restricted shares" under Rule 144 since they were originally issued and sold by
the Company in private transactions in reliance upon exemptions from the
registration provisions of the Securities Act. The holders of restricted shares
will not be eligible to sell such shares pursuant to Rule 144 until the
expiration of one year from the date such restricted shares were acquired.
Additional restrictions on transferability apply to shares of Class B Common
Stock. See "Description of Capital Stock -- Common Stock."

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including persons deemed to be affiliates, whose
restricted shares have been fully paid for and held for at least one year from
the date of issuance by the Company may sell such securities in brokers'
transactions or directly to market makers, provided the number of shares sold in
any three-month period does not exceed the greater of 1% of the then outstanding
shares of Common Stock (114,166 shares based on the number of shares to be
outstanding after the Offering) or the average weekly trading volume of the
Common Stock in the public market during the four calendar weeks preceding the
filing of the seller's Form 144. Sales under Rule 144 are also subject to the
availability of current public information concerning the Company. After two
years have elapsed from the date of issuance of restricted shares by the
Company, such shares generally may be sold without limitation by persons who
have not been affiliates of the Company for at least three months. Rule 144 also
provides that affiliates who are selling restricted shares for which they have
fully paid must nonetheless comply with the above restrictions applicable to
restricted shares, notwithstanding the holding period.

All of the Founding Practices and the Company's officers, directors and
five percent (5%) or greater stockholders have agreed to enter into lock-up
agreements (the "Lock-up Agreements") generally providing that for a period of
365 days after the date of this Prospectus, they will not, except for the
exercise of stock options pursuant to the Stock Plans, directly or indirectly,
offer, sell, loan, pledge or otherwise dispose of, or grant any options or other
rights with respect to, any shares of Common Stock or any securities that are
convertible into or exchangeable or exercisable for Common Stock owned by them
without the prior written consent of J.C. Bradford & Co. Similarly, the Company
has agreed generally that, for a period of 365 days after the date of this
Prospectus, it will not, directly or indirectly, issue, offer, sell, grant
options to purchase or otherwise dispose of any of its equity securities or any
other securities convertible into or exchangeable or exercisable for its Common
Stock or any other equity security, except that the Company may grant stock
options under the Stock Plans and issue shares of Common Stock upon the exercise
of options previously granted.

In addition to the restricted shares outstanding upon completion of the
Offering and the Acquisitions, all of the approximately shares of
Common Stock which may be acquired upon the exercise of vested stock options
within 365 days following the date of this Prospectus (collectively, the "Option
Shares") are subject to the Lock-up Agreements but may be eligible for resale
following the expiration of the Lock-up Agreements (subject, in the case of
affiliates, to certain limitations) pursuant to Rule 701 under the Securities
Act or a Form S-8 registration statement to be filed by the Company under the
Securities Act. See "Management -- Stock Plans." In addition, all of the
approximately 602,500 shares of Common Stock that may be acquired upon the
exercise of warrants (including the Bradford Warrant) will be deemed restricted
securities and may be eligible for resale pursuant to Rule 144. Shares issuable
upon the exercise of such warrants have associated incidental registration
rights pursuant to which the Company is obligated to use reasonable efforts to
register such shares if

43
<PAGE> 45

the Company undertakes an underwritten public offering and files a registration
statement in connection therewith after the date of this Prospectus, excluding
the registration of shares issued pursuant to (i) an employee stock purchase or
option plan or (ii) any acquisition or proposed acquisition by the Company.

The Company intends to file a registration statement on Form S-8 to
register all shares of Common Stock issuable under the Company's stock option
plans, as soon as practicable after the date of this Prospectus, and the
Company's Form S-8 is expected to become effective immediately upon filing.
Shares covered by such registration statement will be eligible for sale in the
public market after the effective date of such registration statement and
following the expiration of the Lock-up Agreements, subject to Rule 144
limitations applicable to affiliates of the Company. See "Management -- Stock
Plans."

In addition, the Company has filed a registration statement with respect to
2,500,000 shares of Common Stock under the Securities Act for use in connection
with future acquisitions. These shares generally will be freely tradable after
their issuance by persons not affiliated with the Company unless the Company
contractually restricts their sale. The Company anticipates that the agreements
entered into in connection with its future acquisitions will restrict the resale
of all or a portion of the shares issued in those transactions for varying
periods of time.

44
<PAGE> 46

UNDERWRITING

Pursuant to the Underwriting Agreement, and subject to the terms and
conditions thereof, the Underwriters named below, acting through J.C. Bradford &
Co., L.L.C. ("Bradford") as representative of the several Underwriters (the
"Representative"), have agreed, severally, to purchase from the Company the
number of shares of Common Stock set forth below opposite their respective
names.

<TABLE>
<CAPTION>
NUMBER OF
NAME OF UNDERWRITER SHARES
- ------------------- ---------
<S> <C>
J.C. Bradford & Co..........................................

-------
Total.............................................
=======
</TABLE>

In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all shares of Common Stock
offered hereby if any of such shares are purchased.

The Company has been advised by the Representative of the Underwriters that
the Underwriters propose initially to offer the shares of Common Stock to the
public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers, who may include the Underwriters, at the
public offering price less a selling concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per share to certain other brokers or dealers. After
the Offering, the public offering price and such concessions may be changed by
the Representative. The Representative has informed the Company that the
Underwriters do not intend to confirm sales to accounts over which they exercise
discretionary authority.

The Offering of the shares of Common Stock is made for delivery when, as
and if accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any offer for the purchase of shares.

The Company has granted the Underwriters an option, exercisable not later
than 30 days from the date of this Prospectus, to purchase up to an aggregate of
390,000 additional shares of Common Stock to cover over-allotments, if any. To
the extent the Underwriters exercise the option, each of the Underwriters will
have a firm commitment to purchase approximately the same percentage thereof
which the number of shares of Common Stock to be purchased by it shown in the
table above bears to the total number of shares in such table, and the Company
will be obligated, pursuant to the option, to sell such shares to the
Underwriters. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the 2,600,000 shares of
Common Stock offered hereby. If purchased, the Underwriters will sell these
additional shares on the same terms as those on which the 2,600,000 shares are
being offered.

Subject to applicable limitations, the Underwriters, in connection with the
Offering, may place bids for or make purchases of the Common Stock in the open
market or otherwise, for long or short account, or cover short positions
incurred, to stabilize, maintain, or otherwise affect the price of the Common
Stock, which may be higher than the price that might otherwise prevail in the
open market. There can be no assurance that the price of the Common Stock will
be stabilized, or that stabilizing, if commenced, will not be discontinued at
any time. Subject to applicable limitations, the Underwriters may also place
bids or make purchases on behalf of the underwriting syndicate to reduce a short
position created in connection with the Offering.

45
<PAGE> 47

Upon the purchase by the Underwriters of the Common Stock being offered
hereby, the Company has agreed to sell to Bradford for a purchase price of $0.01
per underlying share of Common Stock, the Bradford Warrant to purchase up to
87,500 shares of Common Stock at an exercise price per share equal to the higher
of the initial public offering price or the closing bid price of the first
trading day after the date of this Prospectus. The warrant exercise price has
been determined by negotiation between the Company and Bradford as to be within
the Conduct Rules of the National Association of Securities Dealers, Inc. and
various state authorities. The Bradford Warrant has a term of five years from
the effective date of the Offering, is non-transferrable, and is not exercisable
until the earlier of a subsequent public offering of the Common Stock or 24
months after the date of this Prospectus. In any event, the shares underlying
the Bradford Warrant may not be sold, assigned or hypothecated by Bradford or
related parties for a period of one year from the effective date of the Offering
except to partners of Bradford. The terms upon which the Company will be able to
obtain additional equity capital may be adversely affected since Bradford can be
expected to exercise or exchange them at a time when the Company would, in all
likelihood, be able to obtain any needed capital on terms more favorable to the
Company than those provided in the Bradford Warrant. Any profit realized by
Bradford on the sale of the underlying shares of Common Stock may be deemed
additional underwriting compensation. For a discussion of the registration
rights associated with the Bradford Warrant, see "Description of Capital
Stock -- Registration Rights."

The Company intends to apply for listing of the Common Stock on the Nasdaq
National Market. Prior to this Offering, there has been no public market for the
Common Stock. The Offering price has been determined by negotiation among the
Company and the Representative. In determining such price, consideration was
given to, among other things, the financial and operating history and trends of
the Company, the experience of its management, the position of the Company in
its industry, the Company's prospects and the Company's financial results.
Additionally, consideration was given to the status of the securities markets,
market conditions for new offerings of securities and the prices of similar
securities of comparable companies. Bradford intends to act as a market maker
with regard to the Common Stock.

Pursuant to the Lock-up Agreements, all of the Company's officers and
directors and 5% or greater stockholders have agreed with the Representative
that they will not, except for the exercise of stock options pursuant to the
Stock Plans described in this Prospectus, directly or indirectly, offer, sell,
loan, pledge or otherwise dispose of, or grant any options or other rights with
respect to, any shares of Common Stock or any securities that are convertible
into, or exchangeable or exercisable for, Common Stock owned by them for a
period of 365 days following the date of this Prospectus, without the prior
written consent of Bradford. Similarly, the Company has agreed generally that,
for a period of 365 days after the date of this Prospectus, it will not,
directly or indirectly, issue, offer, sell, grant options to purchase or
otherwise dispose of any of its equity securities or any other securities
convertible into or exchangeable or exercisable for its Common Stock or any
other equity security, except that the Company may grant stock options under its
Stock Plans and issue shares of Common Stock upon the exercise of options
previously granted. Bradford may, in its sole discretion and at any time without
notice, release all or any portion of the securities subject to the Lock-up
Agreements. After such 365-day period, such persons will be entitled to sell,
distribute or otherwise dispose of the Common Stock or options to acquire Common
Stock, subject to the provisions of applicable securities laws. See "Shares
Eligible for Future Sale."

The Underwriting Agreement provides that the Company will indemnify the
Underwriters and controlling persons, if any, against certain liabilities,
including liabilities under the Securities Act, or will contribute to payments
that the Underwriters or any such controlling persons may be required to make in
respect thereof.

46
<PAGE> 48

LEGAL MATTERS

The validity of the shares of Common Stock and Class B Common Stock are
being passed upon for the Company by Nelson Mullins Riley & Scarborough, L.L.P.,
Atlanta, Georgia, special securities counsel to the Company. Certain legal
matters in connection with the Offering will be passed upon for the Underwriters
by Bass, Berry & Sims PLC, Nashville, Tennessee.

EXPERTS

The financial statements of Premier Orthodontic Group, Inc., US Orthodontic
Care, Inc. and OrthAlliance, Inc. as of December 31, 1996 included in this
Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto and are included herein in reliance upon the
authority of said firm as experts in giving said reports.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement, on Form
S-1 (together with all exhibits, schedules and amendments relating thereto, the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered hereby. This Prospectus, which is a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Common Stock, reference is hereby made to the
Registration Statement and the exhibits and schedules filed as a part thereof.
Statements contained in this Prospectus concerning the provisions or contents of
any contract, agreement or any other document referred to herein are not
necessarily complete. With respect to each such contract, agreement or document
filed as an exhibit to the Registration Statement, reference is made to such
exhibit for a more complete description of the matters involved, and each
statement shall be deemed qualified in its entirety by such reference to the
copy of the applicable document filed with the Commission. The Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge at the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following Regional Offices of the Commission: New York Regional Office, 7 World
Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional Office,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of the
Registration Statement and the exhibits and schedules thereto can be obtained
from the Public Reference Section of the Commission upon payment of prescribed
fees. The Registration Statement, including the exhibits and schedules thereto,
is also available on the Commission's Web site at http://www.sec.gov. In
addition, the Company will make application for the Common Stock to be listed
for trading on the Nasdaq National Market. Upon listing, periodic reports, proxy
material and other information concerning the Company, when filed, may be
inspected at the offices of the Nasdaq Operations, 1735 K Street, N.W.,
Washington, D.C.

The Company intends to furnish its stockholders with annual reports
containing financial statements audited by the Company's independent public
accountants.

47
<PAGE> 49

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Pro Forma Combined Financial Statements........... F-2
Unaudited Pro Forma Combined Balance Sheet as of March 31,
1997................................................... F-3
Unaudited Pro Forma Combined Statement of Operations for
the Three Months Ended March 31, 1997.................. F-4
Unaudited Pro Forma Combined Statement of Operations for
the Year Ended December 31, 1996....................... F-5
Notes to Unaudited Pro Forma Combined Financial
Statements............................................. F-6
OrthAlliance, Inc.
Report of Independent Public Accountants.................. F-8
Balance Sheets as of December 31, 1996 and March 31,
1997................................................... F-9
Statements of Stockholders' Equity For the Period From
Inception (October 21, 1996) to December 31, 1996 and
for the Three Months Ended March 31, 1997.............. F-10
Notes to Financial Statements............................. F-11
US Orthodontic Care, Inc.
Report of Independent Public Accountants.................. F-13
Balance Sheets as of December 31, 1996 and March 31,
1997................................................... F-14
Statements of Operations For the Period From Inception
(February 7, 1996) to December 31, 1996 and for the
Three Months Ended March 31, 1997...................... F-15
Statements of Shareholders' (Deficit) Equity For the
Period From Inception (February 7, 1996) to December
31, 1996 and for the Three Months Ended March 31,
1997................................................... F-16
Statements of Cash Flows For the Period From Inception
(February 7, 1996) to December 31, 1996 and for the
Three Months Ended March 31, 1997...................... F-17
Notes to Financial Statements............................. F-18
Premier Orthodontic Group, Inc.
Report of Independent Public Accountants.................. F-23
Balance Sheets as of December 31, 1996 and March 31,
1997................................................... F-24
Statements of Operations For the Period From Inception
(November 26, 1996) to December 31, 1996 and for the
Three Months Ended March 31, 1997...................... F-25
Statements of Changes in Owners' Deficit For the Period
From Inception (November 26, 1996) to December 31, 1996
and for the Three Months Ended March 31, 1997.......... F-26
Statements of Cash Flows For the Period From Inception
(November 26, 1996) to December 31, 1996 and for the
Three Months Ended March 31, 1997...................... F-27
Notes to Financial Statements............................. F-28
</TABLE>

F-1
<PAGE> 50

ORTHALLIANCE, INC.

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

Simultaneously with and as a condition to the closing of the proposed
public offering (the "Offering"), OrthAlliance, Inc. ("OrthAlliance") will
acquire certain operating assets of separate orthodontic practices
(collectively, the "Founding Practices") in exchange for cash and shares of
Class A common stock, $.001 par value per share (the "Common Stock") and enter
into long-term management or consulting services agreements with the Founding
Practices (the "Acquisitions"). The number of shares of Common Stock issued in
the Acquisitions will depend on the Offering price of the Common Stock. As a
result of the merger of Premier Orthodontic Group, Inc. ("Premier") and US
Orthodontic Care, Inc. ("USOC") with and into OrthAlliance, effective prior to
the closing of the Offering (the "Merger"), OrthAlliance succeeds to the rights
of Premier and USOC under agreements with the Founding Practices. USOC and
Premier will be merged with and into OrthAlliance prior to the Acquisitions with
the Founding Practices. OrthAlliance was created as a shell corporation to
become activated in connection with the Offering. Prior to the Merger, the sole
stockholder of OrthAlliance held a minority interest in Premier. There were two
common investors between USOC and Premier, and there were no common owners
between USOC and OrthAlliance. USOC and Premier are considered promoters;
therefore, the Merger will be accounted for pursuant to Staff Accounting
Bulletin No. 48, "Transfers of Nonmonetary Assets by Promoters and Shareholders"
as will the transactions with the Founding Practices. As a result, these
transactions will result in the carryover basis of assets and liabilities of
USOC and Premier. In the Merger, the outstanding capital stock of USOC and
Premier will be automatically converted into shares of Class A common stock and
shares of Class B common stock. The stockholders of USOC and Premier shall
receive 70% and 30%, respectively, of the Class A common stock and Class B
common stock issued as consideration in the Merger.

The following unaudited pro forma combined financial statements give effect
to the Merger and the Acquisitions, and are based upon the historical financial
statements of OrthAlliance, Premier, USOC, and the Founding Practices as a
group.

The Unaudited Pro Forma Combined Statement of Operations for the three
months ended March 31, 1997 and the year ended December 31, 1996 gives effect to
the Merger and the Acquisitions as if such events had occurred on January 1,
1996. The Unaudited Pro Forma Combined Balance Sheet gives effect as if such
events had occurred on March 31, 1997. The unaudited pro forma combined
financial statements should be read in conjunction with other financial
information, including the financial statements of USOC, Premier and
OrthAlliance, included elsewhere in this Prospectus.

The Company will not employ orthodontists or control the practice of
orthodontics. As the Company will not be acquiring the future patient revenues
earned by the Founding Practices, the Acquisitions are not deemed to be business
combinations. In accordance with the Securities and Exchange Commission's Staff
Accounting Bulletin No. 48, "Transfers of Nonmonetary Assets by Promoters or
Shareholders," the Acquisitions will be accounted for at the historical cost
basis with the shares of common stock to be issued in those transactions being
valued at the historical cost of the nonmonetary assets acquired net of
liabilities assumed.

The unaudited pro forma combined financial statements are presented for
illustrative purposes only and are not necessarily indicative of the operating
results or financial position that would have been achieved if the Acquisitions
had been consummated on the dates indicated, nor are they necessarily indicative
of the future operating results of the Company. The unaudited pro forma combined
financial information does not give effect to: (1) cost savings or integration
which may result from the Acquisitions; (2) acquisitions of practices which
would have occurred during the year; or (3) the Offering (including net proceeds
and cash payments to the Founding Practices) which will occur simultaneously
with the Acquisitions.

F-2
<PAGE> 51

ORTHALLIANCE, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET

MARCH 31, 1997
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
COMBINED PRO
FOUNDING PRO FORMA FORMA
ORTHALLIANCE USOC PREMIER PRACTICES ADJUSTMENTS COMBINED
------------ ------ ------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............. $ -- $ 315 $ 896 $ 3,743 $ (3,743)(1) $ 1,211
Patient receivables, net.............. -- -- -- 4,599 -- 4,599
Unbilled patient receivables, net..... -- -- -- 2,879 -- 2,879
Deferred income taxes................. -- -- -- -- 1,250(2) 1,250
Other current assets.................. -- 2 -- 2,169 (1,736)(1) 435
------ ------ ----- ------- -------- -------
Total current assets........... -- 317 896 13,390 (4,229) 10,374
Property, equipment and improvements,
net................................. -- 30 24 5,594 (2,798)(1) 2,850
Other assets.......................... -- -- 5 1,112 (1,112)(1) 5
------ ------ ----- ------- -------- -------
Total assets................... $ -- $ 347 $ 925 $20,096 $ (8,139) $13,229
====== ====== ===== ======= ======== =======

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Amounts drawn in excess of cash....... $ -- $ -- $ -- $ 223 $ (223)(1) $ --
Accounts payable and other current
liabilities......................... -- 303 518 650 (650)(1) 821
Patient prepayments................... -- -- -- 1,890 -- 1,890
Deferred income taxes................. -- -- -- -- 215(2) 215
Current portion of long-term debt..... -- -- -- 1,849 947(1) 2,796
------ ------ ----- ------- -------- -------
Total current liabilities...... -- 303 518 4,612 289 5,722
Long-term debt, less current
portion............................. -- -- 1,000 3,218 (3,218)(1) 1,000
------ ------ ----- ------- -------- -------
Total liabilities.............. -- 303 1,518 7,830 (2,929) 6,722
------ ------ ----- ------- -------- -------
STOCKHOLDERS' EQUITY
OrthAlliance, Inc.:
Class A Common Stock
$.001 par value; 70,000,000 shares
authorized, one share issued
and outstanding and 8,816,618
issued and outstanding pro
forma.......................... -- -- -- -- -- --
Class B Common Stock
$.001 par value; 250,000 shares
authorized, no shares issued
and outstanding and 250,000
issued and outstanding pro
forma.......................... -- -- -- -- -- --
Additional paid-in capital.......... -- -- -- -- 6,021(1) 10,178
1,035(2)
3,122(3)
Warrants............................ -- -- -- -- 590(3) 590
Accumulated deficit................. -- -- -- -- (4,261)(3) (4,261)
US Orthodontic Care, Inc.:
Common Stock; no par value,
10,000,000 shares authorized,
2,471,714 shares issued and
outstanding....................... -- -- -- -- -- --
Additional paid-in capital.......... -- 3,122 -- -- (3,122)(3) --
Warrants............................ -- 590 -- -- (590)(3) --
Accumulated deficit................. -- (3,668) -- -- 3,668(3) --
Premier Orthodontic Group, Inc.:
Accumulated deficit................. -- -- (593) -- 593(3) --
Combined Founding Practices' Equity... -- -- -- 12,266 (12,266)(1) --
------ ------ ----- ------- -------- -------
Total stockholders' equity..... -- 44 (593) 12,266 (5,210) 6,507
------ ------ ----- ------- -------- -------
Total liabilities and
stockholders' equity......... $ -- $ 347 $ 925 $20,096 $ (8,139) $13,229
====== ====== ===== ======= ======== =======
</TABLE>

See accompanying notes to unaudited pro forma combined financial statements.

F-3
<PAGE> 52

ORTHALLIANCE, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
COMBINED
FOUNDING PRO FORMA PRO FORMA
ORTHALLIANCE USOC PREMIER PRACTICES ADJUSTMENTS COMBINED
------------ ------- ------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Management service
revenue.................. $ -- $ -- $ -- $ -- $ 11,904(7) $ 11,904
Patient service revenue..... -- -- -- 15,307 (15,307)(8) --
Orthodontist compensation... -- -- -- (5,916) 5,916(8) --
------- ------- ------- ------- -------- ----------
Net revenue......... -- -- -- 9,391 2,513 11,904
EXPENSE
Expenses:
Salaries, wages and
benefits............... -- 395 212 4,096 51(4) 4,754
Orthodontic supplies and
lab.................... -- -- -- 1,667 -- 1,667
Rent..................... -- -- -- 1,065 6(4) 1,071
Advertising and
marketing.............. -- -- -- 305 29(4) 334
------- ------- ------- ------- -------- ----------
General and
administrative......... -- 148 130 2,090 -- 2,368
Depreciation and
amortization........... -- -- -- 168 2(4) 170
------- ------- ------- ------- -------- ----------
Total expenses...... -- 543 342 9,391 88 10,364
------- ------- ------- ------- -------- ----------
Operating (loss)
income............ -- (543) (342) -- 2,425 1,540
Other income (expense):
Interest income
(expense), net......... -- 7 4 (109) 109(6) 11
Other income............. -- -- -- 18 (18)(6) --
Gain on sale of assets... -- -- -- 5 -- 5
------- ------- ------- ------- -------- ----------
Income (loss) before
provision for
income taxes...... -- (536) (338) (86) 2,516 1,556
Provision for income taxes.... -- -- -- -- 591(10) 591
------- ------- ------- ------- -------- ----------
Net income (loss)............. $ -- $ (536) $ (338) $ (86) $ 1,925 $ 965
======= ======= ======= ======= ======== ==========
Net income per share.......... $ .08
==========
Number of shares used in net
income per share
calculation(11)............. 11,716,573
==========
</TABLE>

See the accompanying notes to unaudited pro forma combined financial statements.

F-4
<PAGE> 53

ORTHALLIANCE, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
COMBINED
FOUNDING PRO FORMA PRO FORMA
ORTHALLIANCE USOC PREMIER PRACTICES ADJUSTMENTS COMBINED
------------ ------- ------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Management service
revenue.................. $ -- $ -- $ -- $ -- $ 45,637(7) $ 45,637
Patient service revenue..... -- -- -- 59,877 (59,877)(8) --
Orthodontist compensation... -- -- -- (24,159) 24,159(8) --
------- ------- ------- ------- -------- ----------
Net revenue......... -- -- -- 35,718 9,919 45,637
EXPENSE
Expenses:
Salaries, wages and
benefits............... -- 1,878 240 15,003 871(4) 16,912
(1,080)(9)
Orthodontic supplies and
lab.................... -- -- -- 5,938 -- 5,938
Rent..................... -- -- -- 4,110 24(4) 4,134
Advertising and
marketing.............. -- -- -- 1,313 108(4) 1,421
General and
administrative......... -- 804 15 8,478 15(4) 9,312
Depreciation and
amortization........... -- -- -- 876 10(4) 886
------- ------- ------- ------- -------- ----------
Total expenses...... -- 2,682 255 35,718 (52) 38,603
Operating (loss)
income............ -- (2,682) (255) -- 9,971 7,034
Other income (expense):
Interest income
(expense), net......... -- -- -- (347) 347(6) --
Postponed offering
costs.................. -- (450) -- -- 450(5) --
Other income............. -- -- -- 124 (124)(6) --
Gain on sale of assets... -- -- -- 122 -- 122
------- ------- ------- ------- -------- ----------
Income (loss) before
provision for
income taxes...... -- (3,132) (255) (101) 10,644 7,156
Provision for income taxes.... -- -- -- -- 2,719(10) 2,719
------- ------- ------- ------- -------- ----------
Net income (loss)............. $ -- $(3,132) $ (255) $ (101) $ 7,925 $ 4,437
======= ======= ======= ======= ======== ==========
Net income per share.......... $ 0.38
==========
Number of shares used in net
income per share
calculation(11)............. 11,716,573
==========
</TABLE>

See the accompanying notes to unaudited pro forma combined financial statements.

F-5
<PAGE> 54

ORTHALLIANCE, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

The following is a summary of the adjustments reflected in the unaudited
combined pro forma financial statements:

(1) Reflects the issuance of 6,566,618 shares of Common Stock of the
Company in exchange for substantially all of the operating assets of
the Founding Practices, and to remove certain assets, liabilities and
owners' equity not purchased/assumed as part of the Acquisitions,
based on an assumed Offering price of $11.00. The Founding Practices
will receive up to twenty percent of their practice asset values in
cash and the remainder in Common Stock. The assets purchased and
liabilities assumed from the Founding Practices reflected herein are
as follows:

<TABLE>
<S> <C>
Patient receivables, net of allowances...................... $ 7,478
Other current assets........................................ 435
Property, plant and improvements, net....................... 2,851
Patient prepayments......................................... 1,890
Current portion of long-term debt........................... 2,796
</TABLE>

This entry excludes cash to be paid to the Founding Practices of
approximately $13,800 for the purchase of the practices' assets which
will be paid out of the proceeds of the Offering. The increase in debt
obligations of $947,000 is a result of changes in debt and equity
structures of the Founding Practices prior to the Offering.

(2) Reflects the establishment of deferred income taxes for tax deferred
issuance costs for the Company after the Acquisitions. Assuming
completion of the Acquisitions, management believes that it is more
likely than not that the deferred tax assets will be realized.

(3) Reflects the transfer of stockholders' equity and the accumulated
deficit of USOC and Premier to OrthAlliance as part of the Merger.

(4) Reflects the incremental costs associated with the Company providing
management and consulting services to the Founding Practices in the
first year of operations. The incremental costs were determined based
on the historical operations of the Founding Practices, the historical
operations of USOC and Premier and the budgeted operations of the
Company. The incremental expenses include management salaries under
contract as noted below, clerical staff for processing administrative
functions of the Founding Practices and general and administrative
costs for the offices in California. Pro forma salaries, wages and
benefits includes $1,909 related to management of OrthAlliance for the
twelve months ended December 31, 1996 and $477 for the three months
ended March 31, 1997. Historical amounts for USOC include $250 of
compensation expense related to warrants for the purchase of Common
Stock issued to an officer in the first quarter of 1997.

(5) Eliminates one-time postponed offering costs of USOC. USOC incurred
costs associated with a proposed initial public offering in 1996.
Because this offering did not occur, USOC expensed those items.

(6) Removes income and expense items of the Founding Practices which would
not have been activities of the Company had the Acquisitions occurred
as of the first day of the periods presented. The activities of the
Founding Practices that will not be continued by the Company include
(1) interest expense on the debt of the Founding Practices as all debt
assumed by the Company will be paid with the proceeds of the Offering
(2) certain personal expenses of the orthodontists and (3) income
received by the orthodontists from investments or other non-operating
means.

(7) Reflects management and consulting service fees of the Company
calculated in accordance with the management service agreements
anticipated to be entered into with the Founding Practices, as applied
to the historical operating results of the individual Founding
Practices for the periods indicated.

F-6
<PAGE> 55

ORTHALLIANCE, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

Management service revenue includes management fees and the reimbursed
operating expenses of the Allied Practices. See "Managements Discussion and
Analysis -- Overview."

(8) Eliminates patient service revenue and orthodontist compensation at
the Founding Practice level.

(9) Reflects the elimination of a one-time compensation expense related to
issuances of common stock and warrants of USOC to the founders. During
1996, USOC issued 495,000 shares of common stock and warrants to
purchase 225,000 Shares of common stock to founders. As a result, USOC
recorded a non-recurring, non-cash compensation charge of $1,080,
representing the fair market value of the shares and warrants at the
date of issuance.

(10) Reflects federal and state income taxes using a 38% tax rate, assuming
the Company is a C corporation after the Acquisitions.

(11) The number of shares of Common Stock used in the pro forma net income
per share calculation are determined as follows:

<S> <C>
Shares to be issued to effect the Merger.................... 2,500,000
Shares to be issued in the Acquisitions..................... 6,566,618
Shares to be issued in the Offering......................... 2,600,000
Shares that would be outstanding if outstanding warrants
were exercised and the proceeds were used to repurchase
shares at the assumed initial public offering price....... 49,955
----------
TOTAL............................................. 11,716,573
==========
</TABLE>

F-7
<PAGE> 56

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To OrthAlliance, Inc.:

We have audited the accompanying balance sheet of ORTHALLIANCE, INC. (a
development-stage enterprise, a Delaware corporation, and formerly Premier
Orthodontic Holdings, Inc.) as of December 31, 1996 and the related statement of
stockholders equity for the period from inception (October 21, 1996) to December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of OrthAlliance, Inc. as of
December 31, 1996 and its operations from inception (October 21, 1996) to
December 31, 1996 in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Atlanta, Georgia
May 2, 1997

F-8
<PAGE> 57

ORTHALLIANCE, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS...................................................... $0 $0
== ==

LIABILITIES................................................. $0 $0
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS EQUITY:
Common stock, .001 par value; 3,000 shares authorized and
1 share issued and outstanding at December 31, 1996 and
March 31, 1997......................................... 0 0
Additional paid-in capital................................ 0 0
-- --
Total liabilities and stockholders' equity........ $0 $0
== ==
</TABLE>

The accompanying notes are an integral part of these statements.

F-9
<PAGE> 58

ORTHALLIANCE, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

STATEMENT OF STOCKHOLDERS EQUITY
FOR THE PERIOD FROM INCEPTION (OCTOBER 21, 1996) TO MARCH 31, 1997

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN STOCKHOLDERS'
STOCK CAPITAL EQUITY
------ ---------- -------------
<S> <C> <C> <C>
INITIAL INVESTED CAPITAL (OCTOBER 21, 1996)................. 0 $0 $0
Subscription receivable................................... 0 0 0
-- -- --
STOCKHOLDERS EQUITY AT DECEMBER 31, 1996 and March 31, 1997
(unaudited)............................................... 0 $0 $0
== == ==
</TABLE>

The accompanying notes are an integral part of these statements.

F-10
<PAGE> 59

ORTHALLIANCE, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(INFORMATION AS OF MARCH 31, 1997 AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
IS UNAUDITED)

1. BUSINESS AND ORGANIZATION

OrthAlliance, Inc. (the "Company") (formerly known as Premier Orthodontic
Holdings, Inc.) was formed to create a provider of practice management services
to orthodontic practices in the United States. As a result of a planned merger
of US Orthodontic Care, Inc. ("USOC") and Premier Orthodontic Group, Inc.
("Premier") with and into the Company (the "Merger"), the Company will succeed
to the rights of USOC and Premier in connection with management or consulting
services agreements and with respect to the purchase and sale agreements or
agreements and plans of reorganization that USOC and Premier has with certain
orthodontic practices. As a result, the Company has entered into definitive
agreements to acquire, simultaneous with an initial public offering (the
"Offering"), the stock of an entity holding the assets and certain liabilities
of or the assets and certain liabilities of the founding orthodontic practices.
USOC and Premier will be merged with and into OrthAlliance prior to the purchase
and sale agreements with orthodontic practices. OrthAlliance was created as a
shell corporation to become active in connection with the Offering. Prior to the
Merger, the sole stockholder of OrthAlliance held a minority interest in
Premier. There were two common investors between USOC and Premier, and there
were no common owners between USOC and OrthAlliance. USOC and Premier are
considered promoters; therefore, the Merger will be accounted for pursuant to
Staff Accounting Bulletin No. 48, "Transfers of Nonmonetary Assets by Promoters
and Shareholders," as will the transactions with the orthodontic practices.
These transactions will result in carryover basis of assets and liabilities of
USOC and Premier. In the Merger, the outstanding capital stock of USOC and
Premier will be automatically converted into shares of Class A common stock and
shares of Class B common stock. The stockholders of USOC and Premier shall
receive 70% and 30%, respectively, of the Class A common stock and Class B
common stock issued as consideration in the Merger. The Company will affiliate
with orthodontic practices pursuant to long-term management services or
consulting agreements and will generate revenue by providing management,
marketing, and development services to these practices. The Company has had no
operations to date, and the financial statements have been prepared on the basis
that the proposed transaction will occur, although no assurance can be made that
the proposed transaction will be completed or that the Company will be
successful in completing planned future acquisitions. The Company intends to
expand through the acquisition of management rights to practices throughout the
United States. In order to expand, the Company will need further acquisition
financing in the form of debt or equity financing. There can be no assurance
that such financing will be available.

After the acquisition of the assets and certain liabilities of an
orthodontic practice, the Company will continue to purchase patient accounts
receivable generated by the affiliated orthodontic practice and will record
these receivables on the balance sheet of OrthAlliance. The purchase of these
accounts receivable will be made without recourse and will become an asset of
OrthAlliance. The receivable will be recorded at net realizable value on the
date of purchase. Any subsequent uncollectible account will be written off by
OrthAlliance. OrthAlliance will also record receivables from and payables to the
affiliated orthodontic practice for the net settlement of receivables and
expenses of the practice.

Pursuant to the merger agreement between USOC, Premier, and the Company,
respectively, all of the outstanding stock of USOC and Premier will be converted
to common stock of the Company.

As of December 31, 1996, the Company received $.01 per share for the one
share of stock issued in 1996. This amount has been recorded as a subscription
receivable in the accompanying statement of stockholders equity. The stock of
the Company is owned by a stockholder of Premier.

F-11
<PAGE> 60

ORTHALLIANCE, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INTERIM UNAUDITED FINANCIAL INFORMATION

The financial statements as of and for the three months ended March 31,
1997 are unaudited; however, in the opinion of management, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation of the unaudited financial statements for this interim period have
been included. The results of interim periods are not necessarily indicative of
the results to be obtained for a full year.

ACCOUNTING PRONOUNCEMENTS

The Company anticipates that the Emerging Issues Task Force of the
Financial Accounting Standards Board will be evaluating certain matters relating
to the physician practice management industry such as the ability to consolidate
the revenues of a physician practice through a contractual management agreement,
mergers between physician practices and management entities and merger
transactions that qualify for pooling-of-interest treatment. The Company expects
this evaluation will include a review of accounting for business combinations.
The Company is unable to predict the impact, if any, that this review may have
on the Company's acquisition strategy, allocation of purchase price related to
acquisitions, and amortization life assigned to intangible assets.

3. COMMITMENTS AND CONTINGENCIES

The Company will be subject to certain government regulation at the federal
and state levels. In compliance with certain regulatory requirements, the
Company will not control the practice of orthodontics. There can be no assurance
that the legality of any long-term management services agreements that will be
entered into will not be successfully challenged. There also can be no assurance
that the laws and regulations of states in which the Company will maintain
operations will not change or be interpreted in the future to restrict or
further restrict the Company's relationships with orthodontists.

Orthodontists may be subject to legal liability suits while under
management or consulting services agreements with the Company. The Company will
not control the orthodontists; however, the Company intends to acquire certain
liability insurance for itself.

F-12
<PAGE> 61

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To US Orthodontic Care, Inc.:

We have audited the accompanying balance sheet of US ORTHODONTIC CARE, INC.
(a development-stage enterprise and a Georgia corporation) as of December 31,
1996 and the related statements of operations, shareholders' deficit, and cash
flows for the period from inception (February 7, 1996) to December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of US Orthodontic Care, Inc. as
of December 31, 1996 and the results of its operations and its cash flows for
the period from inception (February 7, 1996) to December 31, 1996 in conformity
with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Atlanta, Georgia
April 4, 1997

(except with respect to

certain information in

Note 8 to which the

date is June 9, 1997)

F-13
<PAGE> 62

US ORTHODONTIC CARE, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 59,940 $ 315,163
Other current assets...................................... 2,250 2,250
----------- -----------
Total current assets.............................. 62,190 317,413
----------- -----------
PROPERTY AND EQUIPMENT, at cost............................. 29,441 34,281
Less accumulated depreciation............................. (2,786) (4,300)
----------- -----------
Property and equipment, net....................... 26,655 29,981
----------- -----------
Total assets...................................... $ 88,845 $ 347,394
=========== ===========

LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 847,203 $ 303,312
Accrued salaries.......................................... 100,000 0
Due to related party...................................... 173,754 0
----------- -----------
Total current liabilities......................... 1,120,957 303,312
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' (DEFICIT) EQUITY:
Common stock; no par value; 10,000,000 shares authorized,
2,195,214 and 2,471,714 shares issued and outstanding
at December 31, 1996 and March 31, 1997,
respectively........................................... 0 0
Additional paid-in capital................................ 1,760,000 3,122,250
Warrants.................................................. 339,750 589,750
Deficit accumulated during the development stage.......... (3,131,862) (3,667,918)
----------- -----------
Total shareholders' (deficit) equity.............. (1,032,112) 44,082
----------- -----------
Total liabilities and shareholders' (deficit)
equity.......................................... $ 88,845 $ 347,394
=========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-14
<PAGE> 63

US ORTHODONTIC CARE, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION FOR THE THREE
(FEBRUARY 7, MONTHS
1996) TO ENDED
DECEMBER 31, MARCH 31,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
REVENUES.................................................... $ 0 $ 0
EXPENSES:
Salaries, wages, and benefits............................. (1,878,205) (395,465)
General and administrative................................ (1,253,657) (147,350)
----------- -----------
Total expenses.................................... (3,131,862) (542,815)
----------- -----------
OTHER INCOME (EXPENSE), NET................................. 0 6,759
----------- -----------
NET LOSS.................................................... $(3,131,862) $ (536,056)
=========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-15
<PAGE> 64

US ORTHODONTIC CARE, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY
FOR THE PERIOD FROM INCEPTION (FEBRUARY 7, 1996) TO MARCH 31, 1997

<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED TOTAL
COMMON STOCK ADDITIONAL DURING THE SHAREHOLDERS'
------------------ PAID IN DEVELOPMENT (DEFICIT)
SHARES AMOUNT CAPITAL STAGE WARRANTS EQUITY
--------- ------ ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT FEBRUARY 7, 1996... 0 $0 $ 0 $ 0 $ 0 $ 0
Common stock issued to
Incorporator............. 1,576,714 0 400,000 0 0 400,000
Common stock issued to
directors and
consultants.............. 495,000 0 742,500 0 0 742,500
Common stock issued to
investors................ 123,500 0 617,500 0 0 617,500
Warrants granted to
consultants.............. 0 0 0 0 339,750 339,750
Net loss.................... 0 0 0 (3,131,862) 0 (3,131,862)
--------- -- ---------- ----------- -------- -----------
BALANCE AT DECEMBER 31,
1996........................ 2,195,214 0 1,760,000 (3,131,862) 339,750 (1,032,112)
Common Stock issued to
investors................ 276,500 0 1,362,250 0 0 1,362,250
Warrants granted to
officer.................. 0 0 0 0 250,000 250,000
Net loss.................... 0 0 0 (536,056) 0 (536,056)
--------- -- ---------- ----------- -------- -----------
BALANCE AT MARCH 31, 1997
(unaudited)................. 2,471,714 $0 $3,122,250 $(3,667,918) $589,750 $ 44,082
========= == ========== =========== ======== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-16
<PAGE> 65

US ORTHODONTIC CARE, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION
(FEBRUARY 7, FOR THE THREE
1996) TO MONTHS ENDED
DECEMBER 31, MARCH 31,
1996 1997
------------------ --------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(3,131,862) $ (536,056)
----------- -----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation........................................... 2,786 1,514
Compensation expense related to stock grants and
warrants............................................. 1,080,000 250,000
Changes in assets and liabilities:
Other assets......................................... (2,250) 0
Accounts payable..................................... 847,203 (543,891)
Accrued salaries..................................... 100,000 (100,000)
Due to Incorporator.................................. 173,754 (173,754)
----------- -----------
Total adjustments................................. 2,201,493 (566,131)
----------- -----------
Net cash used in operating activities............. (930,369) (1,102,187)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........................ (29,441) (4,840)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued to Incorporator....................... 400,000 0
Common stock issued to investors.......................... 617,500 1,362,250
Warrants granted to consultants........................... 2,250 0
----------- -----------
Net cash provided by financing activities......... 1,019,750 1,362,250
----------- -----------
NET CHANGE IN CASH.......................................... 59,940 255,223
CASH, beginning of period................................... 0 59,940
----------- -----------
CASH, end of period......................................... $ 59,940 $ 315,163
=========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-17
<PAGE> 66

US ORTHODONTIC CARE, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(INFORMATION AS OF MARCH 31, 1997 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1997 IS UNAUDITED UNLESS INDICATED)

1. BUSINESS AND ORGANIZATION

US Orthodontic Care, Inc. ("USOC" or the "Company") was incorporated as a
Georgia corporation on February 7, 1996 to effect the combination of the
operations of orthodontic practice entities. USOC did not have significant
operations from February 7, 1996 to March 31, 1996. USOC plans to combine with
Premier Orthodontic Group, Inc. ("Premier") under a newly formed holding
company, OrthAlliance, Inc. ("OrthAlliance") (the "Merger"). USOC and Premier
will be merged with and into OrthAlliance prior to the acquisition of the assets
or stock of an entity holding the assets of certain orthodontic practices.
OrthAlliance was created as a shell corporation to become active in connection
with an initial public offering (the "Offering"). Prior to the Merger, the sole
stockholder of OrthAlliance held a minority interest in Premier. There were two
common investors between USOC and Premier, and there were no common owners
between USOC and OrthAlliance. USOC and Premier are considered promoters;
therefore, the Merger will be accounted for pursuant to Staff Accounting
Bulletin No. 48, "Transfers of Nonmonetary Assets by Promoters and
Shareholders," as will the transactions with the orthodontic practices. These
transactions will result in carryover basis of assets and liabilities of USOC
and Premier. In the Merger, the outstanding capital stock of USOC and Premier
will be automatically converted into shares of Class A common stock and shares
of Class B common stock. The stockholders of USOC and Premier shall receive 70%
and 30%, respectively, of the Class A common stock and Class B common stock
issued as consideration in the Merger. Although USOC has not conducted any
operations to date, other than the initial capitalization and expenses incurred
in connection with the combination of the operations of orthodontic practice
entities and Offering, it has entered into agreements to acquire, simultaneous
with and as a condition to the consummation of the Offering, the stock of an
entity holding the assets and certain liabilities of, or certain assets and
liabilities of established orthodontic practices ("Founding Practices"). These
agreements and the rights thereto are being acquired by OrthAlliance pursuant to
the merger of USOC and Premier with and into OrthAlliance. The financial
statements have been prepared on the basis that the proposed transaction will
occur, although no assurance can be made that the proposed transaction will be
completed or that OrthAlliance will be successful in completing planned future
acquisitions of orthodontic practices.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Deferred Issuance Costs

The Company incurred costs associated with a proposed initial public
offering of $450,000 in 1996. As this offering did not occur, the Company
expensed those items.

Property and Equipment

Property and equipment are stated at cost, less accumulated deprecation.
Depreciation is provided using the straight-line method over the assets'
estimated useful lives of five to seven years.

Property and equipment consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ---------
<S> <C> <C>
Computer equipment.......................................... $15,932 $20,772
Furniture and fixtures...................................... 13,509 13,509
------- -------
29,441 34,281
Less accumulated depreciation............................. (2,786) (4,300)
------- -------
$26,655 $29,981
======= =======
</TABLE>

F-18
<PAGE> 67

US ORTHODONTIC CARE, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Fair Value of Financial Instruments

The carrying values of cash and accounts payable approximate their fair
values principally because of the short-term maturities of these instruments.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Revenue Recognition

Revenue from managing the practices on a national basis will be recognized
on a monthly basis as the services are provided. The revenue of OrthAlliance,
successor to USOC, will consist of the sum of the fees paid to OrthAlliance
pursuant to the management agreements and the reimbursement of certain operating
expenses of the practices under such management agreements. Expenses incurred by
the founding practices and required to be paid by OrthAlliance pursuant to the
agreements and are fully reimbursable by the founding practice to OrthAlliance.
Expenses not required to be paid by OrthAlliance pursuant to the agreements
primarily consist of personal expenses of the orthodontist.

The consulting and service agreements provide for the payment of management
fees based on a negotiated percentage of the practice's adjusted patient
revenue. Adjusted patient revenue is net patient revenue under generally
accepted accounting principles, which includes an adjustment for uncollectible
accounts and other discounts, allowances or activities that do not generate
collectible fees. The negotiated fee paid by each practice is either a variable
percentage of adjusted patient revenue based on a variety of factors including
the practice's profitability, revenues and other factors, or a fixed percentage
of adjusted patient revenue that provides for annual increases based on the
increase in the practice's profit margin. Therefore, variations in profit
margin, overhead or revenues at the practices directly affect the fee received
by OrthAlliance. As the profit margin increases the management fee percentage
increases, thereby decreasing the percentage of the profit of the practice that
is paid to OrthAlliance as a management fee.

Per Share Data

Net loss per share is calculated using the weighted average number of
common shares outstanding during the period. The net loss per share for the
period from inception (February 7, 1996) to December 31, 1996 and for the three
months ended March 31, 1997 was based on the weighted average number of common
shares outstanding. Pursuant to Securities and Exchange Commission Staff
Accounting Bulletins ("SAB"), common stock and common stock equivalents issued
at prices below the expected public offering price during the twelve month
period prior to the filing of the registration statement must be included in the
calculation as if they were outstanding for all periods presented prior to the
Offering, regardless of whether they are antidilutive. Therefore, the effect of
the shares and options issued twelve months prior to the Offering is included in
the weighted average number of common and common equivalent shares outstanding.

Interim Unaudited Financial Information

The financial statements as of and for the three months ended March 31,
1997 are unaudited; however, in the opinion of management, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation of the unaudited financial statements for this interim period has
been included. The results of interim periods are not necessarily indicative of
the results to be obtained for a full year.

F-19
<PAGE> 68

US ORTHODONTIC CARE, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Accounting Pronouncements

On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." At December 31, 1996 and March 31,
1997, the Company had no significant long-lived assets. Under SFAS No. 121, the
Company will analyze intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. If this review indicates that the carrying amount of the asset may
not be recoverable, as determined based on the estimated future operations that
result from the assets acquired, the carrying value of the asset will be reduced
to fair value. Among the factors that the Company will continually evaluate are
unfavorable changes in each orthodontic group's relative market share and local
market competitive environment, current period and forecasted operating and cash
flow levels of the orthodontic group and the impact on the management fee earned
by the Company, and legal factors governing the practice of orthodontics.

3. SHAREHOLDERS' (DEFICIT) EQUITY

In April 1996, 1,576,714 shares of common stock were issued at a total
price of $400,000 to Dr. Robert N. Pickron (the "Incorporator"). Management
believes that the $.2537 per share received in consideration for those shares
represented the fair value of the shares at that date. On June 10, 1996, an
additional 495,000 shares were issued to certain consultants of the Company in
consideration for services provided to that date. Management believes that the
fair value of the shares issued at that date, as calculated for compensation
expense, was $1.50 per share. The fair value of these shares was recorded as
compensation expense of $742,500 and is included in salaries, wages and benefits
in the accompanying statement of operations.

On October 23, 1996, USOC offered 400,000 shares of common stock to
affiliates of anticipated Founding Practices and other accredited investors
through a private placement memorandum ("PPM") at a price of $5.00 per share. As
of December 31, 1996, 123,500 shares were issued under the PPM for net proceeds
of $617,500.

On February 4, 1997, the Company offered the shares not sold in the PPM
discussed above (276,500 shares) at $5.00 per share through a second PPM to
affiliates of anticipated Founding Practices and other accredited investors.

4. INCOME TAXES

As reflected in the accompanying statements of operations, the Company
incurred a loss from operations during the period from inception (February 7,
1996) to December 31, 1996 and for the three months ended March 31, 1997. Due to
the limited operations of the Company since its inception and the pending
Offering, a valuation allowance has been recorded to fully reserve for the
deferred tax benefits generated from tax deferred issuance costs. There is no
significant difference in the tax and book bases of the Company's assets or
liabilities that would give rise to deferred tax balances.

F-20
<PAGE> 69

US ORTHODONTIC CARE, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. RELATED-PARTY TRANSACTIONS

The Incorporator of USOC funded expenses of USOC from the date of inception
through December 31, 1996, as only a portion of the funds provided from the PPM
was available for use prior to year-end. Of the amount funded by the
Incorporator, $173,754 is included in a current liability on the accompanying
balance sheet as of December 31, 1996 and was reimbursed by USOC after December
31, 1996. The remaining amount funded by the Incorporator ($400,000) was repaid
through the issuance of 1,576,714 shares of common stock and is included in
additional paid-in capital on the accompanying balance sheet.

6. WARRANTS

At December 31, 1996, the Company had warrants outstanding to consultants
of the Company and future directors of OrthAlliance to purchase 225,000 shares
of common stock at the initial public offering price. The warrants expire five
years from the effective date of the Offering. The fair market value of these
warrants of $337,500 was recorded as salaries, wages and benefits in the
accompanying statement of operations for the period from inception (February 7,
1996) to December 31, 1996.

On January 1, 1997, USOC granted an option to an officer for the purchase
of 50,000 shares of common stock at an exercise price of $.01 per share. USOC
recorded compensation expense related to those options of $250,000 in the first
quarter of fiscal 1997. On June 10, 1997, the options were cancelled and a
warrant for the purchase of 50,000 shares of common stock at $.01 per share. The
cancellation of the option and the issuance of a warrant created a new
measurement date. The Company will record compensation expense for the
difference between the fair market value and the compensation expense previously
recognized in the second quarter of fiscal 1997.

OrthAlliance, successor to USOC, has agreed to issue warrants for the
purchase of 90,000 shares of common stock to certain Founding Practices. The
exercise price per share will be equal to the initial public offering price.
OrthAlliance will record compensation expense, if any, on these warrants in
accordance with Accounting Principles Board Opinion No. 25 (APB No. 25)
"Accounting for Stock Issued to Employees," and will disclose the effects under
SFAS No. 123 "Accounting for Stock-Based Compensation."

The warrants discussed above are exercisable one for one into Class A
common stock of OrthAlliance.

7. COMMITMENTS AND CONTINGENCIES

OrthAlliance will establish a stock option plan for employees prior to the
Offering. All options issued under this plan will be accounted for in accordance
with APB No. 25, and any required compensation expense on these options will be
recorded at the date of grant. The Company will provide the pro forma disclosure
of net income and earnings per share in the notes to the financial statements as
if the fair value-based method of accounting had been applied to awards as
required by SFAS No. 123.

The Company has granted warrants to purchase shares of Class A common stock
to J.C. Bradford & Co., as part of the Offering. The warrant is for the purchase
of 3/4 of 1% of the shares of common stock outstanding upon closing of the
Offering at an exercise price equal to the initial public offering price.
Additionally, the Company has agreed to pay approximately $400,000 to certain
consultants upon successful completion of the Offering. The fair market value of
the warrants will be recorded as a reduction of the proceeds of the Offering.
The consulting fees will be expensed in the second and third quarter of 1997 as
efforts to complete the Offering are performed.

OrthAlliance will be subject to certain government regulation at the
federal and state levels. In compliance with certain regulatory requirements,
OrthAlliance will not control the practice of orthodontists. Long-term
management and consulting services agreements may be challenged by certain
states as to their legality. There also can be no assurance that the laws and
regulations of states in which OrthAlliance will maintain operations will not
change or be interpreted in the future to restrict OrthAlliance's relationships
with orthodontists.

F-21
<PAGE> 70

US ORTHODONTIC CARE, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

8. TRANSFER OF NET ASSETS FROM PROMOTERS

OrthAlliance plans to complete the transfer of certain assets of the
Founding Practices (the "Transfers") concurrently with the Offering. The
Founding Practices will receive shares of common stock and cash as consideration
in the Transfers. Additionally the selling orthodontists' professional
corporations, professional associations, or other entities (collectively, the
"PCs") will enter into 20-year management or consulting services agreements with
OrthAlliance. The orthodontists will be employed by the PCs; therefore,
OrthAlliance will not employ orthodontists or control the practice of
orthodontics. OrthAlliance will receive a management fee for the services
provided. This management fee percentage paid by a Founding Practice is based on
the profitability of the individual practices and is based on a percentage of
annual accrual patient service revenue or a flat fee with annual incremental
increases calculated as a percentage of the reduction in the annual overhead of
the practice. Each of the Founding Practices is considered a promoter as defined
in rule 1-02 of Regulation S-X.

As OrthAlliance will not be acquiring the future patient service revenues
earned by the individual orthodontic practices, the Transfers are not deemed to
be business combinations. In accordance with the SAB No. 48, "Transfers of
Nonmonetary Assets by Promoters or Shareholders," the acquired nonmonetary
assets and assumed liabilities will be accounted for on the historical cost
basis of the Founding Practices.

The selling orthodontists will generally retain the liabilities of their
respective practices although certain liabilities will be assumed by
OrthAlliance. Certain capital lease obligations will be assumed by OrthAlliance.

The management service revenues that will be earned by OrthAlliance,
subsequent to the Transfers and execution of the management agreements are based
on various arrangements. In general, the resulting fee will be based on the
accrual patient service revenue of the practice. OrthAlliance's standard form of
management agreement will be applied to all practices operating in locations
where it is not prohibited by law or governmental regulation. In those instances
where this contract may not be permitted, an alternative form of consulting and
business services agreement will be used.

Patient service revenues are derived from orthodontic care provided to
patients under contract terms agreed to by the patient or other responsible
parties. The contracts vary by practice and by patient, and service generally
extends over an 18- to 24-month period. Revenue is recognized as the services
are performed, with approximately 20% being recognized at the time of initial
treatment. The balance of the contract revenue is realized evenly over the
remaining contract period. The 20% estimated cost at the initial treatment date
is based on the estimated costs incurred by the practice at that time as
compared to the total costs of providing the contracted services. Additionally,
the 20% estimated revenue at the initial treatment date is consistent with
industry standards and includes the estimated costs of diagnosis and treatment
plan development, initial treatment by orthodontic personnel, orthodontic
supplies, and associated administrative services. For the year ended December
31, 1996 and for the three months ended March 31, 1997, the Founding Practices
had audited accrual adjusted patient service revenue of approximately
$41,019,000 and $10,479,000, respectively.

The difference in the timing of the recognition of patient service revenues
and cash collections results in (i) unbilled receivables in instances where
recognition of revenues precedes the patient's payment plan and (ii) patient
prepayments when payments are made on a more accelerated basis than revenues are
earned.

F-22
<PAGE> 71

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Premier Orthodontic Group, Inc.:

We have audited the accompanying balance sheet of PREMIER ORTHODONTIC
GROUP, INC. (a development-stage enterprise and a Delaware corporation) as of
December 31, 1996 and the related statement of operations, owners' deficit, and
cash flows for the period from inception (November 26, 1996) to December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Premier Orthodontic Group,
Inc. as of December 31, 1996 and the results of its operations and its cash
flows for the period from inception (November 26, 1996) to December 31, 1996 in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Atlanta, Georgia
April 11, 1997

(except with respect to

certain information in

Note 6 to which the

date is June 9, 1997)

F-23
<PAGE> 72

PREMIER ORTHODONTIC GROUP, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 0 $ 895,889
--------- ---------
PROPERTY AND EQUIPMENT, at cost............................. 4,971 24,953
Less accumulated depreciation............................. (166) (415)
--------- ---------
Property and equipment, net............................ 4,805 24,538
OTHER ASSETS................................................ 0 4,620
--------- ---------
Total assets...................................... $ 4,805 $ 925,047
========= =========
LIABILITIES AND OWNERS'/STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued liabilities.................. $ 20,241 $ 137,463
Accrued consulting fees................................... 239,735 380,985
--------- ---------
Total current liabilities......................... 259,976 518,448
NOTE PAYABLE................................................ 0 1,000,000
COMMITMENTS AND CONTINGENCIES
OWNERS'/STOCKHOLDERS' DEFICIT ACCUMULATED DURING THE
DEVELOPMENT STAGE, $.001 par value; 3,000 shares
authorized; 100 shares issued and outstanding at March 31,
1997...................................................... (255,171) (593,401)
--------- ---------
Total liabilities and owners'/stockholders'
deficit......................................... $ 4,805 $ 925,047
========= =========
</TABLE>

The accompanying notes are an integral part of these statements.

F-24
<PAGE> 73

PREMIER ORTHODONTIC GROUP, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION FOR THE THREE
(NOVEMBER 26, MONTHS
1996) TO ENDED
DECEMBER 31, MARCH 31,
1996 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
REVENUES.................................................... $ 0 $ 0
----------- -----------
EXPENSES:
Consulting fees........................................... (239,735) (211,755)
General and administrative................................ (15,436) (129,945)
----------- -----------
Total expenses.................................... (255,171) (341,700)
----------- -----------
OTHER INCOME (EXPENSE), NET................................. 0 (3,470)
----------- -----------
NET LOSS.................................................... $ (255,171) $ (338,230)
=========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-25
<PAGE> 74

PREMIER ORTHODONTIC GROUP, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

STATEMENTS OF CHANGES IN OWNERS'/STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM INCEPTION (NOVEMBER 26, 1996) TO MARCH 31, 1997

<TABLE>
<S> <C>
INITIAL INVESTED CAPITAL (NOVEMBER 26, 1996)................ $ 0
Net loss.................................................. (255,171)
---------
OWNERS' DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE AT
DECEMBER 31, 1996......................................... (255,171)
---------
Net loss.................................................. $(338,230)
---------
OWNERS'/STOCKHOLDERS' DEFICIT ACCUMULATED DURING THE
DEVELOPMENT STAGE AT MARCH 31, 1997 (unaudited)........... $(593,401)
=========
</TABLE>

The accompanying notes are an integral part of this statement.

F-26
<PAGE> 75

PREMIER ORTHODONTIC GROUP, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION
(NOVEMBER 26, FOR THE THREE
1996) TO MONTHS ENDED
DECEMBER 31, MARCH 31,
1996 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(255,171) $(338,230)
--------- ---------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation........................................... 166 249
Changes in assets and liabilities:
Other assets......................................... 0 (4,620)
Accounts payable and accrued liabilities............. 20,241 117,222
Accrued consulting fees.............................. 239,735 141,250
--------- ---------
Total adjustments................................. 260,142 254,101
--------- ---------
Net cash provided by (used) in operating
activities...................................... 4,971 (84,129)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........................ (4,971) (19,982)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable................................ 0 1,000,000
--------- ---------
NET CHANGE IN CASH.......................................... 0 895,889
CASH, beginning of period................................... 0 0
--------- ---------
CASH, end of period......................................... $ 0 $ 895,889
========= =========
</TABLE>

The accompanying notes are an integral part of these statements.

F-27
<PAGE> 76

PREMIER ORTHODONTIC GROUP, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(INFORMATION AS OF MARCH 31, 1997 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1997 IS UNAUDITED UNLESS INDICATED)

1. BUSINESS AND ORGANIZATION

Premier Orthodontic Group, Inc., a Delaware corporation ("Premier" or the
"Company"), was incorporated on January 30, 1997. Premier Orthodontic Ventures,
LLC ("Premier LLC"), formed on November 26, 1996, incurred certain expenses on
behalf of the Company from November 26, 1996 to January 30, 1997. Upon the
incorporation of the Company on January 30, 1997, the Company reimbursed the
expenses incurred by Premier LLC on behalf of the Company from the proceeds of
the loan discussed in Note 7. The accompanying financial statements have been
prepared based on the expenses incurred by Premier LLC on behalf of the Company
from November 26, 1996 to December 31, 1996. The Company was incorporated to
effect the combination of the operations of orthodontic entities. Premier plans
to combine with US Orthodontic Care, Inc. under a newly formed holding company,
OrthAlliance, Inc. ("OrthAlliance") (the "Merger"). USOC and Premier will be
merged with and into OrthAlliance prior to the acquisition of the assets or
stock of an entity holding the assets of certain orthodontic practices.
OrthAlliance was created as a shell corporation to become active in connection
with an initial public offering (the "Offering"). Prior to the Merger, the sole
stockholder of OrthAlliance held a minority interest in Premier. There were two
common investors between USOC and Premier, and there were no common owners
between USOC and OrthAlliance. USOC and Premier are considered promoters;
therefore, the merger will be accounted for pursuant to Staff Accounting
Bulletin No. 48, "Transfers of Nonmonetary Assets by founding Promoters and
Shareholders," as will the transactions with the orthodontic practices. These
transactions will result in carryover basis of assets and liabilities of USOC
and Premier. In the Merger, the outstanding capital stock of USOC and Premier
will be automatically converted into shares of Class A common stock and shares
of Class B common stock. The stockholders of USOC and Premier shall receive 70%
and 30%, respectively, of the Class A common stock and Class B common stock
issued as consideration in the Merger. Although Premier has not conducted any
operations to date, other than the initial capitalization and expenses incurred
in connection with the combination of the operations of orthodontic entities and
a proposed public offering (the "Offering"), it has entered into agreements to
acquire, simultaneous with and as a condition to the consummation of the
Offering, the stock of an entity holding the assets and certain liabilities of,
or certain assets and liabilities of established orthodontic practices
("Founding Practices"). These agreements and the rights thereto are being
acquired by OrthAlliance pursuant to the merger of USOC and Premier with and
into OrthAlliance. The financial statements have been prepared on the basis that
the proposed transaction will occur, although no assurance can be made that the
proposed transaction will be completed or that OrthAlliance will be successful
in completing planned future acquisitions of orthodontic practices.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Property and Equipment

Property and equipment are stated at cost, less accumulated deprecation.
Depreciation is provided using the straight-line method over the assets'
estimated useful lives of five to seven years.

The detail of property and equipment is as follows:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ---------
<S> <C> <C>
Computer equipment.......................................... $4,971 $18,625
Furniture and Equipment..................................... 0 6,328
Less accumulated depreciation............................. (166) (415)
------ -------
$4,805 $24,538
====== =======
</TABLE>

F-28
<PAGE> 77

PREMIER ORTHODONTIC GROUP, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Fair Value of Financial Instruments

The carrying values of financial instruments approximate their fair values
principally because of the short-term maturities of these instruments.

Use of Estimates

Revenue Recognition

Revenue from managing the practices on a national basis will be recognized
on a monthly basis as the services are provided. The revenue of OrthAlliance,
successor to USOC, will consist of the sum of the fees paid to OrthAlliance
pursuant to the management agreements and the reimbursement of certain operating
expenses of the practices under such management agreements. Any expenses
incurred by the founding practices and required to be paid by OrthAlliance under
the agreements are fully reimbursable by the founding practice to OrthAlliance.
Expenses not required to be paid by OrthAlliance pursuant to the agreements
primarily consist of personal expenses of the orthodontist.

The consulting and service agreements provide for the payment of management
fees based on a negotiated percentage of the practice's adjusted patient
revenue. Adjusted patient revenue is net patient revenue under generally
accepted accounting principles, which includes an adjustment for uncollectible
accounts and other discounts, allowances or activities that do not generate
collectible fees. The negotiated fee paid by each practice is either variable
percentage of adjusted patient revenue based on a variety of factors including
the practice's profitability, revenues and other factors, or a fixed percentage
of adjusted patient revenue that provides for annual increases based on the
increase in a practice's profit margin. Therefore, variations in profit margin,
overhead or revenues at the practices directly affects the fee received by
OrthAlliance. As the profit margin increases, the management fee percentage
increases, thereby decreasing the percentage of the profit of the practice that
is paid to OrthAlliance as a management fee.

Per Share Data

Net loss per share is calculated using the weighted average number of
common and common equivalent shares outstanding during the period. The net loss
per share for the period from inception (November 26, 1996) to December 31, 1996
and for the three months ended March 31, 1997 was based on the weighted average
number of common shares outstanding. Pursuant to Securities and Exchange
Commission Staff Accounting Bulletins ("SAB"), common stock and common stock
equivalents issued at prices below the expected public offering price during the
twelve month period prior to the filing of the registration statement must be
included in the calculation as if they were outstanding for all periods
presented prior to the Offering, regardless of whether they are antidilutive.
Therefore, the effect of the shares and options issued twelve months prior to
the Offering is included in the weighted average number of common and common
equivalent shares outstanding.

INTERIM UNAUDITED FINANCIAL INFORMATION

The financial statements as of and for the three months ended March 31,
1997 are unaudited; however, in the opinion of management, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation of the unaudited financial statements for this interim period has
been included. The results of interim periods are not necessarily indicative of
the results to be obtained for a full year.

F-29
<PAGE> 78

PREMIER ORTHODONTIC GROUP, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Accounting Pronouncements

On November 26, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." At December 31, 1996 and March 31,
1997, the Company had no significant long-lived assets. Under SFAS No. 121, the
Company will analyze intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. If this review indicates that the carrying amount of the asset may
not be recoverable, as determined based on the estimated future operations that
result from the assets acquired, the carrying value of the asset will be reduced
to fair value. Among the factors that the Company will continually evaluate are
unfavorable changes in each orthodontic group's relative market share and local
market competitive environment, current period and forecasted operating and cash
flow levels of the orthodontic group and the impact on the management fee earned
by the Company, and legal factors governing the practice of orthodontics.

3. INCOME TAXES

As reflected in the accompanying statement of operations, the Company
incurred a loss from operations during the period from inception (November 26,
1996) to December 31, 1996 and for the three months ended March 31, 1997. Due to
the limited operations of the Company since its inception and the pending
Offering, a valuation allowance has been recorded to fully reserve for the
deferred tax benefits generated from tax deferred issuance costs. There is no
significant difference in the tax and book bases of the Company's assets or
liabilities that would give rise to deferred tax balances.

4. RELATED-PARTY TRANSACTIONS

The incorporators of Premier funded expenses of Premier from the date of
inception through the end of the year. Of the amount funded by the founders,
$17,630 is reflected as a current liability on the accompanying balance sheet as
of December 31, 1996 and was reimbursed by Premier after year-end.

5. COMMITMENTS AND CONTINGENCIES

The Company has agreed to pay certain consultants approximately $500,000
upon completion of the Offering. These fees will be expensed in the second and
third quarter of 1997 as efforts to complete the Offering are performed.

OrthAlliance will be subject to certain government regulation at the
federal and state levels. In compliance with certain regulatory requirements,
OrthAlliance will not control the practice of orthodontists. Long-term service
and consulting services agreement may be challenged by certain states as to
their legality. There also can be no assurance that the laws and regulations of
states in which OrthAlliance will maintain operations will not change or be
interpreted in the future to restrict OrthAlliance's relationships with
orthodontists.

F-30
<PAGE> 79

PREMIER ORTHODONTIC GROUP, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. TRANSFER OF NET ASSETS FROM PROMOTERS

OrthAlliance plans to complete the transfer of certain assets of the
Founding Practices (the "Transfer") concurrently with the Offering. The Founding
Practices will receive shares of common stock and cash as consideration in the
Transfers. Additionally, the selling orthodontists' professional corporations,
professional associations, or other entities (collectively, the "PCs") will
enter into 20-year management or consulting services agreements with
OrthAlliance. The orthodontists will be employed by the PCs; therefore,
OrthAlliance will not employ orthodontists or control the practice of
orthodontics. OrthAlliance will receive a management fee for the services
provided. This management fee percentage paid by the Founding Practices is based
on the profitability of the individual practices and is based on a percentage of
annual accrual patient service revenue or a flat fee with annual incremental
increases calculated as a percentage of the reduction in the annual overhead of
the practice. Each of the founding practices is considered a promoter as defined
in rule 1-02 of Regulation S-X.

As OrthAlliance will not be acquiring the future patient service revenues
earned by the individual orthodontic practices, the Transfers are not deemed to
be business combinations. In accordance with the SAB No. 48, "Transfers of
Nonmonetary Assets by Promoters of Shareholders," the acquired nonmonetary
assets and assumed liabilities will be accounted for on the historical cost
basis of the Founding Practices.

7. SUBSEQUENT EVENTS

In January 1997, Premier LLC loaned the Company $1,000,000. The Company
will pay the total amount of the loan to Premier LLC of $1,000,000 in cash, plus
accrued interest at prime plus 1% from the proceeds of the Offering.

F-31
<PAGE> 80

======================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY THE SHARES OF COMMON STOCK OFFERED HEREBY
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.

---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
The Company........................... 14
Use of Proceeds....................... 14
Dividend Policy....................... 15
Dilution.............................. 15
Capitalization........................ 16
Selected Financial Data............... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 21
Management............................ 30
Certain Transactions.................. 34
Principal Stockholders................ 38
Description of Capital Stock.......... 39
Shares Eligible for Future Sale....... 42
Underwriting.......................... 45
Legal Matters......................... 47
Experts............................... 47
Additional Information................ 47
Index to Financial Statements......... F-1
</TABLE>

UNTIL , 1997 (FOR 25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

======================================================
======================================================

2,600,000 SHARES

LOGO ORTHALLIANCE

COMMON STOCK
-------------------
PROSPECTUS
-------------------
J.C.BRADFORD & CO.
, 1997

======================================================
<PAGE> 81

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table itemizes the expenses of this Offering to be incurred
by the Company in connection with this registration statement, other than
underwriting discounts and commissions. All the amounts shown are estimates
except the SEC registration fee, the NASD filing fee and the Nasdaq National
Market Application and Listing Fee.

<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 8,667
Nasdaq National Market Application and Listing Fee.......... 47,917
NASD Filing Fee............................................. 4,000
Blue Sky Fees and Expenses.................................. 10,000
Accounting Fees and Expenses................................ 500,000
Legal Fees and Expenses..................................... 400,000
Printing and Engraving Costs................................ 270,000
Transfer Agent Fees and Expenses............................ 5,000
Miscellaneous............................................... 454,416
----------
Total............................................. $1,700,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Under Section 145 of the Delaware General Corporation Law (the "DGCL"), a
corporation may indemnify any of its directors and officers against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with a threatened,
pending or completed action, suit or proceeding brought against him by reason of
the fact that he is or was a director or officer (i) if any such person acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the corporation and (ii) in connection with any criminal
action or proceeding if such person had no reasonable cause to believe such
conduct was unlawful. In actions brought by or in the right of the corporation,
however, Section 145 provides that no indemnification may be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable for negligence or misconduct in the performance of such person's duty
to the corporation unless, and only to the extent that, the Court of Chancery of
the State of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in review of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.

The Certificate provides that no director of the Company shall be liable
for breach of fiduciary duty as a director except for (i) any breach of the
director's duty of loyalty to the Company or its stockholders; (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law; (iii) for willful or negligent violations of certain
provisions of the DGCL imposing certain requirements with respect to stock
repurchases, redemptions and dividends; or (iv) any transaction from which the
director derived an improper personal benefit. Pursuant to the Company's
Certificate and Bylaws, the Company is obligated to indemnify each of its
directors and officers to the fullest extent permitted by the DGCL. In addition,
the Bylaws obligate the Company to purchase and maintain insurance on behalf of
any director or officer of the Company against any liability asserted against
and incurred by such director or officer, whether or not the Company would have
the power to indemnify such officer or director against such liability under the
provisions of the DGCL.

The Underwriting Agreement will provide for the indemnification by the
Underwriters of the Company, each of the Company's directors, each of the
Company's officers who signs this Registration Statement and each person who
controls the Company within the meaning of the Securities Act, solely with
respect to information provided by the Underwriters for inclusion in this
Registration Statement.

II-1
<PAGE> 82

The Company intends to obtain insurance which provides general coverage for
its directors and executive officers in amounts to be determined. In addition,
the Company intends to obtain insurance coverage for its directors and executive
officers in amounts to be determined with respect to the Offering.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The following information relates to securities of the Company issued or
sold within the past three years which were not registered under the Securities
Act:

(i) In October, 1996, the Company issued one share of Common Stock to
Sam Westover for $.01 per share;

(ii) Effective prior to the completion of the Offering, Premier
Orthodontic Group, Inc. ("Premier") and US Orthodontic Care, Inc. ("USOC")
will merge with and into the Company. As a result of the merger, holders of
Premier common stock will receive 675,000 shares of Common Stock and 75,000
shares of Class B Common Stock and holders of USOC Common Stock will
receive 1,575,000 shares of Common Stock and 175,000 shares of Class B
Common Stock;

(iii) Simultaneously with the completion of this Offering, the Company
will issue 6,566,618 shares of its Common Stock in connection with the
acquisition of the practice management or consulting rights to and certain
assets of the Founding Practices.

Each of these transactions was completed without registration of the
relevant security under the Securities Act in reliance upon the exemptions
provided by Section 4(2) of the Securities Act and the rules and regulations
promulgated thereunder on the basis that such transactions did not involve a
public offering, the purchasers were sophisticated with access to the kind of
information registration would provide and that such purchasers acquired such
securities without a view toward the distribution thereof.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1.1 * -- Form of Underwriting Agreement
2.1 * -- Agreement and Plan of Merger between OrthAlliance, USOC and
Premier.
2.2 + -- Form of Purchase and Sale Agreement between OrthAlliance and
Founding Practices.
2.3 + -- Form of Agreement and Plan of Reorganization between
OrthAlliance and Founding Practices.
2.4 * -- Form of Purchase and Sale of Stock Agreement between
OrthAlliance and Founding Practices.
3.1 * -- Amended and Restated Certificate of Incorporation of the
Company.
3.2 * -- Amended and Restated Bylaws of the Company.
4.1 * -- Form of certificate evidencing ownership of Common Stock of
the Company.
5.1 * -- Opinion of Nelson Mullins Riley & Scarborough, L.L.P.
regarding legality.
10.1 + -- Form of Service Agreement between OrthAlliance and Founding
Practices.
10.2 + -- Form of Consulting and Business Service Agreement between
OrthAlliance and Founding Practices.
10.3 * -- 1997 Non-Employee Director Stock Plan.
10.4 * -- 1997 Employee Stock Plan.
10.5 * -- Employment Agreement between the Company and Sam Westover.
10.6 * -- Consulting Agreement between the Company and Jonathan
Wilfong.
10.7 * -- Employment Agreement between the Company and Craig Hethcox.
10.8 + -- Form of Employment Agreement between Allied Orthodontist and
practice ownership entity.
10.9 + -- Letter Agreement dated April 18, 1997 between the Company
and Robert S. Chilton.
21.1 * -- List of subsidiaries of OrthAlliance.
23.1 * -- Consent of Nelson Mullins Riley & Scarborough, L.L.P.
(contained in Exhibit 5.1 hereto).
23.2 -- Consent of Arthur Andersen LLP Independent Public
Accountants.
</TABLE>

II-2
<PAGE> 83

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
24.1+ -- Power of Attorney
27.1 -- Financial Data Schedule (for SEC use only).
99.1 * -- Consent of Drs. Durbin and Schmidt, Mr. Summers, Mr.
McKnight and Mr. Ellis to serve as directors.
</TABLE>

- ---------------

+ Previously filed.
* To be filed by amendment.

(b) Financial Statement Schedules

All schedules are omitted since the required information is not present in
amounts sufficient to require submission of the schedule, or because the
information required is included in the financial statements and notes hereto.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Representative to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

1. For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.

2. For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 84

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Pre-Effective Amendment No. 2 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Torrance, State of California, on July 3, 1997.

OrthAlliance, Inc.

By: /s/ SAM WESTOVER
------------------------------------
Sam Westover
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Pre-Effective Amendment No. 2 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>

/s/ SAM WESTOVER Chief Executive Officer, July 3, 1997
- ----------------------------------------------------- President and Director
Sam Westover (principal executive
officer)

/s/ ROBERT S. CHILTON* Chief Financial Officer July 3, 1997
- ----------------------------------------------------- (principal financial and
Robert S. Chilton accounting officer)

/s/ JONATHAN E. WILFONG* Director July 3, 1997
- -----------------------------------------------------
Jonathan E. Wilfong

/s/ RANDALL K. BENNETT, D.D.S.* Director July 3, 1997
- -----------------------------------------------------
Randall K. Bennett, D.D.S.
* Signed by Sam Westover pursuant to power of attorney previously filed.
</TABLE>

II-4
<PAGE> 85

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<C> <C> <S> <C>
1.1* -- Form of Underwriting Agreement..............................
2.1* -- Agreement and Plan of Merger between OrthAlliance, USOC and
Premier.....................................................
2.2+ -- Form of Purchase and Sale Agreement between OrthAlliance and
Founding Practices. ........................................
2.3+ -- Form of Agreement and Plan of Reorganization between
OrthAlliance and Founding Practices. .......................
2.4* -- Form of Purchase and Sale of Stock Agreement between
OrthAlliance and Founding Practices. .......................
3.1* -- Amended and Restated Certificate of Incorporation of the
Company. ...................................................
3.2* -- Amended and Restated Bylaws of the Company. ................
4.1* -- Form of certificate evidencing ownership of Common Stock of
the Company. ...............................................
5.1* -- Opinion of Nelson Mullins Riley & Scarborough, L.L.P.
regarding legality. ........................................
10.1+ -- Form of Service Agreement between OrthAlliance and Founding
Practices. .................................................
10.2+ -- Form of Consulting and Business Service Agreement between
OrthAlliance and Founding Practices. .......................
10.3* -- 1997 Non-Employee Director Stock Plan. .....................
10.4* -- 1997 Employee Stock Plan. ..................................
10.5* -- Employment Agreement between the Company and Sam
Westover. ..................................................
10.6* -- Consulting Agreement between the Company and Jonathan
Wilfong. ...................................................
10.7* -- Employment Agreement between the Company and Craig
Hethcox. ...................................................
10.8+ -- Form of Employment Agreement between Allied Orthodontist and
practice ownership entity. .................................
10.9+ -- Letter Agreement dated April 18, 1997 between the Company
and Robert S. Chilton. .....................................
21.1* -- List of subsidiaries of OrthAlliance. ......................
23.1* -- Consent of Nelson Mullins Riley & Scarborough, L.L.P.
(contained in Exhibit 5.1 hereto). .........................
23.2 -- Consent of Arthur Andersen L.L.P. Independent Public
Accountants. ...............................................
24.1+ -- Power of Attorney...........................................
27.1 -- Financial Data Schedule (for SEC use only)..................
99.1* -- Consent of Drs. Durbin and Schmidt, Mr. Summers, Mr.
McKnight and Mr. Ellis to serve as directors. ..............
</TABLE>

- ---------------

+ Previously filed.

* To be filed by amendment.

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our reports
(and to all references to our firm) included in or made part of this
Registration Statement.

ARTHUR ANDERSEN LLP

Atlanta, Georgia
July 2, 1997

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ORTHALLIANCE, INC. FOR THE TWO MONTHS ENDED DECEMBER 31,
1996 AND THE THREE MONTHS ENDED MARCH 31, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>

<S> <C> <C>
<PERIOD-TYPE> 2-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 MAR-31-1997
<PERIOD-START> OCT-21-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 0 0
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 0 0
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 0 0
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0

</TABLE>