<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended March 31, 1998
OR
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________.
COMMISSION FILE NO. 1-10677
INTEGRATED ORTHOPAEDICS, INC.
-----------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 76-0203483
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5858 Westheimer, Suite 500, Houston, Texas 77057
------------------------------------------------
(Address of principal executive offices)
(713) 225-5464
---------------------------------------------------
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports); and
(2) has been subject to such filing requirements for the past 90 days:
YES [X] NO [_]
As of March 31, 1998, 6,436,153 shares of Common Stock were outstanding.
Transitional Small Business Disclosure Form: YES [_] NO [X]
<PAGE>
INTEGRATED ORTHOPAEDICS, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1998
INDEX
PAGE
NO.
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets--
March 31, 1998 and December 31, 1997................... 1
Consolidated Statements of Operations--
Three Months ended March 31, 1998 and 1997............. 2
Consolidated Statements of Changes in
Stockholders' Equity--
Three months ended March 31, 1998...................... 3
Condensed Consolidated Statements of Cash Flows--
Three months ended March 31, 1998 and 1997............. 4
Notes to Condensed Consolidated Financial Statements... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 9
PART II. OTHER INFORMATION.............................................. 11
SIGNATURES.............................................................. 14
<PAGE>
INTEGRATED ORTHOPAEDICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS MARCH 31, DECEMBER 31,
------ 1998 1997
----------- -------------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 9,906 $16,642
Accounts receivable, net 3,595 2,956
Other current assets 1,736 1,749
------- -------
Total Current Assets 15,237 21,347
------- -------
Property and Equipment 5,167 4,344
Less - Accumulated depreciation and amortization (3,285) (2,815)
------- -------
Net Property and Equipment 1,882 1,529
------- -------
Management Services Agreements, Net 30,808 25,018
Other Assets 261 258
------- -------
TOTAL ASSETS $48,188 $48,152
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable $ 512 $ 565
Accrued liabilities 2,644 3,155
Current maturities of notes payable and
capital lease obligations 99 1,618
------- -------
Total Current Liabilities 3,255 5,338
------- -------
Long-term Debt 1,344 1,519
Other Long Term Liabilities 70 -
Deferred Income Taxes 10,077 7,873
------- -------
Total Liabilities 14,746 14,730
------- -------
Stockholders' Equity:
Preferred stock 3 3
Common stock 7 6
Additional paid-in capital 44,675 41,803
Common stock to be issued 78 1,643
Accumulated deficit (11,321) (10,033)
------- -------
Total Stockholders' Equity 33,442 33,422
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $48,188 $48,152
======= =======
</TABLE>
The accompanying notes are an integral part of this statement.
1
<PAGE>
INTEGRATED ORTHOPAEDICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
MARCH 31, MARCH 31,
1998 1997
--------- ---------
<S> <C> <C>
Revenues $2,638 $ 913
------ ------
Costs and expenses:
Practice compensation and benefits 929 599
Other direct costs 877 345
General and administrative 1,415 728
Depreciation and amortization 247 83
Gain from divestitures and discontinued operations - (415)
------ ------
3,468 1,340
------ ------
Loss from Operations (830) (427)
Interest income 180 102
Interest expense (31) (19)
------ ------
Loss Before Income Tax Benefit (681) (344)
Income Tax Benefit - 131
------ ------
Net Loss $ (681) $ (213)
====== ======
Loss per common share:
Basic $(0.20) $(0.05)
====== ======
Diluted $(0.20) $(0.05)
====== ======
Weighted average common shares outstanding 6,336 5,287
====== ======
</TABLE>
The accompanying notes are an integral part of this statement.
2
<PAGE>
INTEGRATED ORTHOPAEDICS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON
SHARES AMOUNT ADDITIONAL STOCK
--------------- ---------------- PAID IN ACCUMULATED TO BE
COMMON PREFERRED COMMON PREFERRED CAPITAL DEFICIT ISSUED TOTAL
------ --------- ------ --------- ---------- ----------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance -
December 31, 1997 5,886 276 $ 6 $ 3 $41,803 $(10,033) $ 1,643 $33,422
Dividends - Preferred
Stock - Series A (50) (50)
Dividends - Preferred
Stock - Series B 6 557 (557) -
Issuance of shares in
medical practice
transaction 139 679 78 757
Delivery of common stock
to be issued 424 1 1,642 (1,643) -
Exercise of stock options
and other 1 (6) (6)
Net loss (681) (681)
----- --- --- --- ------- -------- ------- -------
Balance -
March 31, 1998 6,450 282 $ 7 $ 3 $44,675 $(11,321) $ 78 $33,442
===== === === === ======= ======== ======= =======
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
INTEGRATED ORTHOPAEDICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1998 1997
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (681) $ (213)
Non-cash expenses and changes in
operating assets and liabilities (819) (1,652)
------- -------
Net cash used in operating activities (1,500) (1,865)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net payments in medical practice transaction (3,602) -
Purchase of property and equipment, net (215) (123)
Proceed from sale of marketable securities 111 -
Collection on note receivable 52 -
------- -------
Net cash used in investing activities (3,654) (123)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on bank borrowings - (1,400)
Payments on note payable and capital lease obligations (1,582) (74)
------- -------
Net cash used in financing activities (1,582) (1,474)
------- -------
NET CHANGE IN CASH AND CASH EQUIVALENTS (6,736) (3,462)
CASH AND CASH EQUIVALENTS:
BEGINNING OF YEAR 16,642 10,177
------- -------
END OF QUARTER $ 9,906 $ 6,715
------- -------
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 11 $ 19
Income taxes paid, net of refunds 135 837
NON CASH TRANSACTIONS AND OTHERS:
Details of medical practice transaction -
Liabilities assumed (20) -
Deferred tax liability for book and tax basis difference (2,204) -
Common stock and additional paid in capital
issued and to be issued (757) -
Others-
Dividends accrued on Series A & B preferred stock 607 50
Equipment acquired under capital leases - 49
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
INTEGRATED ORTHOPAEDICS, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION - Integrated Orthopaedics, Inc. ("IOI"" or the "Company") is a
physician practice management ("PPM") company specializing in the management
of orthopaedic medicine practices and other musculoskeletal-related patient
services. As of March 31, 1998, the Company provides comprehensive management
services under long-term agreements to four orthopaedic practices in four
states. The Company also owns and operates two work hardening facilities in
Houston, Texas.
BASIS OF PRESENTATION. The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting only of those of a normal recurring nature) considered
necessary for a fair presentation have been included. Operating results for
the three months ended March 31, 1998 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998. These
financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto for the year ended December
31, 1997, as filed with the Securities and Exchange Commission on Form 10-KSB
Annual Report.
For periods prior to and ending September 30, 1997, the Company consolidated
the operations of its affiliated physician practices for financial reporting
purposes. In compliance with FASB EITF 97-2, the Company commenced reporting
its financial results on a non consolidated basis, beginning with the year
ended December 31, 1997. Accordingly, results for the quarter ended March 31,
1997 have been restated to reflect the adoption of non-consolidated accounting.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS
130 establishes standards for reporting and disclosure of comprehensive income
and its components in the financial statements. SFAS 130 requires unrealized
gains or losses on the Company's available-for-sale securities, which prior to
adoption were reported separately in stockholders' equity to be included in
other comprehensive income. The adoption of this pronouncement had no impact
on the Company's net loss or stockholders' equity.
The preparation of consolidated financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses, as well as the disclosures of contingent assets and
liabilities. Because of the inherent uncertainties in this process, actual
future results could differ from those expected at the reporting date.
5
<PAGE>
INTEGRATED ORTHOPAEDICS, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 - MEDICAL SERVICE REVENUE
Medical service revenue for services delivered by the medical groups affiliated
with the Company is recorded when the services are rendered based on
established or negotiated charges reduced by contractual adjustments and
allowances for doubtful accounts. Differences between estimated contractual
adjustments and final settlements are reported in the period when the final
settlements are determined. Medical service revenue of the affiliated medical
groups is reduced by the contractual amounts retained by the medical groups to
arrive at the Company's revenue. Substantially all of the amounts retained by
affiliated physician groups under management in the first three months of 1998
were contractually guaranteed as a minimum percentage of practice gross profit.
The amounts retained by the affiliated physician group under management in 1997
was determined by combinations of fixed monthly and hourly amounts plus
variable amounts based on various measures of practice operations.
The following represents the amounts included in the determination of the
Company's revenues (in thousands):
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
------------- ------------
Medical Service Revenue $3,976 $1,563
Less: Amounts Retained by Medical Groups 1,338 650
------ ------
Revenues $2,638 $ 913
====== ======
Management Services Agreements at period end 4 1
NOTE 3 - LOSS PER COMMON SHARE
Basic loss per share excludes dilution and is computed by dividing loss
available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted loss per share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock.
6
<PAGE>
INTEGRATED ORTHOPAEDICS, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
The components of basic loss per share are as follows (in thousands, except per
share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
-----------------------------------------
1998 EPS 1997 EPS
--------- -------- ------- --------
<S> <C> <C> <C> <C>
Net loss $ (681) $(0.11) $ (213) $(0.04)
Series A Preferred Stock Dividend (50) (0.01) (50) (0.01)
Series B Preferred Stock Dividend (557) (0.08) - -
------- ------ ------ -------
Net loss available to common stockholders $(1,288) $(0.20) $ (263) $(0.05)
======= ====== ====== =======
Weighted average common shares
outstanding 6,336 5,287
======= ======
</TABLE>
For the three months ended March 31, 1998 and 1997, the diluted weighted
average shares excluded the following as the issuance or conversion of these
instruments results in anti-dilution (shares in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------------
1998 1997
----------------- -----------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------ -------- ------ --------
<S> <C> <C> <C> <C>
Employee stock options to purchase
common stock 1,612 $5.26 579 $3.34
Warrants to purchase common stock 200 2.13 200 2.13
Non employee stock options to purchase
common stock 98 4.17 63 3.70
Series A Preferred Stock convertible into
common stock 829 - 771 -
Series B Preferred Stock convertible into
common stock 4,279 - - -
</TABLE>
NOTE 4 - MEDICAL PRACTICE TRANSACTION
On March 12, 1998, the Company acquired certain assets and entered into a long-
term management agreement, effective March 1, 1998, with a six-physician
orthopaedic medical practice group in Longmont, Colorado ("Front Range
Orthopedic Center") for consideration totaling approximately $4.6 million. Such
consideration consisted primarily of (i) cash and estimated
7
<PAGE>
INTEGRATED ORTHOPAEDICS, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
transaction costs totaling $3.8 million and (ii) issuance of common stock valued
at $757,000 for 169,694 shares of the Company's common stock, of which 30,001
shares will be delivered on March 11, 2003. The consideration paid for the
medical group to enter into the long-term management service agreement ("MSA")
and for the non-medical assets of the medical group, primarily receivables and
fixed assets, has been accounted for as an asset purchase. The Company recorded
MSA costs of $5.8 million, including a $2.2 million deferred tax liability
related to the recognition of book and tax basis differences of assets acquired
in the medical practice transaction, which is being amortized on a straight line
basis over an estimated useful life of 40 years. The results of Front Range
Orthopedic Center have been included in the operations of the Company since
March 1, 1998.
The following unaudited pro forma consolidated results of operations for the
three months ended March 31, 1998 and 1997 assume that the following
transactions were consummated on January 1, 1997: (i) the affiliation
transaction with Front Range Orthopedic Center in March 1998, (ii) the issuance
of the Series B Preferred Stock in December 1997, (iii) the affiliation
transactions with three medical practices during the three months ended December
31, 1997 and (iii) the divestiture of the affiliated musculoskeletal-related
healthcare delivery system in Houston, Texas in November 1997, with the Company
retaining the operations of two work hardening facilities. The pro forma
information does not purport to be indicative of the results of operations that
actually would have been attained if the transactions described above occurred
on January 1, 1997 ($ in thousands, except loss per share):
THREE MONTHS ENDED
MARCH 31,
----------------
1998 1997(a)
----- ------
Revenue $3,136 $2,854
====== ======
Net income (loss) $ (528) $ 261
====== ======
Loss per common share
Basic $(0.18) $(0.05)
====== ======
Diluted $(0.18) $(0.05)
====== ======
_________________
(a) Includes $415,000 gain from divestitures and discontinued operations related
to the 1996 sale of the Company's occupational medicine businesses due to
the completion of certain transactions at lower than expected costs.
8
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD LOOKING STATEMENTS
Certain of the comments that follow or that appear elsewhere in this quarterly
report represent forward-looking statements with respect to the Company's
future results of operations and its related capital resources and financial
condition. The Company relies on a variety of internal and external
information as well as management judgment in order to develop such forward-
looking statements. Because of the inherent limitations in this process, the
relatively volatile nature of the industry in which the Company operates, and
other risks and uncertainties including those discussed in this quarterly
report and the Company's annual report on Form 10-KSB, there can be no
assurance that actual results will not differ materially from these forward-
looking statements.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1996.
GENERAL
Since October 1, 1997, the Company has entered into long term management
service agreements ("MSA") with four orthopaedic medicine practices. In
December 1997, IOI terminated its MSA with a Houston, Texas musculoskeletal-
related healthcare delivery system (the "1997 divestiture"), which represented
substantially all of its business from January 1, 1997 to October 1, 1997. In
December 1997, the Company also completed the issuance of its Series B
Preferred Stock for net proceeds of $24.5 million. Additionally, to implement
its musculoskeletal-related physician practice management ("PPM") expansion
strategy, the Company began building its corporate infrastructure during the
fourth quarter of 1996 and continued to make key employee additions throughout
1997 and the 1998 year-to-date period. Accordingly, the Company's financial
position and portfolio of operating entities for the three months ended March
31, 1998 were significantly different from those at March 31, 1997.
REVENUES
Revenues for the three months ended March 31, 1998 were $2.6 million, an
increase of $1.7 million, or 188.9%, over revenues of $913,000 for the same
period of 1997. Of the $1.7 million increase, $2.1 million was contributed by
the four physician practices managed since October 1997 and $127,000 was
contributed by the two work hardening facilities retained from the 1997
divestiture, which increases were partially offset by a decrease of $473,000
attributed to the 1997 divestiture.
PRACTICE COMPENSATION AND BENEFITS:
Overall practice compensation and benefit costs increased $330,000, or 55.1%,
from $599,000 in 1997 to $929,000 in 1998. These costs increased by $740,000
due to the addition of the four physician practices and decreased by $410,000
largely as a result of the 1997 divestiture.
9
<PAGE>
OTHER DIRECT COSTS:
Overall direct costs increased $532,000, or 154.2%, from $345,000 in 1997 to
$877,000 in 1998. Of the increase, $759,000 was due primarily to the addition
of the four physician practices, offset by a decrease of $227,000 attributable
to the 1997 divestiture.
GENERAL AND ADMINISTRATIVE EXPENSES:
General and administrative expenses for the first quarter increased $687,000,
or 94.4%, from $728,000 in 1997 to $1.4 million in 1998. Such increase was due
primarily to (i) increased salary, compensation and recruiting costs related to
additional senior management and staff to support the Company's PPM strategy,
(ii) increased travel and communication costs related to business development
and management of the four physician practices located in various states and
(iii) additional costs to support a higher level of staffing.
DEPRECIATION AND AMORTIZATION:
Depreciation and amortization increased $164,000 over the same period of 1997,
which increase was comprised of a $201,000 increase attributable to the four
physician practices and was net of a decrease of $37,000 associated with the
1997 divestiture.
GAIN FROM DIVESTITURES AND DISCONTINUED OPERATIONS:
The Company reported a gain from divestitures and discontinued operations of
$415,000 during the first quarter of 1997 related to the 1996 sale of its
occupational medicine businesses due to the completion of certain transactions
at lower than expected costs.
INTEREST INCOME:
Interest income increased by $78,000 from 1997 to 1998, with the increase
primarily attributable to investment earnings on net proceeds received from the
issuance of the Series B Preferred Stock completed in December 1997.
NET LOSS / LOSS PER COMMON SHARE
Net loss for the quarter ended March 31, 1998 was $681,000, as compared to
$213,000 for the same period in 1997. Because the Company has a recent history
of losses, management continues to provide a valuation allowance in full for
the net operating loss deferred tax asset. Accordingly, no tax benefit has been
recognized on the 1998 operating loss. The Company anticipates additional
losses for at least a portion of 1998.
Loss per common share was $0.20 in 1998, as compared with $0.05 for the same
period of 1997, on a 19.9% increase in shares outstanding and an incremental
increase in dividends payable to preferred stockholders of $557,000. The
increase in shares outstanding was attributable to shares issued since October
1997 involving the four medical practice transactions. The increase in
dividends payable to preferred stockholders was attributable to the issuance of
the Series B Preferred Stock in December 1997.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
Net cash used in operating activities for the three months ended March 31, 1998
was $1.5 million, compared to $1.9 million for the same period of 1997, as the
Company continues to incur losses while building its management and operational
infrastructure as a PPM company. Net cash used in investing activities
increased $3.5 million from $123,000 in 1997 to $3.7 million in 1998, due
primarily to the use of $3.6 million cash in 1998 in a medical practice
transaction. Net cash used in financing activities was $1.6 million in 1998,
as compared to $1.5 million in 1997. The cash used in 1998 was to pay a non-
interest bearing obligation issued in October 1997 in a physician medical
practice transaction. The 1997 payment represented amounts paid on bank
borrowings.
Net working capital was $12.0 million at March 31, 1998, as compared to $16.0
million at December 31, 1997. The decrease was due primarily to a use of cash
during 1998 in a medical practice transaction.
The Company anticipates to continue using its working capital to support
operating losses and its infrastructure building process as a PPM company, and
to enter into MSA's with other orthopaedic medical groups. However, to fully
execute its PPM affiliation strategy, the Company will require additional
capital. Although no assurance can be given that capital will be made
available to the Company at the time or in the amounts required to execute its
strategy, the Company is currently exploring a number of alternatives for
additional financing, including equity investment, additional indebtedness and
strategic partnering.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any pending litigation other than routine
litigation incidental to the business or that which is immaterial in the
amount of damages sought.
ITEM 2. CHANGES IN SECURITIES
On March 12, 1998, the Company acquired (i) the accounts receivable, (ii)
fixed assets and (iii) 100% of the issued and outstanding stock of
Longmont Orthopaedic & Sports Medicine Clinic, P.C. ("LOSMC"). At the
time of the transaction, LOSMC entered into a long-term management
agreement with the medical practice conducted by Front Range Orthopaedic
Center, P.C., a six-physician orthopaedic medicine practice located in
Longmont, Colorado. In connection with the transaction, the Company
delivered aggregate consideration of approximately $4.6 million,
including cash and estimated transaction costs totaling approximately
$3.8 million and 169,694 shares of the Company's common stock (of which
30,001 shares are to be delivered on March 11, 2003). No underwriters
were involved with the transaction described above. The issuance of the
Company's common stock in connection with the transaction was exempt from
the registration provisions of Section 5 of the Securities Act of 1933,
as amended (the "Act"), by virtue of Section 4(2) of the Act.
11
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held a Special Meeting of Stockholders on February 11, 1998,
for the purpose of considering: 1) Proposal 1 - the adoption of Integrated
Orthopaedics, Inc. 1997 Long Term Incentive Plan and 2) Proposal 2 - the
ratification of certain terms and conditions of the Series B Preferred
Stock and Warrants with regard to their respective conversion and exercise
prices. The results of the voting for each proposal are as follows:
Proposal 1 - FOR 8,303,834 AGAINST 217,214 ABSTAIN 396,500
Proposal 2 - FOR 4,011,134 AGAINST 327,024 ABSTAIN 407,586
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits:
2.4. Stock Purchase Agreement by and among Integrated Orthopaedics,
Inc., Kenneth J. Cavanaugh, M.D., Thomas J. Darrah, M.D., Robert E.
FitzGibbons, M.D., Gerald R. Rupp, M.D., and Samuel E. Smith, M.D.
dated March 12, 1998 (Incorporated herein by reference to Exhibit
99.01 to the Company's Current Report on Form 8-K, dated March 12,
1998).
11. Statement re computation of per share earnings.
27. Financial Data Schedule.
b) Reports on Form 8-K:
- The Company filed on January 2, 1998, a Current Report on Form
8-K, dated December 18, 1997, with respect to the Stock
Purchase Agreement dated December 15, 1997, by and among the
Company, Wayne Conrad, M.D., J. Paul Lyet, M.D., Timothy Tymon,
M.D., Raymond Peart, M.D., I. Stanley Porter, M.D., Gary
Zartman, M.D., and Mark K. Perezous, M.D.
- The Company filed on January 26, 1998, Amendment No. 1 on Form
8-K/A, amending the Current Report on Form 8-K, dated November
12, 1997, to provide the required financial statements for
Westside Orthopaedics Clinic and the required pro forma
financial information.
12
<PAGE>
- The Company filed on March 3, 1998, Amendment No. 1 on Form
8-K/A, amending the Current Report on Form 8-K, dated December
18, 1997, to provide the required financial statements for
Lancaster Orthopaedic Clinic and the required pro forma
financial information.
- The Company filed on March 27, 1998 a Current Report on Form
8-K, dated March 12, 1998, with respect to the Stock Purchase
Agreement dated Mach 12, 1998 by and among the Company, Kenneth
J. Cavanaugh, M.D., Thomas J. Darrah, M.D., Robert E.
FitzGibbons, M.D., Gerald R. Rupp, M.D., and Samuel E. Smith,
M.D.
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INTEGRATED ORTHOPAEDICS, INC.
Date: May 14, 1998 By: /s/ Ronald E. Pierce
-------------------------------
RONALD E. PIERCE
President and Chief Executive Officer
Date: May 14, 1998 By: /s/ Jefferson R. Casey
----------------------------------
JEFFERSON R. CASEY
Senior Vice President, Treasurer &
Secretary (Principal Financial &
Accounting Officer)
14
<PAGE>
EXHIBIT 11
INTEGRATED ORTHOPAEDICS, INC.
SCHEDULE RE: LOSS PER SHARE
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
THREE MONTHS ENDED MARCH 31,
-----------------------------
1998 1997
------------ ------------
Basic:
Net loss $ (681) $ (213)
Series A Preferred Stock Dividend (50) (50)
Series B Preferred Stock Dividend (557)
------- ------
Net loss after dividends $(1,288) $ (263)
======= ======
Weighted average common shares outstanding 6,336 5,287
======= ======
Loss per share $(0.20) $(0.05)
======= ======
Diluted:
Net loss $ (681) $ (213)
Series A Preferred Stock Dividend (50) (50)
Series B Preferred Stock Dividend (557)
------- ------
Net loss after dividends $(1,288) $ (263)
======= ======
Weighted average shares outstanding 6,336 5,287
Net effect of dilutive stock options
and warrants, based on treasury
stock method using average
market price _______ ______
Diluted common shares 6,336 5,287
======= ======
Loss per share $ (0.20) $(0.05)
======= ======
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 9,906,000
<SECURITIES> 0
<RECEIVABLES> 10,888,000
<ALLOWANCES> 7,293,000
<INVENTORY> 0
<CURRENT-ASSETS> 15,237,000
<PP&E> 5,167,000
<DEPRECIATION> 3,285,000
<TOTAL-ASSETS> 48,188,000
<CURRENT-LIABILITIES> 3,255,000
<BONDS> 1,344,000
3,000
0
<COMMON> 7,000
<OTHER-SE> 33,432,000
<TOTAL-LIABILITY-AND-EQUITY> 48,188,000
<SALES> 2,638,000
<TOTAL-REVENUES> 2,638,000
<CGS> 3,468,000
<TOTAL-COSTS> 3,468,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,000
<INCOME-PRETAX> (681,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (681,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (681,000)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
