<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) of
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
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 Number 0-20222
PRINCETON DENTAL MANAGEMENT CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3484607
- ------------------------------ ----------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7421 West 100th Place, Bridgeview, Illinois 60455-2442
(Address of principal executive offices)
(Zip Code)
(708) 974-4000
(Registrant's telephone number, including area code)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR 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
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE: 2,024,065 SHARES OF THE
COMPANY'S COMMON STOCK ($.0001 PAR VALUE) PER SHARE OUTSTANDING AS OF
SEPTEMBER 30, 1997.
<PAGE> 2
PRINCETON DENTAL MANAGEMENT CORPORATION
FORM 10-QSB
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE (S)
CONDENSED CONSOLIDATED BALANCE SHEETS 3-4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 7-9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-11
PART II - OTHER INFORMATION 11-15
<PAGE> 3
PRINCETON DENTAL MANAGEMENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, 1997 DECEMBER 31, 1996
----------------- -----------------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash Equivalents $ 137,181 $ 185,235
Accounts Receivable, net of allowances
for doubtful accounts of $341,000 and
$265,000 respectively 997,267 1,170,640
Current portion of loan receivable - affiliate 9,991 9,991
Inventories 107,000 105,193
Other Current Assets 96,815 95,847
---------- -----------
Total Current Assets 1,348,254 1,566,906
Property and equipment, net 789,520 1,159,524
Goodwill, net of accumulated amortization of
$1,924,351 and $1,829,516, respectively 5,729,573 7,002,192
Loan Receivable - affiliate 3,842 10,820
Other Assets, net 851,269 543,512
---------- -----------
Total Other Assets 7,374,204 8,716,048
Total Assets $8,722,458 $10,282,954
========== ===========
</TABLE>
<PAGE> 4
PRINCETON DENTAL MANAGEMENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDER'S EQUITY SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
Current Liabilities:
Notes Payable $ 80,591 $ 179,000
Notes Payable to shareholders 122,948 122,948
Current portion of capital lease obligations 18,036 25,883
Current portion of long-term debt 715,806 715,806
Convertible secured debt 2,115,924 2,115,924
Accounts Payable 942,545 1,442,487
Accrued salaries and wages 593,025 743,958
Other accrued expenses 585,188 583,142
---------- -----------
Total Current Liabilities 5,174,063 5,929,148
Long-term debt, excluding current portion 2,119,860 3,267,106
Capital lease obligations, excluding current portion 20,626 38,145
---------- -----------
Total Liabilities 7,314,549 9,234,399
---------- -----------
Shareholder's Equity:
Series A 11.75% Cumulative Convertible
Preferred Stock par value $1.00 per share;
authorized shares - 1,000,000; issued and
outstanding - 2,848 at December 31, 1996 2,848 2,848
Series B Preferred Stock, par value $1.00
per share; authorized shares - 100; issued
and outstanding - 100 at December 31, 1996 100 100
Common stock, par value $0.0001 per share;
authorized shares - 25,000,000; issued and
outstanding - 2,024,065 at September 30, 1997
and 2,024,065 at December 31, 1996 202 202
Less: 8,462 shares Common Stock held
in treasury, at cost (181,771) (331,771)
Additional Paid-In Capital 15,108,366 15,108,366
Accumulated Deficit (13,521,836) (13,731,190)
---------- -----------
Net Shareholders' Equity 1,407,909 1,048,555
---------- -----------
Total Liabilities and Shareholders' Equity $8,722,458 $10,282,954
========== ===========
</TABLE>
<PAGE> 5
PRINCETON DENTAL MANAGEMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
REVENUE: 1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Practice Revenue $2,319,942 $3,215,844 $ 7,909,268 $10,655,030
Laboratory Revenue 957,286 949,182 3,118,771 2,937,493
---------- ---------- ----------- -----------
Total Revenue $3,277,228 $4,165,026 $11,028,039 $13,592,523
---------- ---------- ----------- -----------
Expenses:
Practice compensation and Benefits 1,682,311 2,885,318 5,680,190 9,056,462
Other Practice Expense 429,223 380,298 1,518,088 1,144,019
Cost of Laboratory Revenue & Expenses 848,170 1,011,871 2,568,665 3,009,187
General Corporate Expenses 216,798 144,995 622,055 1,022,478
Depreciation and Amortization 200,753 273,753 564,078 750,255
---------- ---------- ----------- -----------
Total Operating Expenses 3,377,255 4,696,235 10,953,076 14,982,401
---------- ---------- ----------- -----------
Operating Income (Loss) (100,027) (531,209) 74,963 (1,389,878)
Gain from sale of practices & laboratory 68,636 -- 282,590 --
Interest Reversal (Expense) 255,253 (155,008) (193,186) (465,515)
Other Income 25,061 12,120 44,987 38,331
---------- ---------- ----------- -----------
Net Income (Loss) $ 248,923 $ (674,097) $ 209,354 $(1,817,062)
========== ========== =========== ===========
Net Income (Loss) Per Share $ 0.12 $ (0.37) $ 0.10 $ (1.07)
========== ========== =========== ===========
Weighted Average
Number of Shares Outstanding 2,024,065 1,829,219 2,024,065 1,697,945
</TABLE>
<PAGE> 6
PRINCETON DENTAL MANAGEMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------
<S> <C> <C>
Operating Activities:
Net Income (Loss) $ 209,354 $(1,817,062)
Cash Provided By (Used In) Operating Activities:
Depreciation and Amortization 564,078 750,255
Gain on sale of Dental Practices (282,590) 1,410
Provision for Bad Debts 76,000 119,000
Stock redemption price in excess of market - 18,229
Issuance of stock under Incentive Stock Bonus Plan - 70,750
Changes in Operating Assets and Liabilities:
Accounts Receivable (163,380) (83,958)
Inventories (11,654) (9,750)
Other Current Assets (968) 16,776
Accounts Payable (477,882) 576,988
Accrued Expenses (163,288) 462,297
--------- -----------
Net Cash Provided By (Used In) Operating Activities (250,330) 104,935
--------- -----------
Cash Provided By (Used In) Investing Activities:
Debt Issuance Costs - (27,819)
Other Assets 128,620
Proceeds from notes receivable 6,978
Purchase of property and equipment - Net (162,774) (147,146)
Proceeds from sale of Dental Practices 710,000 (5,407)
--------- -----------
Net Cash Provided By (Used In) Investing Activities 682,824 (180,372)
--------- -----------
Cash Provided By (Used In) Financing Activities:
Proceeds from issuance of long-term debt - 231,826
Principal payments on capital lease obligations (25,366) (25,316)
Principal payments on notes payable (98,409) (18,835)
Principal payments on long term debt and
notes payable to shareholders (356,773) (237,110)
--------- -----------
Net Cash Used In Financing Activities (480,548) (49,435)
--------- -----------
Increase in Cash and Cash Equivalents (48,054) (124,872)
Cash and Cash Equivalents at beginning of period 185,235 124,872
--------- -----------
Cash and Cash Equivalents at end of period $ 137,181 $ -
========= ===========
</TABLE>
<PAGE> 7
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Consolidated Financial Statements
September 30, 1997
(Unaudited)
Note 1 - SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed by Princeton Dental Management Corporation
(the Company) for quarterly financial reporting purposes are the same as those
disclosed in the Company's annual financial statements. In the opinion of
management, the accompanying condensed consolidated financial statements
reflect all adjustments necessary for a fair presentation of the information
presented.
The quarterly condensed consolidated financial statements herein have been
prepared by the Company without audit. Certain information and footnote
disclosures included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
Although the Company's management believes the disclosures are adequate to make
the information not misleading, it is suggested that these quarterly condensed
financial statements be read in conjunction with the audited annual financial
statements and footnotes thereto.
The Company had a five-for-one reverse stock split of its common stock
effective August 18, 1997. All share information and per share information in
these financial statements have been retroactively restated to reflect the
reverse stock split.
Note 2 - RECLASSIFICATIONS
The accompanying condensed consolidated financial statements contain certain
reclassifications of previously reported information. The reclassifications
have been made to more appropriately reflect the operating results of the
Company.
Note 3 - FINANCING AGREEMENT
1. On April 22, 1996, the Company entered into a financing arrangement pursuant
to which the Company issued Convertible Debt (the Convertible Debt) to
Amsterdam Equities Limited in the amount of $2,483,620 and 3,599.77 shares of
Series A 11.75% Cumulative Convertible Preferred Stock (the Preferred Stock) to
Amsterdam Equities Limited (195 shares), Frank Leonard Laport (1,904.77
shares), and Beverly Trust Company, as custodian for the Frank Leonard Laport
Rollover Individual Retirement Account No. 75-49990 (1,500 shares)
(collectively, the Investor Group). The Convertible Debt and Preferred Stock
replaced indebtedness of the Company at April 22, 1996, in the amount of
$1,976,700 incurred under that certain letter agreement dated December 7, 1994
(the Letter Agreement) and that certain Secured Revolving Demand Note dated
January 27, 1995 (the Secured Note). Under the terms of the Convertible Debt
and Preferred Stock Agreements (also referred to herein collectively as the
Financing Arrangement) the Investor Group may lend additional funds, in
increments to be determined solely by the Investor Group. The Convertible Debt
and Preferred Stock were initially to bear interest and have a coupon rate,
respectively of 11.75%, plus the payment of any withholding taxes which might
be due and owing with respect to any person which is a foreign entity.
Payments on the Convertible Debt/Preferred Stock were interest only due in
quarterly installments which were to begin in September 1996. The Convertible
Debt/Preferred Stock originally had a maturity of seven years from the date of
closing, subject to acceleration in the event of a default. Subsequent to
September 30, 1996 the Company was unable to pay the interest only requirements
of the Convertible Debt and Preferred Stock Agreements, therefore, effective
October 1, 1996 until the accrued interest is paid, interest began to accrue at
the default rate of 21.75%.
Pursuant to that certain Modification Agreement ("Modification Agreement")
entered into between the Investor Group and the Company and dated as of July 1,
1997, the Investor Group has agreed, conditioned upon continued listing by the
Company on the Nasdaq SmallCap Market and similar concessions by another
significant Company creditor, to waive all accumulated and ongoing interest
7
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PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Consolidated Financial Statements
September 30, 1997
(Unaudited)
and/or dividends on the Convertible Debt/Preferred Stock for the period from
January 1, 1997 through December 31, 1997.
Assuming this waiver continues through December 31, 1997, this waiver on the
part of the Investor Group will result in a total savings to the Company in
excess of $700,000.
In addition to the amounts owed under the Letter Agreement and the Secured
Note, the terms of the Convertible Debt and Preferred Stock Agreements called
for the conversion of 58,333 shares of the Company's Regulation D stock held by
the Investor Group into $350,000 of Convertible Debt and Preferred Stock. The
shares of common stock were being held in treasury at time of redemption.
An additional provision of the Convertible Debt and Preferred Stock Agreements
included the payment of $300,000 as a closing fee and required the Company to
reimburse the legal fees and costs and expenses of the Investor Group in
connection with the negotiation and the closing of the transaction which
totaled $216,897. The closing fees and reimbursement of the costs and expenses
were payable in the form of Convertible Debt and Preferred Stock. In total, the
Company incurred costs of $544,716 in connection with the refinancing which has
been capitalized and will be amortized over a period of seven years or until
the Convertible Debt/Preferred Stock is called.
The terms of the Convertible Debt and Preferred Stock Agreements provided the
Investor Group with certain rights pertaining to the registration of any common
stock to which the Investor Group may convert from Convertible Debt or
Preferred Stock, certain anti-dilution rights, and a right of first refusal on
any future offering of Company securities.
Under the terms of the transaction, the Company also issued a warrant to
purchase 100 shares of Series B Preferred Stock. The Series B Preferred Stock
entitled Amsterdam Equities Limited, after the occurrence of an event of
default, to elect a Class B director who would have super-majority voting
powers on the Company's Board of Directors.
The Convertible Debt and Preferred Stock may be converted into the common stock
of the Company, at the sole option of the Investor Group, at various conversion
rates as set forth in the conversion formula contained in the Convertible Debt
and Preferred Stock Agreements. Conversion pursuant to such conversion formula
would result in a conversion price per share of the Company's common stock
below present market levels. If the Investor Group were to convert all
outstanding Convertible Debt and Preferred Stock at the present time, the
conversion would result in the issuance to the Investor Group of a majority
interest representing in excess of Fifty Percent (50.0%) of the issued and
outstanding shares of the Company's common stock (assuming full conversion and
anti-dilution).
In addition, pursuant to the terms of the Financing Arrangement, the Company
issued to the holders of the Convertible Debt and the Preferred Stock a series
of default warrants to purchase an aggregate of 825,000 shares of common stock
at an exercise price of $0.50 per share. The Investor Group could exercise the
warrants only upon the occurrence of an event of default under the terms of the
Financing Arrangement or upon the failure by the Company to achieve certain
minimum financial goals of net income of at least one dollar in the fiscal year
ending December 31, 1996, and net income at least equal to 60% of the dollar
amount of Convertible Debt of the Company outstanding at the end of 1997 for
the fiscal year ending December 31, 1997, increased by 10% each year
thereafter, compounded, plus 60% of the additional Convertible debt outstanding
at the end of such year over the immediately preceding year. The Company has
been in ongoing default under the Financing Arrangement and the stated
financial goals have not been met, and, accordingly, these default warrants
have been capable of being exercised by the Investor Group upon payment of the
exercise price of $412,500 in the aggregate since January 1, 1997. The
cumulative effect of the issuance of shares pursuant to the default warrants to
the Investor Group and the conversion of outstanding Convertible Debt/Preferred
Stock could result in
8
<PAGE> 9
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Consolidated Financial Statements
September 30, 1997
(Unaudited)
ownership by the Investor Group of in excess of 75% of the Company's total
issued and outstanding common stock. To date, the Investor Group has taken no
steps to exercise these default warrants.
Pursuant to the Modification Agreement, and as an absolute pre-condition to the
waiver by the Investor Group of all accumulated and ongoing interest and/or
dividends on the Convertible Debt/Preferred Stock for the period from January
1, 1997 through December 31, 1997 the Company agreed to reduce the exercise
price of the default warrants from $0.50 per share to $0.05 per share effective
as of July 1, 1997. This modification effectively reduces the aggregate
exercise price of $412,500 for the default warrants to an aggregate exercise
price of $41,250 (not accounting for any adjustments due to changes in the
total issued and outstanding shares of the Company's common stock).
2. In August 1996, the Company entered into a Letter Agreement by and among the
Company; Dr. Charles R. Mitchell, a former President of the Company; Stratum
Management, Inc., a former consultant to the Company; John H. Hagan, a former
director of the Company; Dr. Seymour Kessler, a former director of the Company;
and Amsterdam Equities Limited, Frank Leonard Laport, and Beverly Trust
Company, as Custodian of the Frank Leonard Laport Rollover Individual
Retirement Account No. 75-49990, each members of the Investor Group. Under the
Letter Agreement, which became effective on August 9, 1996, the Series B
Preferred Stock previously referred to in the Convertible Debt Agreement
executed by the Company on April 22, 1996 was amended to be immediately
effective and Class B Preferred Stock was immediately issued to Amsterdam.
The Class B Preferred Stock entitled Amsterdam to elect a Director to the Board
of Directors of the Company who would have super majority voting powers. In
effect, the Class B director appointed by Amsterdam shall have the number of
votes on the Board of Directors as the current Board currently holds, plus one
vote. The amendment and activation of the Class B Preferred Stock occurred
upon the satisfaction of the following two conditions: (i) delivery to the
Company of a notice, pursuant to which the Investor Group would convert an
aggregate amount of U.S. $700,000 of currently outstanding Convertible
Debt/Preferred Stock into the Company's Common Stock in accordance with the
contractual terms of the Convertible Debt and Preferred Stock Agreements
executed on April 22, 1996 and (ii) upon the advance to the Company of an
additional $200,000.00 pursuant to the Convertible Debt and the Preferred Stock
Agreements executed April 22, 1996. As of August 9, 1996, the Investor Group
had satisfied these two conditions and the Class B Preferred Stock was issued
to Amsterdam.
Frank Leonard Laport, Chairman and CEO of the Company, was elected as the
Series B Director effective as of August 9, 1996. The Series B Director has not
voted on any matters to date or taken any action whatsoever to date.
In connection with the activation of the Class B Preferred Stock, the provision
of additional funding and conversion of debt, Stratum, Hagan and Kessler agreed
to forfeit, on a pro rata basis, an aggregate amount of 60,000 options/warrants
to purchase the Company's Common Stock of the Company.
Note 4 - CONVERSION OF DEBT
Pursuant to the Allonge and Fourth Amendment to Acquisition Promissory Note
dated as of July 1, 1997, the Company, Mason Dental Midwest, Inc. and the
constituent Shareholders of the Delaware corporation formally known as Mason
Dental, Inc., agreed to convert $150,000.00 worth of the outstanding debt held
by the constituent Shareholders into 53,381 share of the company's common stock
which was previously held as treasury stock.
9
<PAGE> 10
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Consolidated Financial Statements
September 30, 1997
(Unaudited)
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
condensed consolidated financial statements and notes thereto, and with the
Company's audited financial statements and notes thereto for the year ended
December 31, 1996.
Results of Operations
Revenue for the nine month period ended September 30, 1997 was $11,028,039
compared with $13,592,523 for the nine month period ended September 30, 1996, a
decrease of $2,564,484. The change in revenue is due primarily to the sale of
three dental practices and one dental laboratory. Operating expenses decreased
$4,029,325 to $10,953,076 for the nine month period ended September 30, 1997
from $14,982,401 for the nine month period ended September 30, 1996. This
decrease is due in large part to the sales of the practices and dental
laboratory, as well as several cost cutting measures related to compensation,
benefits, and various other practice expenses.
Interest expense decreased $272,329 to $193,186 for the nine month period ended
September 30, 1997 versus $465,515 incurred in the comparable nine month period
last year. The decrease is primarily from the waiver of interest pursuant to
the Modification Agreement and the Allonge. (See Exhibits 10.55 and 10.56)
The Company showed a net income of $209,354 for the nine month period ended
September 30, 1997, as compared to a net loss of $1,817,062 for the nine month
period ended September 30, 1996. Net income for the nine month period ended
September 30,1997 shows substantial improvement over the prior year nine month
period ended September 30, 1996, primarily as a result of significant
improvement in operations, the waiver of interest pursuant to the Modification
Agreement and the Allonge, the gain from the sale of three dental offices and
one dental lab, an accompanying reduction of the depreciation, and a reduction
of the monthly amortization based on the write down of goodwill at December 31,
1996.
Financial Condition
Changes in the Company's financial condition at September 30, 1997 as compared
with December 31, 1996 resulted primarily from the waiver of interest pursuant
to the Modification Agreement and the Allonge and a general improvement in
operations and the sale of three dental practices and a dental laboratory
during the nine month period ended September 30, 1997. During the nine months
ended September 30, 1997, the Company realized significant proceeds from
the sale of Fairfield Dental, Center Century Dental Center, and Mason Dental
Southeast / Renaissance Dental Studio. The sale of the Dental Team of Delray
Beach was exclusively forgiveness of debt. The Company recognized no cash from
the sale of the Delray Beach practice.
During the first, second and third quarters of 1997, the Company arranged
payment terms with several of its suppliers. Those suppliers have once again
begun extending standard credit terms, and orders are no longer shipped on a
C.O.D. basis. One of the Company's largest suppliers has begun shipping
supplies and providing services based on a mutually agreed upon plan that has
been put into place to reduce the outstanding balances.
The Company is currently in the process of developing revenue enhancement
programs in both the dental practice segment as well as the laboratory segment.
In addition, the Company is also working to improve the operating results of
the various operations by reducing the costs of patient services including
10
<PAGE> 11
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Consolidated Financial Statements
September 30, 1997
(Unaudited)
the reduction in payroll. The Company has begun steps to reduce general and
administrative expenses. However, the Company can make no assurances in regards
to the results of these programs.
In addition, the Company has sold its dental practices in Pennsylvania and its
dental laboratory in Florida. These sales are consistent with the Company's
long-term business plans and should generally have a positive impact upon
operations. No additional sales have been contemplated at this time.
During the first and second quarters of 1996, the Company did not deposit
certain state payroll tax liabilities totaling approximately $53,000. The
Company filed the state payroll tax returns for the first and second quarters
of 1996 during the first quarter of 1997. Management is currently negotiating
with the State to abate penalties associated with the late payment. These
negotiations are under review by state authorities.
Liquidity and Capital Resources
As of September 30, 1997, the Company had a working capital deficit of
$3,825,809 and a financial accumulated deficit of $13,521,836. Goodwill and
other intangibles comprise approximately 66% of total assets, leaving tangible
assets of approximately $2,992,885 and negative tangible net worth of
approximately $4,331,664.
During the nine month period ended September 30, 1997, the Company's cash and
cash equivalents decreased $48,054. Cash used in operations was $250,330,
resulting primarily from the Company's decrease in accounts receivable, which
can be attributed to the sale of the dental practices, accounts payable, and
accrued expenses. These operations were partially offset by depreciation and
amortization of $564,078.
Investing activities provided $682,824 of cash, primarily related to the sale
of the dental practices and laboratory. Cash of $480,548 was used in financing
activities, primarily as a result of the extinguishment of debt.
As disclosed in Note 3, the Company's primary source of outside financing is
from the Investor Group. Given the Company's working capital deficit and
negative tangible net worth, the Company is heavily reliant on the Investor
Group's financing to continue the Company's expansion plans and to a larger
extent, provide working capital to fund the operations. As indicated above,
the Company has reached agreement with the Investor Group as to a temporary
waiver of interest.
11
<PAGE> 12
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Consolidated Financial Statements
September 30, 1997
(Unaudited)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
a) On October 16, 1996, the Company was sued for $160,000 by Romajo
Partners Limited Partnership, a Partnership controlled by Dr.
Seymour Kessler, a former directr of the Company. The Company
received an adverse judgement in that suit in October, 1997 and
has paid Romajo Partners Limited Partnership $162,627 as the
judgement amount.
b) The Company is involved in a number of other legal
proceedings related to malpractice, worker's compensation, general
employment and contract disputes all in various stages of
proceedings, most of which will be covered by insurance.
Item 2. Changes in Securities
a) Effective August 18, 1997, the Company's shareholders approved a
five-for-one reverse Stock split of the company's common stock.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
The following documents are filed as an exhibit to this Report:
(10.51) Letter Agreement dated February 4, 1997 between Dr.
Richard Staller and the Registrant regarding the sale of the
assets of the Dental Team of Delray Beach. (Incorporated by
reference to Exhibit 10.51 to the Registrant's Form 10-KSB for
the fiscal year ended December 31, 1996 filed with the Commission
on March 31, 1997)
(10.52) Letter Agreement effective as of January 10, 1997 by
and among the Registrant and Drs. Barfield and Payne regarding
the sale of the assets of the Fairfield Dental Center practice.
(Incorporated by reference to Exhibit 10.52 to the Registrant's
Form 10-KSB for the fiscal year ended December 31, 1996 filed
with the Commission on March 31, 1997)
(10.53) Agreement effective as of May 20, 1997 by and among the
Registrant and Valley Forge Dental Associates regarding the sale
of the assets of the Century Dental Center practice,
(Incorporated by reference to Exhibit 10.53 to the Registrant's
Form 10QSB for the period ended June 30, 1997).
(10.54) Letter Agreement effective as of June 1, 1997 by and
among the Registrant and Mr. Larry Ceraulo d/b/a Certex Dental
Studio regarding the sale of the assets comprising Mason Dental
Southeast, Inc. and Renaissance Dental Studio, (Incorporated by
reference to Exhibit 10.54 to the Registrant's Form 10QSB for the
period ended June 30, 1997).
(10.55) Modification Agreement dated as of July 1, 1997 by and
among the Registrant, Amsterdam Equities Limited, Frank Leonard
Laport, and Beverly Trust Company, as Custodian of the Frank
Leonard Laport Rollover Individual Retirement Account No. 75-
12
<PAGE> 13
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Consolidated Financial Statements
September 30, 1997
(Unaudited)
49990, (Incorporated by reference to Exhibit 10.55 to the
Registrant's Form 10QSB for the period ended June 30, 1997).
(10.56) Allonge and Fourth Amendment to Acquisition Promissory Note
dated as of July 1, 1997, the Company, Mason Dental Midwest,
Inc. and the Constituent Shareholders of the Delaware corporation
formally known as Mason Dental, Inc, (Incorporated by reference to
Exhibit 10.56 to the Registrant's Form 10QSB for the period ended
June 30, 1997).
(10.57) Promissory Note in the initial principal amount of $96,357
executed by Lawrence Ceraulo, Victor Texidor, and Certex Dental
Studio, Inc. in favor of Mason Dental Southeast and dated as of
August 1, 1997, (Incorporated by reference to Exhibit 10.57 to the
Registrant's Form 10QSB for the period ended June 30, 1997).
b) Reports on Form 8-K
The Registrant filed the following Form 8-Ks during the period from
January 1, 1997 through September 30, 1997:
1) On January 16, 1997 the Registrant filed with
the Securities and Exchange Commission a current report on
Form 8-K regarding the sale of the assets of the Fairfield
Dental Center practice to Drs. Barfield and Payne. The
Fairfield practice, with 1995 revenues of approximately
$2,000,000, represented approximately 11.9% of the total
revenue of the Company. The Fairfield practice was sold for a
purchase price of approximately $885,000, of which
approximately $410,000 represented forgiveness of debt.
2) On February 11, 1997, the Registrant filed with
the Securities and Exchange commission a current report on
Form 8-K regarding the sale of the assets of the Dental Team
of Delray Beach practice to Dr. Richard Staller. The Delray
Beach practice, with 1995 revenues of approximately $859,135,
represented approximately 5.1% of the total revenue of the
Company. The Delray Beach practice was sold for a purchase
price of approximately $200,000 in the form of forgiveness of
debt.
3) On May 23, 1997, the Registrant filed with the
Securities and Exchange Commission a current report on Form
8-K regarding the sale of the assets comprising the Century
Dental Center to Valley Forge Dental Associates, P.C. The
Century Dental practice, with 1996 revenues of approximately
$965,000, represented approximately 5.3% of the total revenue
of PDMC. The Century practice was sold for $585,000. The
sales price includes $235,000 in cash, $140,000 in
contingency payments, a $30,000 note receivable, and
forgiveness of debt of approximately $180,000.
4) On June 6, 1997, the Registrant filed with the
Securities and Exchange Commission a current report on Form
8-K regarding the sale of the assets comprising the Mason
Dental Southeast, Inc. / Renaissance Dental Studio to Mr.
Lawrence Ceraulo, individually and doing business as Certex
Dental Studio. The Mason Dental Southeast, Inc. /
Renaissance Dental Studio, with 1996 revenues of
approximately $390,000, represented approximately 2.2% of the
total revenue of PDMC, and has represented a loss in 1996 to
the company. The Mason Dental Southeast, Inc. /
13
<PAGE> 14
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Consolidated Financial Statements
September 30, 1997
(Unaudited)
Renaissance Dental Studio was sold for $92,096 in the form of a
short-term note; an additional short-term note payable to
purchase supplies in the amount of $9,847; and an assumption of
an existing note payable of $18,372. The sale of Mason Dental
Southeast, Inc. / Renaissance Dental Studio was a profitable
transaction for PDMC, in the amount of approximately $49,000.
5) On August 28, 1997, the Registrant filed with the Securities and
Exchange Commission a current report on Form 8-K regarding, (I)
the approval by the Registrant of a five-for-one reverse stock
split of it's common stock, (ii) the election of the Board of
Directors of the Registrant, and (iii) the Registrants Balance
Sheet and Statement of Operations as of July 31, 1997
6) On September 29, 1997, the Registrant filed with the Securities
and Exchange Commission a current report on Form 8-K regarding
the resignation of Dr Richard S. Sokol from the Registrant's
Board of Directors.
14
<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this quarterly report of Form 10-QSB for the quarter
ended September 30, 1997, to be signed on its behalf, by the undersigned there
unto duly authorized.
DATED: Princeton Dental Management Corporation
By: __________________________
Gary A. Lockwood
President and Chief Operating Officer
<PAGE> 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this quarterly report of Form 10-QSB for the quarter
ended September 30, 1997, to be signed on its behalf, by the undersigned there
unto duly authorized.
DATED: Princeton Dental Management Corporation
By: __________________________
Barbara M. Kamenczak
Chief Accounting Officer
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<PERIOD-START> JUL-01-1997
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