<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 June 30, 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 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: 2,040,965 SHARES OF THE
COMPANY'S COMMON STOCK ($.0001 PAR VALUE) PER SHARE OUTSTANDING AS OF
JUNE 30, 1998.
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PRINCETON DENTAL MANAGEMENT CORPORATION
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE (S)
<S> <C>
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 10-11
PART II - OTHER INFORMATION 12-16
</TABLE>
<PAGE> 3
PRINCETON DENTAL MANAGEMENT CORPORATION
Condensed Consolidated Balance Sheets
For Six Months Ending June 30, 1998 and Year Ending December 31, 1997
<TABLE>
<CAPTION>
ASSETS June 30, 1998 December 31, 1997
--------------- -------------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash Equivalents $ 318,569 $ 46,644
Accounts Receivable, net of allowances
for doubtful accounts of $189,000 and
$189,000 respectively 836,647 922,383
Current portion of loan receivable - affiliate 143,045 298,637
Inventories 117,790 107,951
Other Current Assets 57,628 89,513
------------- ------------
Total Current Assets 1,473,679 1,465,128
Property and equipment, net 644,856 756,579
Goodwill, net of accumulated amortization of
$2,312,306 and 2,081,576, respectively 5,311,628 5,542,358
Loan Receivable - affiliate 50,000 50,000
Other Assets, net 404,812 441,936
------------- ------------
Total Other Assets 6,411,296 6,790,873
Total Assets $ 7,884,975 $ 8,256,001
============= =============
</TABLE>
<PAGE> 4
PRINCETON DENTAL MANAGEMENT CORPORATION
Condensed Consolidated Balance Sheets
For Six Months Ending June 30, 1998 and Year Ending December 31, 1997
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDER'S EQUITY June 30, 1998 December 31, 1997
------------------ ------------------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Notes Payable $ 60,591 $ 60,591
Bank Debit Balance - 69,849
Current portion of capital lease obligations 8,992 18,849
Current portion of long-term debt 849,184 849,184
Convertible secured debt 2,133,428 2,133,428
Accounts Payable 882,700 922,994
Accrued salaries and wages 466,976 476,178
Other accrued expenses 1,045,990 711,930
--------------- --------------
Total Current Liabilities 5,447,861 5,243,003
Long-term debt, excluding current portion 1,568,410 1,787,436
Capital lease obligations, excluding current portion 18,588 18,588
--------------- --------------
Total Liabilities 7,034,859 7,049,027
--------------- --------------
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, 1997 2,848 2,848
Series B Preferred Stock, par value $1.00
per share; authorized shares - 100; issued
and outstanding - 100 at December 31, 1997 100 100
Common stock, par value $0.0001 per share;
authorized shares - 25,000,000; issued and
outstanding - 2,040,965 at June 30, 1998
and 2,024,465 at December 31, 1997 204 202
Less: 8,462 shares Common Stock held
in treasury, at cost (181,771) (181,771)
Additional Paid-In Capital 15,140,769 15,108,366
Accumulated Deficit (14,112,034) (13,722,771)
--------------- ---------------
Net Shareholders' Equity 850,116 1,206,974
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 7,884,975 $ 8,256,001
=============== ===============
</TABLE>
<PAGE> 5
PRINCETON DENTAL MANAGEMENT CORPORATION
Condensed Consolidated Statements of Operation
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
Revenue: 1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Practice Revenue $ 1,978,801 $ 2,656,539 $ 4,169,361 $ 5,589,326
Laboratory Revenue 1,127,586 1,100,787 2,139,970 2,161,485
----------- ----------- ----------- -----------
Total Revenue $ 3,106,387 $ 3,757,326 $ 6,309,331 $ 7,750,811
----------- ----------- ----------- -----------
Expenses:
Practice compensation and Benefits 1,526,490 1,829,361 3,126,328 3,997,879
Other Practice Expense 494,144 536,731 897,145 1,088,865
Cost of Laboratory Revenue & Expenses 832,446 894,723 1,613,018 1,720,495
General Corporate Expenses 135,355 162,119 236,702 405,257
Depreciation and Amortization 208,877 138,043 417,754 363,325
----------- ----------- ----------- -----------
Total Operating Expenses 3,197,312 3,560,977 6,290,947 7,575,821
----------- ----------- ----------- -----------
Operating Gain/(Loss) (90,925) 196,349 18,384 174,990
Gain from sale of practices & laboratory - 246,526 - 213,954
Interest Expense (215,741) (258,411) (423,406) (448,439)
Other Income 11,928 7,798 15,759 19,926
------------ ----------- ----------- -----------
Net Income (Loss) $ (294,738) $ 192,262 $ (389,263) $ (39,569)
============ =========== =========== ===========
Net Loss Per Share $ (0.14) $ 0.09 $ (0.19) $ (0.02)
============ =========== =========== ===========
Weighted Average
Number of Shares Outstanding 2,040,965 2,024,465 2,038,215 2,024,465
</TABLE>
<PAGE> 6
PRINCETON DENTAL MANAGEMENT CORPORATION
Condensed Consolidated Statements of Cash Flow
For the Six Months Ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
Operating Activities:
Net Loss $ (389,263) $ (39,569)
Cash Provided by (Used In) Operating Activities:
Depreciation and Amortization 417,754 363,325
Gain on sale of Dental Practices - (213,954)
Issuance of stock under Incentive Stock Bonus Plan 32,405 -
Changes in Operating Assets and Liabilities:
Accounts Receivable 85,736 (132,792)
Inventories (9,839) (27,075)
Other Current Assets 31,885 2,093
Accounts Payable (40,294) (197,198)
Accrued Expenses 324,858 193,107
------------ ----------
Net Cash Used In Operating Activities 453,242 (52,063)
------------ ----------
Cash Provided by (Used In) Investing Activities:
Other Assets 37,124 15,613
Proceeds from notes receivable 155,592 4,404
Purchase of property and equipment - Net (75,301) (41,560)
Proceeds from sale of Dental Practices - 710,000
------------ ----------
Net Cash Provided by Investing Activities 117,415 688,457
------------ ----------
Cash Provided by (Used In) Financing Activities:
Principal payments on capital lease obligations (9,857) (21,715)
Principal payments on notes payable (219,026) (93,311)
Principal payments on long term debt and
notes payable to shareholders - (193,765)
------------ ----------
Net Cash Used In Financing Activities (228,883) (308,791)
------------ ----------
Increase in Cash and Cash Equivalents 341,774 327,603
Cash and Cash Equivalents at beginning of period (23,205) 185,235
------------ ----------
Cash and Cash Equivalents at end of period $ 318,569 $ 512,838
============ ==========
</TABLE>
<PAGE> 7
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Condensed Consolidated Financial Statements
June 30, 1998
(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 consolidated 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 could choose to 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 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 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
and/or dividends on the Convertible Debt/Preferred Stock for the period from
January 1, 1997 through December 31, 1997. That waiver ended on January 1,
1998, and interest and dividends have again been accruing.
7
<PAGE> 8
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Condensed Consolidated Financial Statements
June 30, 1998
(Unaudited)
The waiver of interest and dividends during 1997 on the part of the
Investor Group resulted 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, 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, and
exercise the default warrants (see below), the conversion would result in the
issuance to the Investor Group of a majority interest representing approximately
eighty-five percent (85.0%) of the issued and outstanding shares of Company's
common stock (after conversion and assuming full conversion and anti-dilution).
In the event of such a conversion and exercise, the 85% of the Class would be
held almost entirely by Amsterdam Equities, with Mr. Laport holding less then 8%
of the stock resulting from such conversion and exercise.
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 number of shares of common
stock equivalent to fifty percent (50.0%) of the issued and outstanding Common
Stock of the Company at an exercise price of $0.50 per share (subsequently
reduced to $0.05 per share under the terms of the Modification Agreement). This
modification effectively reduced the aggregate exercise price of approximately
$412,500 for the default warrants to an aggregate exercise price of
approximately $41,250 (not accounting for any adjustments due to the
anti-dilution provision of the Warrants and due to changes in the total issued
and outstanding shares of the Company's common stock). Initially, 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 various net income tests
in subsequent years. 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 a minimal exercise
8
<PAGE> 9
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Condensed Consolidated Financial Statements
June 30, 1998
(Unaudited)
price 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 ownership by the
Investor Group of approximately 85% of the Company's total issued and
outstanding common stock after such conversion and exercise. In the event of
such a conversion and exercise, the 85% of the Class would be held almost
entirely by Amsterdam Equities with Mr. Laport holding less then 8% of the stock
resulting from such conversion and exercise. To date, while the Company could
potentially cure these defaults, the Investor Group has taken no steps to
exercise these default warrants.
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 has 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.
Note 4 - CONVERSION OF DEBT
Pursuant to the Allonge and Fifth Amendment ("Allonge") 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 shares of the Company's
common stock which was previously held as treasury stock.
9
<PAGE> 10
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Condensed Consolidated Financial Statements
June 30, 1998
(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 period ended
December 31, 1997.
Results of Operations
Revenue for the six month period ended June 30, 1998 was $6,309,331
compared with $7,750,811 for the six month period ended June 30, 1997, a
decrease of $1,441,480. The change in revenue is due primarily to the sale of
three dental practices and one dental laboratory during 1997. Operating
expenses decreased $1,284,874 to $6,290,947 for the six month period ended
June 30, 1998 from $7,575,821 for the six month period ended June 30,
1997. 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 $25,033 to $423,406 for the six month period
ended June 30, 1998 versus $448,439 incurred in the comparable six month period
last year. The decrease is primarily the result of the Modification Agreement
and the Allonge (see Exhibits 10.55 and 10.56) having a material positive effect
upon the Company's interest expense.
The net loss for the six month period ended June 30, 1998 was $389,263. The
net loss increased by $349,694 when compared with the six month period ended
June 30, 1997. This increase in the net loss is primarily due to the
elimination of the practice sales gain, reduced production and increased
amortization.
Financial Condition
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 a
significant 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 the past the Company did not pay certain state tax liabilities in the
State of Michigan. Currently the Company is in the process of negotiating with
the State to abate penalties with respect to the late payment. The Company
estimates its total liability in this regard to be $175,000.
Liquidity and Capital Resources
As of June 30, 1998, the Company had a working capital deficit of
$3,974,182 and a financial accumulated deficit of $14,112,034. Goodwill and
other intangibles comprise approximately 67% of total assets, leaving tangible
assets of approximately $2,573,347 and negative tangible net worth of
approximately $4,461,512.
During the six month period ended June 30, 1998, the Company's cash and
cash equivalents increased $341,773. Cash generated from depreciation and
amortization was $417,954.
10
<PAGE> 11
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Condensed Consolidated Financial Statements
June 30, 1998
(Unaudited)
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 to provide working capital to fund operations. The
Company has not needed to obtain additional material amounts of funding from the
Investor Group during the past year. However, the Company remains heavily
reliant on the Investor Group.
11
<PAGE> 12
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Condensed Consolidated Financial Statements
June 30, 1998
(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 director of the Company. While the
Company is appealing this decision, 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) On June 12, 1998, the Company sued Dr. Charles Mitchell, a
former officer and director of the Company, and Stratum Management,
Inc. an affiliate of Dr. Mitchell and a former consultant to the
Company, for breach of contract and breach of fiduciary duty. That
lawsuit is still pending.
c) In July, 1998, the Company obtained service in a
lawsuit brought, in April 1998, against Dr. Richard Sokol, a
former officer and director of the company, and Lawrence Ceraulo and
Primecast Dental, former contractors for the Company, for breach of
contract and breach of fiduciary duty. That lawsuit is still
pending.
d) 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 5. Other Information
a) Effective as of July 1, 1998 the Company entered into that
certain Allonge and Amendment to Balloon Promissory Note and All
Related Agreements with Dr. Glenn C. Lehr and certain related
entities. This Agreement serves to restructure the debt owed by the
Company in connection with the Amdent practices. (See Exhibit
10.61).
b) The Company has been advised by NASDAQ that it does not
presently meet the new listing criteria for the NASDAQ Small Cap
Market. While the Company has requested a hearing from NASDAQ in
this regard, the Company can make absolutely no assurances regarding
the Company's continued listing on the NASDAQ Small Cap Market.
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)
12
<PAGE> 13
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Condensed Consolidated Financial Statements
June 30, 1998
(Unaudited)
(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. 75-49990,
(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).
(10.58) Allonge & Fifth Amendment to Acquisition Promissory Note
dated as of July 1, 1997, among 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 10.58 to the Registrant's Form 10KSB for the period ended
December 31, 1997).
(10.59) Agreement of Purchase and Sale dated as of May 1, 1997
between Princeton Medical Management Northeast, Inc. and Valley
Forge Dental Associates, Inc. (Incorporated by reference to
Exhibit 10.59 to the Registrant's Form 10KSB for the
period ended December 31, 1997).
(10.60) Financial Consulting Agreement between the Company and
BullsEye Marketing, Inc., dated as of July 14, 1998.
(10.61) Allonge and Amendment to Balloon Promissory Note and All
Related Agreements dated as of July 1, 1998 by and among the
Company, Dr. Lehr and certain related entities.
13
<PAGE> 14
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Condensed Consolidated Financial Statements
June 30, 1998
(Unaudited)
(b) Reports on Form 8-K The Registrant filed the following Form 8-K's during
the period from January 1, 1998 through July 31, 1998:
1) Effective as of July 14, 1998, PDMC entered into a Financial
Consulting Agreement with BullsEye Marketing, Inc.
The Agreement anticipates that BullsEye Marketing, Inc. will assist
PDMC in generally building market awareness of PDMC. As specified
in the Agreement, (see Exhibit 10.60), PDMC will pay the consultant
$1,000 per month plus reasonable expenses and issue 250,000
warrants to the consultant. The warrants are exercisable at the
same exercise price as the current publicly held warrants.
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 June 30, 1998, 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
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 June 30, 1998, 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
15
<PAGE> 1
EXHIBIT 10.60
[BullsEye Marketing, Inc. Letterhead]
July 13, 1998
BullsEye Marketing, Inc.
Consulting Agreement
This Financial Consulting Agreement is made the 10th day of July 1998 by and
between Princeton Dental Management (the "Company") and BullsEye Marketing, Inc.
(the "Consultant").
Preamble
- --------
Whereas the Company desires to engage Consultant as an independent contractor
and Consultant desires to render services to Company as an independent
contractor on the conditions and terms hereinafter set forth:
Consultant's Services
- ---------------------
Consultant will provide the Company consulting services in connection with the
following matters:
* Use our best efforts to assist Princeton Dental Management Corporation in
the exercising of outstanding publicly-held warrants.
A. Assist the Company through introductions to high end money
managers and investment bankers.
B. Assist the Company in building market awareness of the Company
through introductions to qualified industry analysts.
* Use our best efforts to induce brokerage firms to consider the Company's
securities as appropriate investments for their retail clients.
A. Consultant will send qualified self-generated leads to approved
brokers.
* Recruit and supervise a graphic design firm acceptable to the Company's
Board of Directors, to assist the company in the design and production of
their corporate information in a well organized media kit.
The Company's Responsibility
- ----------------------------
1. The Company shall supply the Consultant on a regular and timely basis
with all approved data and information about the Company, its management,
its products, and its operations and the Company shall be responsible for
advising the Consultant of any fact which would affect the accuracy of any
prior data and information supplied to the Consultant.
2. Consultant, in the absence of notice in writing from the Company, may
rely on the continuing accuracy of material information and data supplied
by the Company.
<PAGE> 2
Terms of Engagement
- -------------------
1. Appointment. The Company hereby appoints, retains and employs Consultant
on the terms and conditions of this agreement. Consultant
accepts such appointment and agrees to perform services upon
the terms and conditions of this agreement and in full
compliance with law, including all applicable state and
federal security laws. Consultant in no sense is authorized
to speak for the Company or to oblige the Company in any
manner whatsoever. Consultant shall not distribute or
release any literature or information that has not been
pre-approved in writing by the Company. Consultant agrees
to indemnify Company and hold Company entirely harmless for
any loss, damage or cause of action arising in any way out
of Consultant's actions in distributing or releasing
literature or information that has not been pre-approved in
writing by the Company.
2. Term. The terms of this agreement shall commence upon the signing
and shall automatically renew subject to termination on a
month to month basis.
3. Fee. A: The sum of $1,000.00 paid at monthly intervals during
the course of this agreement. The fee for the month in
which this agreement commences shall be prorated and,
thereafter, the fee for successive months during the
course of this agreement is to be paid at the beginning
of each new month.
B: Reasonable expenses not to exceed $250.00 per month to
be paid Consultant after provision by Consultant to
Company of itemization and supporting bills therefor.
4. Options. A: 250,000 options are to be issued to BullsEye Marketing,
Inc. within thirty (30) days of the commencement of
this Agreement.
B: These options shall be execrable for a period of six
(6) months from the commencement of this Agreement and,
at the sole and exclusive option of the Company, no
matter how arbitrary, may be extended for additional
periods of six (6) months.
C: These options are execrable at the same exercise price
and terms as the current underlying publicly-held
warrants.
D: In the event that the Company reduces the exercise
price on said publicly-held warrants, the price of the
issued options will be matched.
This agreement may be terminated at any time at the sole and exclusive option of
the Company, no matter how arbitrary.
BullsEye Marketing, Inc., by: Princeton Dental Management Corporation, by:
/s/ Paul A. Kaplan /s/ Frank Leonard Laport
- ------------------------------- --------------------------------------------
Paul A. Kaplan, President Frank Leonard Laport, CEO
Date: 07-13-98 Date: 7/14/98
------------- ------------
<PAGE> 1
EXHIBIT 10.61
ALLONGE AND AMENDMENT TO BALLOON
PROMISSORY NOTE AND ALL RELATED AGREEMENTS
This Allonge and Amendment to Balloon Promissory Note and all Related
Agreements ("Amendment") is made effective as of the 1st day of July, 1998
between Princeton Dental Management Corporation, a Delaware corporation
("PDMC"), Princeton Medical Management Midwest, Inc., a Michigan corporation
("Princeton Midwest") (PDMC and Princeton Midwest, together with any and all
subsidiary and affiliated corporations and individuals are hereinafter
collectively referred to herein as "Princeton"), Amdent, P.C., a Michigan
professional corporation ("Amdent"), and Glenn C. Lehr, D.D.S. (Dr. Lehr,
together with any and all affiliated corporations, is collectively referred to
herein as "Dr. Lehr").
RECITALS
A. Princeton Midwest (formerly known as Princeton Medical Management
Corporation) has previously executed in favor of Dr. Lehr that certain Balloon
Promissory Note dated July 31, 1992 in the initial principal amount of
$1,000,000 (as subsequently supplemented and amended, the "Balloon Promissory
Note").
B. Princeton and Dr. Lehr have also previously entered into numerous
additional agreements, including, without limitation, (i) that certain Share
Purchase Agreement dated as of July 31, 1992, (ii) that certain Stock Pledge
and Escrow Agreement dated as of July 31, 1992, (iii) that certain Management
Agreement Stock Pledge and Escrow Agreement dated as of July 31, 1992, (iv)
that certain Glenn C. Lehr, D.D.S. Facilities Management Agreement dated as of
July 31, 1992, and (v) that certain Installment Promissory Note dated July 31,
1992 in the amount of $168,565.51 (collectively, the "Related Agreements").
C. Princeton, Amdent and Dr. Lehr desire to further amend the Balloon
Promissory Note and the Related Agreements to reflect certain agreements reached
by Princeton, Amdent and Dr. Lehr.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Unless otherwise defined herein, all capitalized terms used herein
which are defined in the Balloon Promissory Note and the Related Agreements
shall have the meanings assigned to them in the Balloon Promissory Note and the
Related Agreements.
<PAGE> 2
2. Effective as of July 31, 1998, and assuming the July 1, 1998 payment
of $12,132.76, the parties agree that the outstanding principal amount of the
Balloon Promissory Note shall be $364,140.52.
3. On August 3, 1998, Princeton shall make an additional, one-time
payment in the amount of $25,000 to Dr. Lehr for credit against the Balloon
Promissory Note. Upon receipt of such payment, Dr. Lehr shall make immediate
arrangements to return to Princeton any checks, whether insurance or otherwise,
which have been sent to Dr. Lehr for dental services provided by Princeton,
Amdent or any dentists or other individuals employed or engaged by same.
4. On August 3, 1998, the parties agree that the outstanding principal
amount of the Balloon Promissory Note shall be increased by $30,000, which,
after taking into account the additional, one-time payment of $25,000 but prior
to taking into account the monthly August, 1998 payment, shall mean that the
outstanding principal balance of the Balloon Promissory Note shall be
$369,140.50 as of that date.
5. The parties agree that, effective as of August 3, 1998, the per annum
interest rate on the principal balance of the Balloon Promissory Note
outstanding from time to time after August 3, 1998 shall be increased from 8% to
9%.
6. The parties agree that, effective as of August 3, 1998, the monthly
payment due on the Balloon Promissory Note shall be increased to a monthly
payment of $15,000.
7. The parties agree that, effective as of the date hereof, the terms
and amortization schedule of the Balloon Promissory Note shall be solely as set
forth on Exhibit A attached hereto and incorporated herein. Assuming payments
are made as per such Exhibit A, Dr. Lehr agrees, upon request and from time to
time, to promptly provide Princeton and Princeton's outside auditors with
written confirmation that such Exhibit A accurately represents all sums of any
sort whatsoever owed by Princeton to Dr. Lehr.
8. The parties acknowledge (solely for the purposes of this settlement)
that prior to this Amendment, Princeton was in default under the Balloon
Promissory Note and the Related Agreements on numerous grounds, technical and
otherwise, and that such state of ongoing default is expected to continue. Being
desirous of resolving all such matters with this Amendment, the parties hereby
agree that, effective from and as of the date hereof, the only actionable
defaults under the Balloon Promissory Note and the Related Agreements shall be
(i) a failure to make the payments as set forth in this Amendment and on the
attached Exhibit A hereto, (ii) a filing by Princeton of a Chapter 7
bankruptcy, and/or (iii) the sale of any or all of the Battle Creek, Ypsilanti
or Taylor dental practices . So long as such payments are made and such actions
avoided, Dr. Lehr shall not be entitled to claim a default under the Balloon
Promissory Note or under any of the Related Agreements or to accelerate the
amounts owed pursuant to the Balloon Promissory Note or the Related Agreements.
Without limitation, it shall not be an event of default if Princeton (i)
becomes generally insolvent or files for bankruptcy
<PAGE> 3
(provided that such bankruptcy is a Chapter 11 reorganization and not a Chapter
7 liquidation), so long as the payments per Exhibit A continue to be made to Dr.
Lehr, and/or (ii) transfers the location of any and all of the underlying
collateral (it being specifically understood that it is probable that the
location of the Battle Creek dental practice will need to be moved).
9. Effective as of the date hereof, ownership in Amdent shall be deemed
transferred from Dr. Lehr to Dr. David Parker. Dr. Lehr agrees to immediately
take whatever steps are deemed necessary by PDMC, including the execution of
reasonably necessary documentation, to transfer the entire ownership of and
interest in Amdent from Dr. Lehr to Dr. David Parker (or any other designee of
PDMC) without any additional cost or obligation whatsoever on the part of
Princeton.
10. The parties hereto agree to mutually waive any and all claims and
causes of action which they may have, whether now or in the future, against the
other party of any nature whatsoever except as expressly set forth herein.
Without limitation, (i) Princeton hereby releases Dr. Lehr from any and all
claims, whether known or unknown, including but not limited to all allegations
previously made by Princeton regarding the fraudulent conduct of Dr. Lehr, and
(ii) Dr. Lehr hereby releases Princeton and Amdent from any and all claims,
whether known or unknown, including but not limited to all allegations
previously made by Dr. Lehr regarding wrongful set-off and moneys owed by
Princeton and/or Amdent to Dr. Lehr. Without further limitation, the parties
agree that the only sums or obligations of any sort whatsoever, whether now or
in the future, which may be owed by Princeton or Amdent to Dr. Lehr are as set
forth herein and in Exhibit A. Princeton affirms that the debt set forth herein
and in Exhibit A is a valid debt and is not subject to set off or counterclaim
for any reason whatsoever except as expressly set forth herein.
Except as specifically amended by this Amendment, the Balloon Promissory
Note and the Related Agreements shall remain in full force and effect. In the
event of any conflict between the terms of this Amendment and the terms of the
Balloon Promissory Note and the Related Agreements, the terms of this Amendment
shall control.
This Amendment may be executed in counterparts.
[END OF TEXT ON THIS PAGE]
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Allonge and Amendment to
Balloon Promissory Note and All Related Agreements as of the date first written
above.
PRINCETON DENTAL MANAGEMENT CORPORATION
By:___________________________________
Gary Lockwood, President
PRINCETON MEDICAL MANAGEMENT MIDWEST, INC.
By:___________________________________
Gary Lockwood, President
AMDENT, P.C.
By: _________________________
Glenn C. Lehr, sole shareholder
and director
_____________________________________
Glenn C. Lehr, D.D.C., individually
and on behalf of any affiliated
companies
<PAGE> 5
STATE OF MICHIGAN)
COUNTY OF _____ )
I, ________________________, a Notary Public in and for the County and
State aforesaid, DO HEREBY CERTIFY that Gary Lockwood, personally known to me to
be the President of Princeton Medical Management Midwest, Inc., appeared before
me this day in person and acknowledged that as such officer he signed and
delivered such instrument as his free and voluntary act and with due
authorization, and as the free and voluntary act of the Company, for the uses
and purposes therein set forth.
Given under my hand and seal this ___ day of July, 1998.
________________________
NOTARY PUBLIC
My Commission expires __________.
STATE OF MICHIGAN)
COUNTY OF ____ )
I, ______________________, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY that Gary Lockwood, personally known to me to be
the President of Princeton Dental Management Corporation, appeared before me
this day in person and acknowledged that he signed and delivered such instrument
as his free and voluntary act and with due authorization, and as the free and
voluntary act of the Company, for the uses and purposes therein set forth.
Given under my hand and seal this ___ day of July, 1998.
________________________
NOTARY PUBLIC
My Commission expires __________.
<PAGE> 6
STATE OF MICHIGAN)
COUNTY OF _____ )
I, ________________________, a Notary Public in and for the County and
State aforesaid, DO HEREBY CERTIFY that Glenn C. Lehr, D.D.S., personally known
to me to be the sole shareholder and director of Amdent, P.C., appeared before
me this day in person and acknowledged that as such officer he signed and
delivered such instrument as his free and voluntary act and with due
authorization, and as the free and voluntary act of the Company, for the uses
and purposes therein set forth.
Given under my hand and seal this ___ day of July, 1998.
________________________
NOTARY PUBLIC
My Commission expires __________.
STATE OF MICHIGAN)
COUNTY OF _____ )
I, ________________________, a Notary Public in and for the County and
State aforesaid, DO HEREBY CERTIFY that Glenn C. Lehr, D.D.S., personally known
to me, appeared before me this day in person and acknowledged that he signed
and delivered such instrument as his free and voluntary act and with due
authorization, for the uses and purposes therein set forth.
Given under my hand and seal this ___ day of July, 1998.
________________________
NOTARY PUBLIC
My Commission expires __________.
<PAGE> 7
LEHR NOTE
EFFECTIVE 8/1/98
PERIODIC RATE = .75% YEARLY RATE = 9%
PAYMENT INTEREST PRINCIPAL BALANCE
LOAN BALANCE @ 7/31/98 364140.50
INCREASE IN LOAN 8/1/98 30000.00
LOAN PAYMENT 8/1/98 -25000.00
-----------
LOAN BALANCE 369140.50
Aug-98 15000.00 2461.06 12538.94 356601.56
Sep-98 15000.00 2377.46 12622.54 343979.02
Oct-98 15000.00 2293.31 12706.69 331272.33
Nov-98 15000.00 2208.59 12791.41 318480.92
Dec-98 15000.00 2123.31 12876.69 305604.24
Jan-99 15000.00 2037.46 12962.54 292641.70
Feb-99 15000.00 1951.04 13048.96 279592.74
Mar-99 15000.00 1864.04 13135.96 266456.79
Apr-99 15000.00 1776.47 13223.53 253233.25
May-99 15000.00 1688.31 13311.69 239921.56
Jun-99 15000.00 1599.56 13400.44 226521.12
Jul-99 15000.00 1510.22 13489.78 213031.33
Aug-99 15000.00 1420.28 13579.72 199451.61
Sep-99 15000.00 1329.74 13670.26 185781.36
Oct-99 15000.00 1238.60 13761.40 172019.96
Nov-99 15000.00 1146.86 13853.14 158166.82
Dec-99 15000.00 1054.50 13945.50 144221.32
Jan-00 15000.00 961.52 14038.48 130182.84
Feb-00 15000.00 867.93 14132.07 116050.77
Mar-00 15000.00 773.71 14220.29 101824.48
Apr-00 15000.00 678.86 14321.14 87503.34
May-00 15000.00 583.38 14416.62 73086.73
Jun-00 15000.00 487.27 14512.73 58574.00
Jul-00 15000.00 390.51 14609.49 43964.51
Aug-00 15000.00 293.11 14706.89 29257.62
Sep-00 15000.00 195.06 14804.94 14452.68
Oct-00 14452.68 0.00 14452.68 0.00
<PAGE> 8
PERIODIC RATE .6667%
PAYMENT INTEREST PRINCIPAL BALANCE
6905-10 2445-10
430299.71
Jan-98 12132.76 2868.81 9263.95 421035.76
Feb-98 12132.76 2807.05 9325.71 411710.04
Mar-98 12132.76 2744.87 9387.89 402322.15
Apr-98 12132.76 2682.28 9450.48 392871.68
May-98 12132.76 2619.28 9513.48 383358.19
Jun-98 12132.76 2555.85 9576.91 373781.28
Jul-98 12132.76 2492.00 9640.76 364140.52
Amount after 7/1/98 payment 364140.5
---------------------------------------------------
Aug-98 12132.76 2427.72 9705.04 354435.49 -25000
--------
Sep-98 12132.76 2363.02 9769.74 344665.75 339140.5
Oct-98 12132.76 2297.89 9834.87 334830.87 30000
--------
Nov-98 12132.76 2232.32 9900.44 324930.43 369140.5
Dec-98 12132.76 2166.31 9966.45 314963.98
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