<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 March 31, 1999
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: 3,196,448 SHARES OF THE
COMPANY'S COMMON STOCK ($.0001 PAR VALUE) PER SHARE OUTSTANDING AS OF
MAY 1, 1999.
<PAGE> 2
PRINCETON DENTAL MANAGEMENT CORPORATION
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE(S)
<S> <C>
PART I - FINANCIAL INFORMATION
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 11-16
</TABLE>
<PAGE> 3
PRINCETON DENTAL MANAGEMENT CORPORATION
Condensed Consolidated Balance Sheets
March 31, 1999 and December 31, 1998
<TABLE>
<CAPTION>
ASSETS MARCH 31, 1999 DECEMBER 31, 1998
------ -------------- -----------------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash Equivalents $ 253,799 $ 188,724
Accounts Receivable, net of allowances
for doubtful accounts of $129,000 and
$129,000 respectively 835,912 821,190
Current portion of loan receivable - affiliate 150,300 163,336
Inventories 106,432 100,048
Other Current Assets 74,371 73,373
------------ ------------
Total Current Assets 1,420,814 1,346,671
Property and equipment, net 503,625 550,976
Goodwill, net of accumulated amortization of
$2,658,406 and $2,543,042, respectively 4,965,528 5,080,892
Other Assets, net 358,850 377,804
------------ ------------
Total Other Assets 5,828,003 6,009,672
Total Assets $ 7,248,817 $ 7,356,343
============ ============
</TABLE>
<PAGE> 4
PRINCETON DENTAL MANAGEMENT CORPORATION
Condensed Consolidated Balance Sheets
March 31, 1999 and December 31, 1998
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDER'S EQUITY MARCH 31, 1999 DECEMBER 31, 1998
------------------------------------ -------------- -----------------
(UNAUDITED)
<S> <C> <C>
Current Liabilities:
Notes Payable $ 130,591 $ 130,591
Current portion of capital lease obligations 12,800 17,345
Current portion of long-term debt 500,947 500,947
Convertible secured debt 2,133,428 2,133,428
Accounts Payable 985,710 976,901
Accrued salaries and wages 416,470 297,618
Other accrued expenses 1,996,777 1,822,712
------------ ------------
Total Current Liabilities 6,176,723 5,879,542
Long-term debt, excluding current portion 1,472,383 1,591,685
Capital lease obligations, excluding current portion 1,243 1,243
------------ ------------
Total Liabilities 7,650,349 7,472,470
------------ ------------
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 March 31, 1999 100 100
Common stock, par value $0.0001 per share;
authorized shares - 25,000,000; issued and
outstanding - 3,196,448 at March 31, 1999
and at December 31, 1998 320 320
Less: 8,462 shares Common Stock held
in treasury, at cost (181,771) (181,771)
Additional Paid-In Capital 15,403,623 15,403,623
Accumulated Deficit (15,626,652) (15,341,247)
------------ ------------
Net Shareholders' Equity (401,532) (116,127)
------------ ------------
Total Liabilities and Shareholders' Equity $ 7,248,817 $ 7,356,343
============ ============
</TABLE>
<PAGE> 5
PRINCETON DENTAL MANAGEMENT CORPORATION
Condensed Consolidated Statements of Operation
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
<S> <C> <C>
Revenue:
Practice Revenue $ 2,022,628 $ 2,190,560
Laboratory Revenue 1,178,382 1,012,384
----------- -----------
Total Revenue $ 3,201,010 $ 3,202,944
----------- -----------
Expenses:
Practice compensation and Benefits 1,662,008 1,599,838
Other Practice Expense 412,977 403,001
Cost of Laboratory Revenue & Expenses 840,932 780,572
General Corporate Expenses 144,008 101,347
Depreciation and Amortization 187,946 208,877
----------- -----------
Total Operating Expenses 3,247,871 3,093,635
----------- -----------
Operating Income (Loss) (46,861) 109,309
Interest Expense (241,814) (207,665)
Other Income 3,270 3,831
----------- -----------
Net Loss $ (285,405) $ (94,525)
=========== ===========
Basic & Diluted Net Loss Per Share of common stock $ (0.09) $ (0.05)
=========== ===========
Basic & Diluted weighted common shares outstanding 3,196,448 2,035,332
=========== ===========
</TABLE>
<PAGE> 6
PRINCETON DENTAL MANAGEMENT CORPORATION
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
<S> <C> <C>
Operating Activities:
Net Loss (285,405) (94,525)
Cash Provided By (Used In) Operating Activities:
Depreciation and Amortization 187,946 189,263
Issuance of stock under Incentive Stock Bonus Plan -- 31,875
Changes in Operating Assets and Liabilities:
Accounts Receivable (14,722) 7,446
Inventories (6,384) (25,009)
Other Current Assets (998) (25,873)
Accounts Payable 8,809 (11,813)
Accrued Expenses 292,917 199,572
-------- --------
Net Cash Provided By Operating Activities 182,163 270,936
-------- --------
Cash Provided By (Used In) Investing Activities:
Other Assets 18,954 19,205
Proceeds from notes receivable 13,036 35,941
Purchase of property and equipment - Net (25,231) (20,220)
-------- --------
Net Cash Provided By Investing Activities 6,759 34,926
-------- --------
Cash Provided Used In Financing Activities:
Principal payments on capital lease obligations (4,545) (3,711)
Principal payments on long term debt and
notes payable to shareholders (119,302) (109,237)
-------- --------
Net Cash Used In Financing Activities (123,847) (112,948)
-------- --------
Increase in Cash and Cash Equivalents 65,075 192,914
-------- --------
Cash and bank debit balances, beginning of period 188,724 (23,205)
-------- --------
Cash and bank debit balances, end of period 253,799 169,709
======== ========
</TABLE>
<PAGE> 7
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Condensed Consolidated Financial Statements
March 31, 1999
(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 one-for-five 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
March 31, 1999
(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 held in treasury after the 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. Effective as
of August, 1996, Mr. Laport was elected as the Class B Director. The Class B
Director has taken no action to date.
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 of the issued and
outstanding shares of Company's common stock (after conversion and 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 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 $0.10 per share (subsequently
reduced to $0.01 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 price since January 1, 1997. At present
the cumulative effect of the issuance of shares pursuant to the default warrants
to the Investor Group and
8
<PAGE> 9
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Condensed Consolidated Financial Statements
March 31, 1999
(Unaudited)
the conversion of outstanding Convertible Debt/Preferred Stock could result in
ownership by the Investor Group of approximately 65% of the Company's total
issued and outstanding common stock after such conversion and exercise.
Effective as of November 4, 1998, the Company was advised that (i)
Amsterdam Equities Limited had transferred any and all interest which they had
in the default warrants to Frank Leonard Laport, and (ii) that Mr. Laport had
proceeded to exercise such default warrants. Exercise of all of the default
warrants for the stated exercise price resulted in Mr. Laport receiving
approximately 1,065,483 shares of Company 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 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.
Effective as of August 9, 1996, the Investor Group 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.
9
<PAGE> 10
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Condensed Consolidated Financial Statements
March 31, 1999
(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, 1998.
Results of Operations
Revenue for the three month period ended March 31, 1999 was $3,201,010
compared with $3,202,944 for the three month period ended March 31, 1998, a
decrease of $1,934. With less than 1% change in revenue the revenue remained
stable throughout the same period. Operating expenses increased $154,236 (an
increase of 5%) to $3,247,871 for the three month period ended March 31, 1999
from $3,093,635 for the three month period ended March 31, 1998. This increase
is due in large part to an increase in the practice compensation paid to
professional staff and a general increase in benefits and laboratory and
corporate expenses.
Interest expense increased $34,149 to $241,814 for the three month
period ended March 31, 1999 versus $207,665 incurred in the comparable three
month period last year. The increase is primarily the result of the interest and
dividends continuing to accrue on the Convertible Debt and Preferred Stock.
The net loss for the three month period ended March 31, 1999 was
$285,405. The net loss increased by $190,880 when compared with the three month
period ended March 31, 1998. This increase in the net loss is primarily due to
the increased operating expenses and the increase in interest expense.
Financial Condition
The Company is working to improve the operating results of the various
operations by reducing costs. 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 attempting to
take certain steps with the State to abate penalties with respect to the late
payment. The Company estimates its total liability in this regard to be
$500,000.
Given the Company's recurring losses from operations, the significant
working capital deficits and the uncertainty in obtaining additional funding to
provide working capital in the short term, a substantial doubt has been raised
as to the Company's ability to continue as a going concern. Absent significant
and immediate additional funding, the Company will have to consider relief under
Chapter 11 of the United States Bankruptcy Code or some similar possibility. The
Company presently has no source for any additional funding.
Liquidity and Capital Resources
As of March 31, 1999, the Company had a working capital deficit of
$4,755,909 and a financial accumulated deficit of $15,626,652. Goodwill and
other intangibles comprise approximately 69% of total assets, leaving tangible
assets of approximately $2,283,289 and negative tangible net worth of
approximately $5,367,060.
During the three month period ended March 31, 1999, the Company's cash
and cash equivalents increased $65,075. Cash generated from depreciation and
amortization was $187,946.
10
<PAGE> 11
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Condensed Consolidated Financial Statements
March 31, 1999
(Unaudited)
The Company has extensive deferred maintenance on all of its
facilities. The Company estimates that it could cost in excess of $1.15 Million
to properly re-equip and refurbish all facilities. At present the Company has
no source of funding to address such matters.
Many computer systems in use today were designed and developed using
two digits, rather than four to specify the year. As a result, such systems may
recognize the year 2000 as 00. This could cause many computer applications to
fail completely or to create erroneous results unless corrective measures are
taken. The Company utilizes software and related computer technologies essential
to its operations that may be affected by the Year 2000 issue.
Management has developed a plan to modify its information technology to
be ready for year 2000 and has begun converting critical data processing
systems. At present, management expects the project to be substantially complete
by November, 1999 and incur total expenditures of approximately $190,000 related
to the project.
The Company has reviewed the Year 2000 problem as it relates to the
Company's internal system and does not believe at this time that it will have a
material impact upon its business, operations or financial condition. However,
the Company's review is continuing and the Company can make no absolute
assurances in this regard.
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. The Company has not needed to obtain additional material amounts
of funding from the Investor Group during the past year but no payments have
been made to the Investor Group and the Company remains in an ongoing state of
default under the terms of the Financing Arrangement. If the Investor Group was
to call a formal default on the Preferred Stock/Convertible Debt issued by the
Company, the Company would have no means of curing such default.
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 along with subsequent attorneys fees of
approximately $20,000 and costs.
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 October, 1998, the Company obtained judgement 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. The Company
is in the process of seeking to enforce such judgement.
d) The Company is the defendant in several pending employee
discrimination and vendor/creditor law suits in which it is
the defendant. Such law suits include law suits brought
against the Company by (i) J.F. Jelenko & Co. claiming
$90,338 owed; (ii) Office Max/Office Depot claiming $25,000
owed; (iii) Chuhak & Tecson claiming approximately $50,000
(the Company has counter-claimed alleging legal malpractice;
(iv) Primecast Dental claiming unspecified
11
<PAGE> 12
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Condensed Consolidated Financial Statements
March 31, 1999
(Unaudited)
damages; (v) a discrimination suit brought against the Company
in Michigan by several plaintiffs seeking damages in excess of
$300,000; (vi) a disability discrimination claim brought
against the Company in Michigan seeking unspecified damages;
and (vii) a sexual discrimination suit brought against the
company in Florida seeking unspecified damages. The Company is
vigorously defending these lawsuits.
e) Litigation has been commenced against the Company by Henry
Schein, Inc. and Zahn Dental Company claiming that the Company
owes them an aggregate of approximately $500,000. The Company
has advised Henry Schein, Inc and Zahn Dental Company that it
will vigorously contest such claim and believes that it has
significant counter-claims against Henry Schein, Inc.
f) While no litigation has been commenced, the Company has been
advised by the Dickerson Investment Group, an entity
controlled by Mr. Donnell Dickerson, that such company is
claiming that the Company owes it approximately $70,000. The
Company has advised that it will vigorously contest any such
claim.
g) 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. Management believes settlements, if any, in
excess of insurance coverage would be immaterial. There is no
other litigation pending to which Princeton is a party or of
which any of its property is the subject, other than routine
litigation incidental to its business. Further, there are no
proceedings known to be contemplated by governmental
authorities relating to either Princeton or its properties.
Item 2. Changes in Securities
a) Effective August 18, 1997, the Company's shareholders approved
a one-for-five reverse Stock split of the company's common
stock.
Item 3. Defaults Upon Senior Securities
a) While no formal default has been called to date by the
Investor Group (See Note 3 above), the Company has failed to
pay any of the interest and/or dividend payments called for
under the Financing Arrangement (See Note 3 above) and would
be considered in a state of ongoing default with respect to
the Financing Arrangement. If the Investor Group was to call a
formal default with respect to the Preferred Stock/Convertible
Debt issued by the Company to the Investor Group, the Company
would have no means of curing such a default.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
The following documents are filed as an exhibit to this Report:
(10.2) Letter Agreement dated December 7, 1994 between an
investment group and the Registrant (incorporated by reference
to Exhibit 10.1 to the Registrant's Form 10-QSB/A (Amendment
No. 1) (Registration No. 33-43298-A) filed with the Commission
on December 20, 1994).
12
<PAGE> 13
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Condensed Consolidated Financial Statements
March 31, 1999
(Unaudited)
(10.4) Secured Revolving Demand Note dated January 27, 1995
between an investment group and the Registrant (incorporated
by reference to the Exhibit to the Registrant's Form 10-KSB
for the fiscal year ended December 31, 1994 (Registration
Number 33-43298-1A) filed with the Commission on April 14,
1995).
(10.44) Series A 11.75% Cumulative Convertible Preferred Stock
Purchase Agreement by and between Frank Leonard Laport,
Beverly Trust Company, as Custodian of the Frank Leonard
Laport Rollover Individual Retirement Account Number 75-49990,
and Amsterdam Equities Limited, dated April 22, 1996
(incorporated by reference to the exhibit to the Registrant's
Form 10-QSB filed with the Commission on September 23, 1996).
(10.45) Convertible Debt Agreement by and between the Company
and Amsterdam Equities Limited, dated April 22, 1996
(incorporated by reference to the exhibit to the Registrant's
Form 10-QSB filed with the Commission on September 23, 1996).
(10.46) Letter of Agreement dated July 15, 1996 and effective
August 9, 1996, by and between the Company, Dr. Charles R
Mitchell, Stratum Management Inc., John H. Hagan, Dr. Seymour
Kessler, Amsterdam Equities Limited, Frank Leonard Laport, and
Beverly Trust Company (incorporated by reference to the
exhibit to the Registrant's Form 10-QSB filed with the
Commission on September 23, 1996).
(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. 75-49990, (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
13
<PAGE> 14
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Condensed Consolidated Financial Statements
March 31, 1999
(Unaudited)
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.
(Incorporated by reference to Exhibit 10.60 to the
Registrant's Form 10QSB for the period ended June 30, 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.
(Incorporated by reference to Exhibit 10.61 to the
Registrant's Form 10QSAB for the period ended June 30, 1998).
(b) Reports on Form 8-K The Registrant filed the following Form 8-K's during
the period from January 1, 1999 through May 1, 1999:
None
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 March 31, 1999, to be signed on its behalf, by the undersigned there unto
duly authorized.
DATED: May 14, 1999 Princeton Dental Management Corporation
By: /s/ Gary A. Lockwood
---------------------------------------
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 March 31, 1999, to be signed on its behalf, by the undersigned there unto
duly authorized.
DATED: May 14, 1999 Princeton Dental Management Corporation
By: /s/ Barbara M. Kamenczak
------------------------------------
Barbara M. Kamenczak
Chief Accounting Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 253,799
<SECURITIES> 0
<RECEIVABLES> 1,115,212
<ALLOWANCES> 129,000
<INVENTORY> 106,432
<CURRENT-ASSETS> 1,420,814
<PP&E> 1,968,877
<DEPRECIATION> 1,465,252
<TOTAL-ASSETS> 7,248,817
<CURRENT-LIABILITIES> 6,176,723
<BONDS> 1,473,626
2,948
0
<COMMON> 320
<OTHER-SE> (404,800)
<TOTAL-LIABILITY-AND-EQUITY> 7,248,817
<SALES> 0
<TOTAL-REVENUES> 3,201,010
<CGS> 0
<TOTAL-COSTS> 3,247,871
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 241,814
<INCOME-PRETAX> (285,405)
<INCOME-TAX> 0
<INCOME-CONTINUING> (285,405)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (285,405)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
