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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the Fiscal Year Ended December 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____ to _____
Commission File No. 000-27836
ORTHODONTIX, INC.
----------------------------------------------------
(Exact name of small business issuer in its charter)
FLORIDA 65-0643773
- ---------------------------- -------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1428 Brickell Avenue, Suite 105
Miami, Florida 33131
----------------------------------------
(Address of principal executive offices)
(305) 371-4112
--------------------------------
(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, OTC Electronic Bulletin Board
par value $.0001 per share
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports);
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $0.
The aggregate market value of the voting and non-voting stock held by non-
affiliates of the Company based on the average of the bid and asked price of
$0.175 of such Common Stock, as of March 21, 2003, is $364,197 based upon
2,081,127 shares of the Company's Common Stock outstanding as of March 21,
2003 held by non-affiliates. For purposes of this computation, all executive
officers, directors and 5% beneficial owners of the Common Stock of the
registrant have been deemed to be affiliates. Such determination should not
be deemed to be an admission that such directors, officers or 5% beneficial
owners are, in fact, affiliates of the registrant.
As of March 21, 2003, the Company had a total of 2,915,428 shares of Common
Stock, par value $.0001 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None.
ORTHODONTIX, INC.
FORM 10-KSB
FISCAL YEAR ENDED DECEMBER 31, 2002
TABLE OF CONTENTS Page
----
PART I -1-
Item 1. Description of Business -1-
Item 2. Description of Property -2-
Item 3. Legal Proceedings -2-
Item 4. Submission of Matters to a Vote
of Security Holders -2-
PART II -2-
Item 5. Market for Common Equity and Related Stockholder
Matters -2-
Item 6. Management's Discussion and Analysis or Plan of
Operation -3-
Item 7. Financial Statements -4-
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure -4-
PART III -5-
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance With Section 16(a)
of the Exchange Act -5-
Item 10. Executive Compensation -6-
Item 11. Security Ownership of Certain Beneficial Owners
And Management -8-
Item 12. Certain Relationships and Related Transactions -9-
Item 13. Exhibits And Reports on Form 8-K -10-
Item 14. Controls and Procedures -10-
SIGNATURES -11-
CERTIFICATIONS -12-
EXHIBIT INDEX -15-
-i-
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BACKGROUND
Orthodontix, Inc. (the "Company") was formed as Embassy Acquisition
Corp., a Florida corporation, in November 1995 for the purpose of effecting a
merger with an operating business. In April 1998, the Company merged with an
orthodontic practice management company and acquired certain assets and
assumed certain liabilities of 26 orthodontic practices (the "Practices") in
exchange for shares of the Company's Common Stock and the entering into of
practice management service agreements with the Practices (the "Merger").
Upon completing the Merger, the Company changed its name to Orthodontix, Inc.
and began managing the business aspects of the Practices, including billing,
collections, cash management and payroll processing, in exchange for a
management fee.
CESSATION OF THE ORTHODONTIC PRACTICE MANAGEMENT BUSINESS OF THE COMPANY
By November 1999, the Company had ceased providing practice management
services to all the Practices and by May 15, 2001, the Company had terminated
its affiliation with all the Practices. In connection with the termination
of its affiliations and the cessation of its practice management business,
the Company sold certain practice assets back to the Practices and assumed
certain liabilities. During April and May 2001, certain of the Company's
executive officers resigned and returned to the Company shares of its Common
Stock and options to acquire Common Stock. The Company recorded the sales of
all the practice assets and the shares of Common Stock returned in connection
with the resignations of management as of December 31, 2000 and December 31,
2001, and such transactions are reflected in the Company's Annual Reports on
Form 10-KSB for the years then ended. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS AND PLAN OF OPERATION" at page 3 for a further discussion.
FUTURE PLANS
Following the cessation of the orthodontic practice management business,
the Company has tried to effect a merger, acquisition or other business
combination with an operating company utilizing any combination of its Common
Stock, cash on hand, or other funding sources that the Company reasonably
believes are available. Since June 2001, management has devoted
substantially all of its time to identifying potential merger or acquisition
candidates. The Company is searching for an established business,
principally in South Florida, and the Company has evaluated more than 100
such companies operating in selected industries, including business services,
health care, manufacturing, distribution, aviation, pharmaceutical and
banking.
Although the Company believes that it will be successful in consummating
a business combination with an operating company, there can be no assurances
that the Company will enter into such a transaction in the near term or on
terms favorable to the Company, or that other funding sources will be
available.
1
EMPLOYEES
Except for Glenn L. Halpryn, the Company's Chief Executive Officer, the
Company currently has no full-time or part-time employees. The Company's
Acting Chief Financial Officer, Alan Jay Weisberg, is compensated by the
Company on a project basis through the accounting firm of Weisberg Brause &
Co., a firm in which Mr. Weisberg is a shareholder.
ITEM 2. DESCRIPTION OF PROPERTY
The Company currently maintains, at no cost to the Company, its
executive offices in approximately 500 square feet of office space located at
1428 Brickell Avenue, Suite 105, Miami, Florida 33131. Such office space
represents a portion of the corporate offices of Transworld Investment
Corporation ("TIC"), a company in which Glenn L. Halpryn and Noah Silver,
directors and executive officers of the Company, are officers and directors.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the year ended December 31, 2002, no
matters were submitted to a vote of security holders of the Company.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock of the Company is quoted for trading in the over-the-
counter electronic bulletin board market (the "OTC Bulletin Board") under the
symbol "OTIX." The following table shows the reported high and low bid
quotations for the Common Stock obtained from the OTC Bulletin Board for the
periods indicated. The high and low bid prices for such periods are
interdealer prices, without retail mark-up, mark-down or commissions and may
not represent actual transactions.
OTC Bulletin Board Low Bid High Bid
- ---------------------------------- ------------- ------------
2002
First Quarter $.23 $.38
Second Quarter $.23 $.38
Third Quarter $.16 $.23
Fourth Quarter $.11 $.16
2001
First Quarter $.16 $.25
Second Quarter $.15 $.40
Third Quarter $.27 $.35
Fourth Quarter $.22 $.35
2
The Company has approximately 59 stockholders of record as of March 21,
2003, inclusive of those brokerage firms and/or clearinghouses holding the
Company's shares of Common Stock for their clientele (with each such
brokerage house and/or clearing- house being considered as one holder).
The Company has not paid or declared any dividends upon its Common Stock
since its inception and does not contemplate or anticipate paying any
dividends upon its Common Stock in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following discussion with regard to the Company's financial
condition and results contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are based on current plans and expectations of the Company and
involve substantial risks and uncertainties that could cause actual future
activities and results of operations to be materially different from those
set forth in the forward-looking statements.
Important factors that could cause actual results to differ from the
Company's plans and expectations include, among others, the Company's
inability to consummate an acquisition of an operating business on terms
favorable to the Company or, in the event the Company does consummate the
transaction contemplated, the Company's ability to successfully manage and
operate the combined business.
The discussion of the Company's financial condition and plan of
operation, should be read in conjunction with the Company's Financial
Statements and Notes thereto included elsewhere in this Report.
FINANCIAL RESULTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31,
2001.
REVENUES. The Company had ceased providing orthodontics practice
management services to the Practices as of November 1999 and accordingly, no
management service fee revenue or other operating revenue was recorded by the
Company during the years ended December 31, 2002 and 2001. The Company does
not expect to generate operating revenue until such time as the Company
consummates a business combination with an operating company.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses were approximately $166,000 and $292,000 for the years ended
December 31, 2002 and 2001, respectively. During 2002, such expenses
consisted primarily of executive officer compensation totaling approximately
$54,000, insurance of approximately $23,000, and legal and accounting costs
amounting to approximately $66,000.
The Company incurred costs during the year ended December 31, 2001 in
connection with the termination of its practice management business, but no
such costs were incurred during the year ended December 31, 2002. The
Company anticipates that its general and administrative expenses will remain
low until such time as the Company effects a merger or other business
combination with an operating company.
3
INTEREST INCOME. Interest income of approximately $16,000 and $57,000
for the years ended December 31, 2002 and 2001, respectively, represents
interest earned on excess cash balances invested primarily in short-term
money market accounts. The decrease in interest income for year 2002 is
primarily attributable to lower market rates of interest combined with the
Company's having less excess cash invested during the year.
NET LOSS. For the years ended December 31, 2002 and 2001, the Company
recorded a net loss of approximately $150,000 and $329,000, respectively, or
$0.05 and $.10 per share, respectively. Included in the financial results
for 2001 is a $94,000 loss relating to the Company's termination of its last
affiliation with an orthodontic practice, which occurred in May 2001.
The Company does not expect to generate net income, if at all, until
such time as it effects a business combination with an operating company.
However, in the event that the Company does consummate a merger or an
acquisition of an operating company, there can be no assurances that the
combined operation will operate profitably.
LIQUIDITY AND CAPITAL RESOURCES/PLAN OF OPERATION
As of December 31, 2002, the Company had cash and cash equivalents of
approximately $808,000 and total liabilities of approximately $79,000. The
Company's cash is currently invested in money market accounts and overnight
repurchase agreements. The Company continues to anticipate that the primary
uses of working capital will include general and administrative expenses and
costs associated with seeking to locate and consummate a business
combination. The Company believes that its operating funds will be
sufficient for its cash expenses for at least the next twelve months. At
December 31, 2002, the Company had no ongoing contractual commitments.
Management of the Company intends to continue devoting substantially all
of its time to identifying merger or acquisition candidates, targeting
established businesses that operate principally in South Florida and in
selected industries, including business services, health care, manufacturing,
distribution, aviation, pharmaceutical and banking. The Company has
evaluated more than 100 such businesses since June 2001. In the event the
Company locates an acceptable operating business, the Company intends to
effect the transaction utilizing any combination of its Common Stock, cash on
hand, or other funding sources that the Company reasonably believes are
available. However, there can be no assurances that the Company will be able
to consummate a merger or acquisition of an operating business on terms
favorable to the Company, or that other funding sources will be available.
ITEM 7. FINANCIAL STATEMENTS
The financial statements included herein, commencing at page F-1, have
been prepared in accordance with the requirements of Regulation S-B.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
4
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
The current directors and executive officers of the Company are as
follows:
NAME AGE POSITION
- ---- --- --------
Glenn L. Halpryn 42 Chairman of the Board of
Directors, Chief Executive
Officer, President and
Secretary
Alan Jay Weisberg 57 Acting Chief Financial and
Accounting Officer, Director
Noah M. Silver 44 Director
Glenn L. Halpryn has been the Company's Chief Executive Officer since
May 2001 and Chairman of the Board of Directors, President and Secretary of
the Company since April 2001. Mr. Halpryn has been a member of the Board of
Directors since its inception and served a previous term as President of the
Company from its inception through the closing of the Merger. Mr. Halpryn is
also Chief Executive Officer and a director of Transworld Investment
Corporation ("TIC"), serving in such capacity since June 2001. From 1984 to
June 2001, Mr. Halpryn served as Vice President/Treasurer of TIC. From 1999,
Mr. Halpryn also served as Vice President of Ivenco, Inc. ("Ivenco") until
Ivenco's merger into TIC in June 2001. In addition, since 1984, Mr. Halpryn
has been engaged in real estate investment and development activities,
including the management, finance and leasing of commercial real estate.
From April 1988 through June 1998, Mr. Halpryn was Vice Chairman of Central
Bank, a Florida state-chartered bank. Since June 1987, Mr. Halpryn has been
the President of and beneficial holder of stock of United Security
Corporation ("United Security"), a broker-dealer registered with the NASD.
From June 1992 through May 1994, Mr. Halpryn served as the Vice President,
Secretary-Treasurer of Frost Hanna Halpryn Capital Group, Inc., a "blank
check" company whose business combination was effected in May 1994 with
Sterling Healthcare Group, Inc. From June 1995 through October 1996, Mr.
Halpryn served as a member of the Board of Directors of Sterling Healthcare
Group, Inc. During 2002 Mr. Halpryn became a director of Ivax Diagnostics,
Inc., a publicly held corporation, and is a member of its audit committee.
Alan Jay Weisberg has been the Company's Acting Chief Financial Officer
since September 1999 and a member of the Board of Directors and Treasurer of
the Company since April 2001. Since July 1986, Mr. Weisberg has been a
stockholder in the accounting firm of Weisberg Brause & Co., Miami, Florida.
Mr. Weisberg has been the principal financial officer of United Security
since June 1987.
5
Noah M. Silver has been a member of the Company's Board of Directors
since April 2001 and was a consultant to the Company during 1999. Mr. Silver
has been the Chief Financial Officer of TIC since June 2001, a firm in which
Mr. Halpryn is the Chief Executive Officer and a director. From March 2000,
Mr. Silver served as the Chief Financial Officer of Ivenco, serving in such
capacity until Ivenco's merger into TIC in June 2001. From January 1997
through February 1999, Mr. Silver was the President of Dryclean USA, Florida
Division, and Dryclean USA Franchise Company. From April 1995 through
December 1996, Mr. Silver was the Florida Division Controller and Vice
President of Dryclean USA, the parent company of Dryclean USA, Florida
Division. Mr. Silver is a Certified Public Accountant and a Certified
Management Accountant and has earned a Master of Accounting Degree.
AUDIT COMMITTEE FINANCIAL EXPERTS
The Board of Directors has determined that the Company has two audit
committee financial experts serving on its audit committee--Noah M. Silver
and Alan Jay Weisberg. Only Mr. Silver is independent.
COMPLIANCE WITH SECTION 16(a)
To the Company's knowledge, based solely upon the Company's review of
Forms 3, 4 and 5 furnished to the Company, for the year ended December 31,
2002, no person who was a director, officer or beneficial owner of more than
ten percent of the Company's outstanding Common Stock or any other person
subject to Section 16 of the Securities Exchange Act of 1934 (the "Exchange
Act") failed to file on a timely basis, reports required by Section 16(a) of
the Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
During the year ended December 31, 2002, each director of the Company
(employee and non-employee directors alike) received $300 for each Board
meeting attended as well as reimbursement for any reasonable business
expenses incurred by the director in connection with his activities on behalf
of the Company. During 2002, the Company held two meetings of the Board of
Directors. In addition, directors are entitled to receive stock options
under the 1997 Orthodontix, Inc. Stock Option Plan. No such stock options
were granted to directors during the year ended December 31, 2002.
EXECUTIVE COMPENSATION
No executive officer of the Company was compensated more than $100,000
during the year ended December 31, 2002. The following table sets forth all
the compensation earned by Dr. Grussmark, who served as Chief Executive
Officer of the Company during the years ended December 31, 2001, 2000 and
1999, and by Glenn L. Halpryn, who has been the Company's Chief Executive
Officer since May 2001.
6
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation Awards
______________________ _____________________________________________
Name and Securities
Principal Other Annual Underlying All Other
Position Year Salary Bonus Compensation Options Compensation
Stephen Grussmark, 2001 $ 0 $ 0 $ 0 0 $ 0
Chief Executive 2000 $ 0 $ 0 $ 0 0 $ 0
Officer 1999 $ 0 $ 0 $ 0 0 $ 0
Glenn Halpryn, 2002 $50,000 $ 0 $ 0 0 $600
Chief Executive 2001 $71,000 $ 0 $ 0 0 $900
Officer(1)
(1) In April 2001, the Board of Directors of the Company decided to
compensate Mr. Halpryn for his services to the Company during the years ended
December 31, 1999 and 2000 in the amount of $50,000 for each year and to
reimburse Mr. Halpryn for certain legal and accounting fees of approximately
$175,000 paid by Mr. Halpryn from January 1999 through April 2001 for advice
in connection with the termination of the Company's practice management
business and its affiliation with the Practices. Mr. Halpryn had not
previously received any compensation for any of the years reported. The
Board of Directors also agreed to pay Mr. Halpryn a salary of $50,000 for the
year ended December 31, 2001 for his service as President and Chairman of the
Board of Directors of the Company. When Mr. Halpryn became the Company's
Chief Executive Officer, the Board of Directors agreed to increase Mr.
Halpryn's salary, and he received $70,833 in salary and $900 in directors'
fees during 2001. In January 2002 Mr. Halpryn reduced his salary to $50,000
annually.
STOCK OPTION GRANTS IN 2002
No options to purchase shares of the Company's Common Stock were granted
to any executive officer during the year ended December 31, 2002. The
following table sets forth certain summary information concerning grants of
options to purchase shares of the Company's Common Stock during the year
ended December 31, 2002:
Number of Securities % of Total Options Exercise/
Underlying Options Granted to Employees Base Price/ Expiration
Name Granted in Fiscal Year Share Date
Glenn Halpryn N/A --- --- ---
7
STOCK OPTION EXERCISES IN 2002
AND YEAR-END OPTION VALUES
No options to purchase shares of the Common Stock of the Company were
exercised by any executive officer of the Company during the year ended
December 31, 2002 and at December 31, 2002, there were no unexercised options
to purchase the Company's Common Stock held by any executive officer of the
Company. The following table sets forth certain summary information
concerning exercised and unexercised options to purchase shares of the
Company's Common Stock as of December 31, 2002:
Shares Value of Unexercisable In-
Acquired Number of Unexercised the-money Options at FY-
on Value Options at FY-end end Exercisable /
Name Exercise Realized Exercisable/Unexercisable Unexercisable
Glenn L. Halpryn --- N/A 0/0 $0/$0
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Neither Mr. Halpryn, the Company's Chief Executive Officer, nor any
other executive officer of the Company, has an employment agreement with the
Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to the Company with
respect to the beneficial ownership of its Common Stock as of March 21, 2003
by (i) each stockholder known by the Company to own beneficially more than 5%
of the outstanding Common Stock, (ii) each named executive officer of the
Company, (iii) each director of the Company, and (iv) all directors and
executive officers as a group. As of March 21, 2003, there were 2,915,428
shares of Common Stock outstanding.
8
PRINCIPAL SHAREHOLDERS
Name and Address Shares of Common Stock Percent
of Beneficial Owner Beneficially Owned(1) Owned
Stephen Grussmark 450,000(2) 15.4%
7400 North Kendall Drive Suite 704
Miami, FL 33156
Glenn L. Halpryn 380,100 13.0%
1428 Brickell Avenue, Suite 105
Miami, FL 33131
Alan Jay Weisberg 4,201 0.14%
1428 Brickell Avenue, Suite 105
Miami, FL 33131
Noah Silver 0 0%
1428 Brickell Avenue, Suite 105
Miami, FL 33131
All Officers and 384,301 13.2%
Directors as a Group(2)
Total Shares Outstanding
as of March 21, 2003 2,915,428
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options or warrants held by that person
that are currently exercisable or will become exercisable within 60 days
after March 21, 2003 are deemed outstanding, while such shares are not deemed
outstanding for purposes of computing percentage ownership of any other
person. Unless otherwise indicated in the footnotes below, the persons and
entities named in the table have sole voting and investment power with
respect to all shares beneficially owned, subject to community property laws
where applicable.
(2) Represents shares of Common Stock held in various trusts for which
either Dr. Grussmark or his wife is the sole trustee and the beneficiaries of
which are Dr. Grussmark, his wife or his children.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Alan Jay Weisberg, CPA, the Company's Acting Chief Financial Officer
since September 1999 and a member of the Company's Board of Directors and
Treasurer since April 2001, is a shareholder of Weisberg Brause, which firm
was paid $9,100.00 and $8,683 during the years ended December 31, 2002 and
2001, respectively.
9
Since June 2001, the Company has utilized as its principal office, a
portion of the corporate offices of TIC, a company in which Messrs. Halpryn
and Silver are officers and directors. The Company occupies such space free
of rent.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report
1. Financial Statements
See page F-1.
2. Exhibits:
See Exhibit Index. The Exhibits listed in the accompanying Exhibits
Index are filed or incorporated by reference as part of this report.
(b) Reports on Form 8-K:
None
ITEM 14. CONTROLS AND PROCEDURES
CONTROLS AND PROCEDURES
On March 5, 2003, the Company's management concluded its evaluation of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures. As of the Evaluation Date, the Company's President
and Chief Executive Officer and its Chief Financial Officer concluded that
the company maintains disclosure controls and procedures that are effective
in providing reasonable assurance that information required to be disclosed
in the company's reports under the Securities Exchange Act of 1934 (Exchange
Act) is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is
accumulated and communicated to the Company's management, including its
President and Chief Executive Officer and its Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. The
Company's management necessarily applied its judgment in assessing the costs
and benefits of such controls and procedures, which, by their nature, can
provide only reasonable assurance regarding management's control objectives.
There have been no significant changes in the Company's internal controls or
in other factors that could significantly affect these controls subsequent to
the Evaluation Date.
10
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
By: /s/ Glenn Halpryn____
Glenn Halpryn, Chief Executive Officer
March 27, 2003
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant in the capacities and on
the dates indicated.
By: /s/ Glenn Halpryn_____
Glenn Halpryn, Chairman of the Board,
Chief Executive Officer, President, Secretary
March 27, 2003
By: /s/ Alan Jay Weisberg_
Alan Jay Weisberg, Acting Chief Financial
and Accounting Officer, Director
March 27, 2003
By: /s/ Noah Silver_______
Noah Silver, Director
March 27, 2003
11
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Glenn L. Halpryn, certify that:
1. I have reviewed this annual report on Form 10-KSB of
Orthodontix, Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the
period covered by this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in
all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing
the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Dated: March 27, 2003 By:
---------------------------------------
Glenn L. Halpryn
Chief Executive Officer
12
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Alan Jay Weisberg, certify that:
1. I have reviewed this annual report on Form 10-KSB of
Orthodontix, Inc.;
2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the
period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing
the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Dated: March 27, 2003 By:
---------------------------------------
Alan Jay Weisberg
Acting Chief Financial Officer
13
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Annual Report on Form 10-KSB of Orthodontix,
Inc. for the period ended December 31, 2002 as filed with the Securities
and Exchange Commission (the "Report"), I, Glenn L. Halpryn, Chief Executive
Officer of Orthodontix, Inc., hereby certify pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
Orthodontix, Inc.
Dated: March 27, 2003 By:
---------------------------------------
Glenn L. Halpryn
Chief Executive Officer
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Annual Report on Form 10-KSB of Orthodontix,
Inc. for the period ended December 31, 2002 as filed with the Securities
and Exchange Commission (the "Report"), I, Alan Jay Weisberg, Acting Chief
Financial Officer of Orthodontix, Inc., hereby certify pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
Orthodontix, Inc.
Dated: March 27, 2003 By:
---------------------------------------
Alan Jay Weisberg
Acting Chief Financial Officer
14
EXHIBIT INDEX
Exhibit
Number Exhibit Description
------ -------------------
2.1* Agreement and Plan of Merger and
Reorganization, dated October 30, 1997,
between Embassy Acquisition Corp. (now known
as Orthodontix, Inc. (the "Company")) and
Orthodontix, Inc. (now known as Orthodontix
Subsidiary, Inc.).
3.1* Amended and Restated Articles of Incorporation
of the Company.
3.2* Bylaws of the Company as amended.
4.1* Form of certificate representing shares of
Common Stock of the Company.
10.1* 1997 Orthodontix, Inc. Stock Option Plan.
10.2* Form of Administrative Services Agreement of
the Company.
10.3* Forms of Services Agreement of the Company.
10.4* Form of Agreement and Plan of Reorganization
of the Company.
10.5* Forms of Lock-Up Agreement.
- ---------------------------
* Incorporated by reference to the Company's Registration Statement on Form
S-4 declared effective on March 26, 1998 by the Securities and Exchange
Commission, SEC File No. 333-48677.
15
INDEX TO FINANCIAL STATEMENTS
Pages
Report of Independent Certified Public Accountants F-2
Financial Statements:
Balance Sheets as of December 31, 2002 and 2001 F-3
Statements of Operations for the years ended
December 31, 2002 and 2001 F-4
Statements of Stockholders' Equity
for the years ended December 31, 2002 and 2001 F-5
Statements of Cash Flows for the years ended
December 31, 2002 and 2001 F-6
Notes to the Financial Statements F-7
F-1
Report of Independent Certified Public Accountants
To the Board of Directors and
Shareholders of Orthodontix, Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders' equity and cash flows present fairly, in all
material respects, the financial position of Orthodontix, Inc. (the
"Company") at December 31, 2002 and 2001, and the results of its
operations and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements
in accordance with auditing standards generally accepted in the United States
of America, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1, the Company terminated its affiliation with all of
its Founding Practices and intends to effect a merger, acquisition or other
business combination with an operating company utilizing any combination of
its common stock, cash on hand or other funding sources.
PricewaterhouseCoopers LLP
Miami, Florida
March 14, 2003
F-2
ORTHODONTIX, INC.
BALANCE SHEETS
as of December 31, 2002 and 2001
- ------------------------------------------
2002 2001
Assets
Current assets:
Cash and cash equivalents $ 807,639 $ 915,635
Prepaid expenses and other current assets 24,323 40,493
------------ ------------
Total current assets 831,962 956,128
Notes receivable and other assets 43,258 67,056
------------ ------------
Total assets $ 875,220 $ 1,023,184
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 79,074 $ 77,276
------------ ------------
Total current liabilities 79,074 77,276
------------ ------------
Commitments
Stockholders' equity:
Preferred stock, $.0001 par value, 100,000,000 shares
authorized, no shares issued and outstanding - -
Common stock, $.0001 par value, 100,000,000 shares
authorized, 2,915,428 shares outstanding
at December 31, 2002 and 2001 292 292
Additional paid-in capital 4,232,821 4,232,821
Accumulated deficit (3,436,967) (3,287,205)
------------ ------------
Total stockholders' equity 796,146 945,908
------------ ------------
Total liabilities and stockholders' equity $ 875,220 $ 1,023,184
============ ============
The accompanying notes are an integral part of these financial statements.
F-3
ORTHODONTIX, INC.
Statements of Operations
For the years ended December 31, 2002 and 2001
- ----------------------------------------------
2002 2001
General and administrative expenses $ 165,790 $ 291,789
Loss on the disposition of certain assets and liabilities
of Founding Practices (Note 4) - 94,000
------------ ------------
Total expenses 165,790 385,789
------------ ------------
Operating loss (165,790) (385,789)
------------ ------------
Other income:
Interest income 15,716 56,616
Other income 312 -
------------ ------------
Total other income 16,028 56,616
------------ ------------
Net loss $ (149,762) $ (329,173)
============ ============
Loss per common and common
equivalent share:
Basic $ (0.05) $ (0.10)
============ ============
Diluted $ (0.05) $ (0.10)
============ ============
Weighted average number of common and
common equivalent shares outstanding -
basic and diluted 2,915,428 3,228,504
============ ============
The accompanying notes are an integral part of these financial statements.
F-4
ORTHODONTIX, INC.
Statements of Stockholder's Equity
For the years ended December 31, 2002 and 2001
- -----------------------------------------------
Additional Common
Common Stock Paid-In Accumulated Stock
Shares Amount Capital Deficit Receivable Total
--------- ---------- ----------- ------------ ------------ ----------
Balance, December 31, 2000 3,933,571 $ 393 $ 4,409,502 $(2,958,032) $ (108,035) $1,343,828
Shares retired in connection
with disposition of assets
and settlements (1,018,143) (101) (176,681) - 108,035 (68,747)
Net loss for the year ended
December 31, 2001 - - - (329,173) - (329,173)
--------- ---------- ----------- ------------ ------------ ----------
Balance, December 31, 2001 2,915,428 292 4,232,821 (3,287,205) - 945,908
Net loss for the year ended
December 31, 2002 - - - (149,762) - (149,762)
--------- ---------- ----------- ------------ ------------ ----------
Balance, December 31, 2002 2,915,428 $ 292 $ 4,232,821 $(3,436,967) $ - $ 796,146
--------- ---------- ----------- ------------ ------------ ----------
The accompanying notes are an integral part of these financial statements.
F-5
ORTHODONTIX, INC.
Statements of Cash Flows
For the years ended December 31, 2002 and 2001
- -----------------------------------------------
2002 2001
------------- ------------
Cash flows from operating activities:
Net loss $ (149,762) $ (329,173)
Adjustments to reconcile net loss to net cash used
in operating activities:
Noncash stock settlement - ( 66,293)
Gain on sale of fixed asset (150) -
Changes in assets and liabilities
(net of practice assets sold):
Assets held for sale - 9,318
Advances to Founding Practices - 5,747
Prepaid expenses and other current assets 1,528 2,934
Accounts payable and accrued liabilities 1,798 (411,961)
------------- ------------
Net cash used in operating activities (146,586) (789,428)
------------- ------------
Cash flows from investing activities:
Sale of investments - 1,217,218
Payment on notes receivable 38,440 97,106
Proceeds from the sale of fixed asset 150 -
------------- ------------
Net cash provided by investing activities 38,590 1,314,324
------------- ------------
Net (decrease) increase in cash and cash equivalents (107,996) 524,896
Cash and cash equivalents, beginning of year 915,635 390,739
------------- ------------
Cash and cash equivalents, end of year $ 807,639 $ 915,635
============= ============
The accompanying notes are an integral part of these financial statements.
F-6
ORTHODONTIX, INC.
Notes to Financial Statements
December 31, 2002 and 2001
- ------------------------------------------
1. Description of Business
On April 16, 1998, Orthodontix, Inc. and subsidiaries ("Orthodontix"
or the "Company") consummated a merger (the "Merger") with Embassy
Acquisition Corp. ("Embassy"), a publicly held Florida corporation.
Simultaneously with the closing of the Merger, the Company acquired certain
assets and assumed certain liabilities of 26 orthodontic practices (the
"Founding Practices") (collectively referred to as the "Affiliated
Acquisitions").
During the year ended December 31, 1999, the Company began to
terminate its affiliation with the Founding Practices. In connection with
the termination of its affiliation with the Founding Practices, the Company
sold certain practice assets, consisting principally of accounts receivable
and property and equipment, to the Founding Practices and the Founding
Practices assumed certain liabilities in exchange for cash and shares of the
Company's common stock. As of December 31, 2000, the Company had terminated
its affiliation with 25 Founding Practices. The Company terminated its
affiliation with the one remaining Founding Practice during the year ended
December 31, 2001 (see Note 4).
The accompanying financial statements have been prepared on the basis
which assumes that the Company will continue to operate as a going
concern and which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of business.
The Company has generated an accumulated deficit of approximately $3.4
million at December 31, 2002 as a result of operations and the termination
of its affiliation with the Founding Practices. The Company incurred net
losses of approximately $150,000 and $329,000 for the years ended December
31, 2002 and 2001, respectively.
The Company currently intends to effect a merger, acquisition or other
business combination with an operating company utilizing any combination of
its common stock, cash on hand or other funding sources that the Company
believes are available. Since June 2001, management has devoted substantially
all of its time to identifying potential merger or acquisition candidates.
There can be no assurances that management's efforts to consummate a merger,
acquisition or business combination with an operating company or management's
efforts to identify other funding sources will be successful. The Company
anticipates that its current working capital is sufficient to fund its
operating expenses at their current level for at least the next twelve
months.
F-7
ORTHODONTIX, INC.
Notes to Financial Statements
December 31, 2002 and 2001
- ------------------------------------------
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements include the accounts of
Orthodontix and its wholly owned subsidiaries. All significant
intercompany transactions have been eliminated in the preparation of
the financial statements for the year ended December 31, 2001. During the
year ended December 31, 2002, the Company liquidated the Company's
remaining wholly owned subsidiaries. The financial statements at December
31, 2002 include the accounts of Orthodontix.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates
of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from
those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid financial instruments with
maturities of 90 days or less at the date of purchase to be cash
equivalents.
The Company maintains its cash and cash equivalents, which consist
principally of demand deposit accounts and money market accounts, with
financial institutions. The balance in demand deposit accounts, at times,
may exceed FDIC insurance limits.
Income Taxes
The Company utilizes the liability method of accounting for income
taxes. The liability method requires recognition of deferred tax assets and
liabilities based on the differences between the financial statement and the
tax bases of assets and liabilities using enacted tax rates and laws in
effect in the years in which the differences are expected to reverse.
Deferred tax assets are also established for the future tax benefits of loss
and credit carryovers.
F-8
ORTHODONTIX, INC.
Notes to Financial Statements
December 31, 2002 and 2001
- ------------------------------------------
Earnings Per Share
Basic earnings per share is calculated by dividing the net income
or loss by the weighted average number of common and potential common
shares outstanding during the period. Potential common shares consist of
the dilutive effect of outstanding options calculated using the treasury
stock method. There are no potential common shares as of December 31,
2002 and 2001.
Stock Options
The Company accounts for options granted to employees under the
Company's Option Plan (see Note 8) using the intrinsic value method. The
Company has chosen not to apply the fair value accounting rules in the
statements of operations for employee stock-based compensation but such
treatment is required for non-employee stock-based compensation. The
Company has chosen the alternative to disclose pro forma net loss and loss
per share as if the fair value accounting rules were used for options
granted to employees.
Had compensation for stock options been determined based on fair
value accounting rules, there would be no impact on the Company's net loss
and net loss per share--basic and diluted for the years ended December
31, 2002 and 2001.
New Accounting Pronouncements
In December 2002, Statement of Financial Accounting Standards No. 148,
"Accounting for Stock-Based Compensation--Transition and Disclosure--an
amendment to FAS 123," ("FASB No. 148") was issued. This statement amends
FAS No. 123 to provide alternative methods of transition for a voluntary
change to the fair market based method of accounting for stock based employee
compensation. In addition, this statement amends the disclosure requirements
of FAS No. 123 to require prominent disclosures in financial statements about
the method of accounting for stock-based employee compensation and the effect
of the method used on reported results. The majority of the provisions of
this statement are effective for financial statements for fiscal years ending
after December 15, 2002. The Company has implemented the disclosure
requirements of FAS No. 148 in the accompanying financial statements.
F-9
ORTHODONTIX, INC.
Notes to Financial Statements
December 31, 2002 and 2001
- ------------------------------------------
3. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following at
December 31, 2002 and 2001:
2002 2001
Accounts payable $ 4,214 $ 4,214
Other accrued expenses 74,860 73,062
------------- -------------
$ 79,074 $ 77,276
============= =============
4. Assets Held For Sale and Termination of Affiliation with
Certain Founding Practices
On May 14, 2001, the Company terminated its affiliation with the
one remaining Founding Practice owned by Dr. Stephen M. Grussmark and
sold certain practice assets, consisting of accounts receivable and
property and equipment. In addition, the Founding Practice assumed
certain liabilities. The carrying value of the practice assets sold
less liabilities assumed was $15,065 at the date of the transaction.
In connection with this transaction, the Company received 96,571 shares
of the Company's common stock from the remaining Founding Practice.
In addition, in connection with this transaction, the Company paid
$115,000 for the return of an additional 345,385 shares of the
Company's common stock. The Company also paid $30,000 for legal expenses
in connection with the transaction. All the shares received from
Dr. Grussmark have been cancelled and are no longer outstanding.
In connection with these transactions, the Company and Dr. Grussmark
executed certain mutual releases and Dr. Grussmark resigned as the
Company's Chief Executive Officer and a member of the Company's Board
of Directors.
As a result of the transactions described above, the Company
recorded a loss in the amount of $94,000 for the year ended December 31,
2001.
F-10
ORTHODONTIX, INC.
Notes to Financial Statements
December 31, 2002 and 2001
- ------------------------------------------
At December 31, 2002, in connection with a previous transaction
with another Founding Practice, the Company had a note receivable with an
outstanding balance of $65,131, of which $21,873 is included in prepaid
expenses and other current assets as this amount is expected to be repaid
in 2003. The interest rate on the note is 6.5% per annum and matures
as of December 31, 2002 as follows:
Year ending December 31,
2003 21,873
2004 43,258
---------------
$ 65,131
===============
5. Commitments and Contingencies
At December 31, 2002, the Company has a month-to-month operating lease
for record storage. The Company incurred rental expense for noncancelable
operating leases and month-to-month leases of approximately $2,000 and $4,900
for the years ended December 31, 2002 and 2001, respectively.
In April 2001, the Company settled certain outstanding liabilities
to companies that had provided professional services to the Company. In
connection with the settlement with those professional services firms, 68,207
shares of the Company's common stock were returned to the Company and the
Company cancelled stock options to acquire 47,500 shares of common stock with
an exercise price of $9.11. As a result of this settlement, the Company had
recorded a reduction of approximately $58,400 to general and administrative
expenses for the year ended December 31, 2000 related to amounts previously
expensed by the Company with respect to professional services.
6. Related Party Transactions
In addition to transactions with related parties described elsewhere,
the Company had the following additional related party transaction:
In April 2001, the individual who served as the Company's former
Chairman of the Board of Directors and the individual who served as the
President and Chief Operating Officer, resigned their positions. In
F-11
ORTHODONTIX, INC.
Notes to Financial Statements
December 31, 2002 and 2001
- ------------------------------------------
connection with their resignations and the execution of mutual releases with
the Company, these individuals returned 507,980 shares of the Company's
common stock and the Company cancelled stock options to acquire 350,000
shares of common stock with exercise prices ranging from $8.00 to $9.11 per
share.
7. Income Taxes
The components of the income tax expense are as follows for the
years ended December 31, 2002 and 2001:
2002 2001
Deferred:
Federal $ 47,732 $ 105,763
State 8,170 18,105
Change in valuation allowance (55,902) (123,868)
---------- -----------
Total $ - $ -
========== ===========
The differences between the effective rate, which was 0% at December
31, 2002 and 2001, and the U.S. federal income tax statutory rates are as
follows for the years ended December 31, 2002 and 2001:
2002 2001
Tax benefit at statutory rate $ (50,919) $ (111,919)
State income tax, net of
federal benefit (5,392) (11,949)
Other 409 -
Change in valuation allowance 55,902 123,868
---------- -----------
Total $ - $ -
========== ===========
F-12
ORTHODONTIX, INC.
Notes to Financial Statements
December 31, 2002 and 2001
- ------------------------------------------
The significant components of deferred income tax assets and
liabilities are as follows at December 31, 2002 and 2001:
2002 2001
Deferred tax assets:
Start-up expenses $ 20,292 $ 79,048
Net operating loss carryforward 925,993 800,998
Accrued expenses 5,908 3,612
---------- -----------
952,193 883,658
Valuation allowance (952,193) (883,658)
---------- -----------
$ - $ -
========== ===========
The Company has recorded a valuation allowance at December 31, 2002
and 2001 with respect to the deferred tax assets to the extent that
management has determined that it is more likely than not that the benefit
of such amounts will not be realized.
The Company has net operating loss carryforwards for federal and
state tax purposes of approximately $2,436,000 and $2,690,000,
respectively, at December 31, 2002. Such net operating loss carryforwards
expire commencing in 2019.
8. Stock Option Plan
The Company adopted an option plan (the "Option Plan") that provides
for granting up to 500,000 shares of common stock by November 2007. The
Option Plan provides for the issuance of incentive stock options and
non-qualified stock options. Under the Option Plan, options may be granted
at not less than the fair market value of the stock on the date of the grant.
The term of each option generally may not exceed ten years.
In addition, the Company had issued underwriter options to purchase
120,000 shares of common stock at an exercise price of $7.80 per share.
Such options were exercisable for a period of five years commencing April
2, 1996. Such options expired unexercised on April 2, 2001.
As a result of the forfeitures of various stock options, there were no
options outstanding as of December 31, 2002 and 2001.
F-13
ORTHODONTIX, INC.
Notes to Financial Statements
December 31, 2002 and 2001
- ------------------------------------------
A summary of the Company's stock option activity and related
information is as follows:
Weighted
Number Option Price Average Expiration
of Shares Per Share Exercise Price Date
---------- ------------ -------------- -----------
Outstanding at
December 31, 2000 680,000 $1.75 - $9.11 $7.80 2001 - 2003
Forfeited 680,000 1.75 - 9.11 7.80 2001 - 2003
---------- ------------ --------------
Outstanding at
December 31, 2001 - $ - $ -
========== ============ ==============
F-14