SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
(Mark one)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the quarterly period ended December 31, 1996
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OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____________ to _____________
Commission File No. 33-11935
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DENTAL SERVICES OF AMERICA, INC.
(Name of small business issuer in its charter)
DELAWARE 8021 59-2754843
- ------------------------- ---------------------------- ------------------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation Classification Code Number) Identification No.)
or organization)
12000 Biscayne Boulevard, #200
Miami, Florida 33154
- ---------------------------------------- -----------------
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code: (305) 895-0716
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Check whether the issuer (1) has filed all reports required to be Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
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The number of shares outstanding of the issuer's common stock, $.001 par value
per share as of December 31, 1996 is 7,320,000
Item 1. Financial Statements
DENTAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996 AND SEPTEMBER 30, 1996
ASSETS
December 31 September 30
----------- ------------
Current assets
Cash $ 240,871 $ 559,272
Accounts receivable, less allowance
for doubtful accounts of $0 and $6,303
at December 31 and September 30 respectively 65,899 49,308
Dental supplies inventory 62,775 56,990
Marketable securities, at cost 13,354 9,294
Prepaid expenses 15,369 9,041
Other current asset 10,844 2,800
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Total current assets 409,113 686,705
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Furniture and equipment, less accumulated
depreciation of $28,052 and $19,163 175,283 161,172
------- -------
Other assets
Prepaid registration costs 38,604 34,443
Organization costs less accumulated
amortization of $387 at December 31 100,272 7,750
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138,876 42,193
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$723,272 $890,070
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $109,226 $ 67,690
Loan payable bank 21,450 21,450
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Total current liabilities 130,676 89,140
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Stockholders' equity
Preferred stock, $.01 par value. Authorized
10,000,000 shares. None issued or
outstanding
Common stock, $.001 par value. Authorized
shares 25,000,000. 7,320,000 shares issued
and outstanding 7,320 7,320
Additional paid-in capital 1,305,653 1,305,653
Deficit (720,377) (512,043)
-------- --------
592,596 800,930
-------- --------
$ 723,272 $ 890,070
======== ========
The accompanying notes are an integral part of these financial statements
Page 2 of 11
DENTAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
---- ----
Revenues earned $ 231,166 $ -
Cost of revenues earned (307,200) -
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Gross Profit (Loss) (76,034) -
General and administrative
expenses 135,736 1,150
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(211,770) (1,150)
------- -----
Other income and expense
Interest and dividend income 4,053 8
Interest expense ( 617) -
------- -----
3,436 8
------- -----
Net loss $(208,334) $(1,142)
======= =====
Loss per common share $(.028) $(.000)
==== ====
The accompanying notes are an integral part of these financial statements
Page 3 of 11
DENTAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
Additional
Common stock paid-in
Shares Amount capital Deficit
------ ------ ------- -------
(000's)
Balance September 30, 1993 5,500 $5,500 $ 223,527 $(227,072)
Net loss 1994 - ( 7,783)
----- ----- --------- -------
Balance September 30, 1994 5,500 $5,500 $ 223,527 $(234,855)
Net loss 1995 - ( 2,145)
----- ----- --------- -------
Balance September 30, 1995 5,500 $5,500 $ 223,527 $(237,000)
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Sales of common stock 1,820 1,820 927,972
Effect of acquisition of DPA 154,154
Net loss 1996 - - (275,043)
----- ----- --------- -------
Balance September 30, 1996 7,320 $7,320 $1,305,653 $(512,043)
----- ----- --------- -------
Net loss quarter ended December 31, 1996 (208,334)
Balance December 31, 1996 7,320 $7,320 $1,305,653 $(720,377)
===== ===== ========= =======
The accompanying notes are an integral part of these financial statements
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DENTAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
---- ----
Cash Flows From Operating Activities
Net loss $(208,334) $(1,142)
Adjustments to reconcile net loss to net cash provided
by operating activities
Depreciation 8,889 -
Amortization 387 -
Increase in accounts receivable ( 16,591) -
Increase in supplies inventory ( 5,785) -
Increase in prepaid expenses ( 6,328) -
Increase in other current assets ( 8,044) -
Change in accounts payable and accrued expenses 41,536 -
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Net Cash Used by Operating Activities (194,270) (1,142)
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Cash Flows from Investing Activities
Purchase of marketable securities (4,060) -
Purchase of furniture and equipment (23,000) -
------ -----
Net Cash Used by Investing Activities (27,060) -
------ -----
Cash Flows Provided by Financing
Increase in organization costs (92,909) -
Increase in prepaid registration costs (4,161) -
Cash Provided by Financing Activities (97,070) -
------ -----
Increase (Decrease) in Cash $(512,670) (1,142)
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Cash, Beginning of year 559,272 2,087
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Cash, End of year $ 240,872 $ 945
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Supplementary Information
Furniture, equipment and supplies valued at $154,154 was contributed to the
Company and is included as additional paid-in capital.
The accompanying notes are an integral part of these financial statements
Page 5 of 11
DENTAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
Note 1. Summary of Significant Accounting Principles
Organization
- ------------
Dental Services of America, Inc. (the Company or DSA), formally known as
Campbell Capital Corp. was organized under the laws of the State of Delaware in
January, 1987, for the purpose of providing a vehicle to raise capital and seek
business opportunities. Effective as of July, 1996, the Company acquired 100% of
the issued and outstanding capital stock of Dental Practice Administrators, Inc.
(DPA), a Florida corporation which was formed in 1995 to engage in the business
of operating dental clinics. In conjunction with the acquisition of DPA, the
Company changed its corporate name to Dental Services of America, Inc.
These financial statements include the operations of DSA and its wholly owned
subsidiaries, Dental Practice Administrators, Inc. and its affiliates.
DPA and its affiliates have been operating since January 1, 1996. Prior to the
acquisition, DSA had no operations. The results of operations in these financial
statements relate primarily to the operations of DPA and its affiliates.
Supplies Inventory
- ------------------
Supplies inventory is recorded at cost and represents the materials needed for
day to day operations.
Accounts Receivable
- -------------------
Revenues are recognized on the accrual method of accounting. Therefore when the
patients are treated revenue is recorded and a corresponding receivable is
established. As many patients are covered by Medicaid, the accounts receivable
represent primarily the amounts due from Medicaid.
An allowance for uncollectible accounts was established at September 30 for
those receivables which may not be collected. For December 31, the allowance for
uncollectible accounts was written off directly to revenues earned.
Furniture and Equipment
- -----------------------
Furniture and equipment are recorded at cost. The Company provides depreciation
for financial purposes over the estimated useful lives of the assets using the
straight line method. Upon retirement or sale of fixed assets, their net book
value will be removed from the accounts and the difference between such net book
value and proceeds received is recorded in income. Expenditures for maintenance
and repairs are charged to income; renewals and improvements are capitalized.
Earnings per common share
- -------------------------
Earnings per common share is based on the weighted average of common shares
outstanding throughout the year. The number of shares utilized in the
computation were 7,320,000 and 5,957,486, at December 31, 1996 and 1995
respectively.
Page 6 of 11
DENTAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
Prepaid Registration Costs
- --------------------------
Prepaid registration costs relate to costs paid to various entities who are
involved with working on a new registration statement. These expenses will be
charged to additional paid-in capital upon the exercise of the warrants related
to the registration statement becomes effective. If the insufficient warrants
are converted to cover the costs of the registration statement, then the costs
not covered by the proceeds of the conversion will be charged to operations.
Income taxes
- ------------
The Company and its subsidiaries file a consolidated federal income tax return.
Income taxes are generally provided under the provisions of the Financial
Accounting Standards Board (FASB) No. 109, 'Accounting for Income Taxes'. For
the year ended September 30, 1996, the Company had an taxable loss of
approximately $275,000. This loss may be carried forward to offset future
taxable income, for a period of fifteen years.
Note 2. Leases
The Company leases office facilities under operating leases which expire over
the next 6 years. Most of these leases provide for renewals for a like period of
time.
Minimum payments for these leases having initial or remaining noncancellable
terms in excess of one year are as follows:
Year ended: September 30, 1997 $116,499
September 30, 1998 107,924
September 30, 1999 47,358
September 30, 2000 41,400
September 30, 2001 22,100
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$335,281
=======
Rental expense for the year ended September 30, 1996 was $143,043.
Note 3. Furniture And Equipment
Furniture and equipment as of December 30 and September 30, 1996 are as follows:
Estimated
December September Life
-------- --------- ----
Equipment $171,240 $152,770 5 years
Furniture 5,565 5,565 7 years
Leasehold improvements 26,530 22,000 31 years
-------- --------
$203,335 $180,335
======== ========
During the formation of the Company, $154,154 in dental equipment, furniture and
supplies were donated to the Company as part of the initial capitalization. This
amount was credited to addition paid-in capital.
Page 7 of 11
DENTAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
Note 4. Line of Credit
On March 31, 1996, the Company was granted a $25,000 line of credit from the
Barnett Bank. The use of proceeds from this line will be used to give additional
financing to the Company. The Company borrowed $21,450 on this line as of
September 30, 1996. This loan bears interest at the prime rate as determined by
the lender.
Note 5. Commitments and Contingencies
The Company has entered into employment contracts with certain of its officers.
Pursuant such employment agreement, Mr. Paulo Dominguez will receive, in the
aggregate, $50,000, $55,000 and $60,000 for the next three years; Mr. Sujit
Shyam will receive, in the aggregate, $37,500, $45,000 and $50,000 for the next
three years; Dr. Roger Prieto will receive, in the aggregate, $30,000, $36,000
and $42,000 for the next three years.
Note 6. Stock Option Plan
The Company's Board of Directors and shareholders have adopted two stock option
plans (the Plans). Pursuant to the 1996 Director Stock Option Plan (the Director
Plan), options to acquire a maximum of the greater of 500,000 shares or 5% of
the number of shares of Common stock then outstanding may be granted to the
directors of the Company. Pursuant to the 1996 Employee Stock Option Plan (the
1996 Plan), options to acquire a maximum of the greater of 1,000,000 shares of
Common stock or 10% of the number of Common Stock then outstanding may be
granted to executive officers, employees (including employees who are
directors), independent contractors and consultants of the Company.
Options to purchase 644,400 shares at prices ranging from $.50 to $1.125 per
share have been granted to directors, employees and consultants of the Company
under the Plans.
Page 8 of 11
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
Reference is made to the Company's Annual Report on Form 10-KSB for the fiscal
year ended September 30, 1996.
Total revenues for the quarter ended December 31, 1995 consisted entirely of
interest income. Total revenues, for the quarter ended December 31, 1996 was
derived, in large part, from the operations of the Company's dental clinics. The
majority of these revenues are a result of billing the State of Florida Medicaid
program for services rendered to their clients on a fee for service basis.
Revenues for the quarter ended December 31, 1996 were $231,166, and the related
expenses for that period were $442,936. This resulted in a loss from operations
of $211,770 before other income and expenses.
The Company continues to incur losses from operations. The losses from clinical
operations for the quarter ended December 31, 1996 were approximately $76,034.
The Company's individual clinics are at or below breakeven in most cases. None
of the Company's clinics has been in operation for longer than 12 months. Many
dental practices require a much longer period to achieve a significant client
base and reach a breakeven point. The overhead attributable to the clinics
results in the additional losses in clinical operations.
As the Clinics mature, and if their profitability increases, the clinical
operations should tend towards profitability. This tendency to profitability may
be temporarily affected unfavorably by any start up new locations. Conversely,
Management intends to identify and acquire existing profitable practices that
will allow immediate improvements to the profitability of the clinical
operations. No assurance can be made that such practices can be identified, or
successfully negotiated for, or integrated profitably into the Company's
current structure. Further, when, and if, the Company is granted a license to
operate a dental health maintenance organization, Management believes, that
significant revenue will be derived from utilizing the Company's clinics to
service the plan's patients. Management anticipates that the Company's
subsidiary, DentAll Plans of Florida, Inc., will be granted a license to operate
as a Dental Health Maintenance Organization by the end of the first quarter of
1997. However, no assurance can be made that upon the granting of such license,
and the commencement of operations of the DentAll Plan, that sufficient
profitable clients will be direct to the Company's clinics to reverse the
current financial trend.
As the Company proceeds through the license period in regards to its application
with the State of Florida for a Dental Health Maintenance Organization, it is
incurring significant costs without any related revenue. The Company foresees
these expenses will continue until such time as a license is granted. Further,
cost and expenses will accelerate on a material basis upon the granting of a
licenses to DentAll Plans of Florida. As DentAll begins marketing to future
members and prior to the time of those members joining the plan, significant
outflows will occur.
The Company has postured itself for future growth. The costs related to starting
new dental clinics, acquiring existing clinics and establish managed care plans
are a significant burden on revenues. Until the hoped for growth of the clinical
operations and the approval, start up and successful operation of the managed
care subsidiaries occurs, the Company will continue to incur net losses due to
its overhead and in maintaining the ongoing expenses related to its expansion
plans.
Page 9 of 11
Financial Condition, Liquidity and Capital Resources
The Company's cash on hand was $240,871 and $559,272 at December 31 and
September 30, 1996 respectively. Working capital, including cash on hand was
$278,437 and $597,565 at December 31 and September 30, 1996 respectively
representing a decrease of $319,128 from September 30, 1996 to December 31,
1996. At September 30, 1996, the Company has $335,281 in lease commitments which
could affect its liquidity.
The Company's recent acceleration of the startup of DentAll Plans of Florida has
placed extraordinary demand on the Company's working capital. Management has
talked with some of the holders of the Company's public and non public warrants.
Some of the warrant holders have indicated that they intend to exercise their
Warrants in the first quarter of 1997. Should the warrant holders so exercise
their warrants, the Company would receive sufficient working capital to enable
it to continue forward with its accelerated development plan for at least the
next 9 months. There can be no assurance that the warrants will be exercised, or
a sufficient number of warrants will be exercised. Should the losses accelerate
due to increased costs involved with new clinics and markets, the Company may
require additional capital to maintain a reasonable level of liquidity. Any such
additional financing may be obtained through loans, issuance of additional
securities, or through other private or public financing arrangements. There can
be no assurance that any such financing will be available when it is required
or, even if it is available, that it will be available on terms acceptable to
the Company.
Item 6. Exhibits and Reports on Form 8-K
Financial Statements
The following financial statements of the Company are included in this
report:
a. Balance Sheet as of December 31, 1996 and September 30, 1996;
and
b. Statement of Income for the three months ended December 31,
1996 and 1995; and
c. Statement of Cash Flows for the three months ended December
31, 1996 and 1995; and
d. Notes to Financial Statements.
Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
Page 10 of 11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Annual Report on form 10-QSB to be signed on its behalf by the
undersigned, hereunto duly authorized, in the City of Miami, State of Florida,
on the 29/th/ day of January, 1997.
DENTAL SERVICES OF AMERICA, INC.
By: /s/ Paul Rothman
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Paul Rothman
Principal Executive Officer
By: /s/ Henry Ewen
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Henry Ewen
Principal Financial and Accounting Officer
Page 11 of 11