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 June 30, 1997
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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
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Commission File No. 33-11935
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DENTAL SERVICES OF AMERICA, INC.
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(Name of small business issuer in its charter)
DELAWARE 8021 59-2754843
- ------------------------------ ---------------------------- -------------------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
12000 BISCAYNE BOULEVARD, #200
MIAMI, FLORIDA 33181
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(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 June 30, 1997 is 8,228,714
The number of shares outstanding of the issuer's preferred stock Class "A", $.01
par value per share as of June 30, 1997 is 100,000
The number of shares outstanding of the issuer's preferred stock Class "C", $.01
par value per share as of June 30, 1997 is 250,000
DENTAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997 AND SEPTEMBER 30, 1996
ASSETS
June 30 Sept 30
---------- --------
CURRENT ASSETS
Cash $ 701,930 $559,272
Accounts receivable 29,030 49,308
Dental supplies inventory 21,970 56,990
Marketable securities, at cost 13,354 9,294
Prepaid expenses 98,905 9,041
Other current asset 8,955 2,800
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TOTAL CURRENT ASSETS 874,144 686,705
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FIXED ASSETS
Land 650,000 -
Building 600,000 -
Furniture and equipment, less accumulated
depreciation of $22,844 and $28,052 163,083 161,172
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1,413,083 161,172
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OTHER ASSETS
Prepaid registration costs - 34,443
Deferred start-up costs - DentAll Plans 238,973 -
Organization costs less accumulated
amortization of $1,550 and $0 6,200 7,750
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245,173 42,193
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TOTAL ASSETS $2,532,400 $890,070
========== ========
DENTAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES
Page 2 of 12
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997 AND SEPTEMBER 30, 1996
LIABILITIES AND STOCKHOLDERS EQUITY
June 30 Sept 30
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CURRENT LIABILITIES
Accounts payable 137,821 67,690
Loans payable 171,450 21,450
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TOTAL CURRENT LIABILITIES 309,271 89,140
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TOTAL LIABILITIES 309,271 89,140
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STOCKHOLDERS' EQUITY
Class "A" preferred stock, $.01 par value. Authorized
5,000,000 shares. 100,000 shares issued and
outstanding 1,000 -
Class "C" preferred stock, $.01 par value. Authorized
5,000,000 shares. 250,000 shares issued and
outstanding 2,500 -
Common stock, $.001 par value. Authorized
shares 25,000,000. 8,228,714 shares issued
and outstanding 8,229 7,320
Additional paid-in capital 3,436,997 1,305,653
Deficit (1,225,597) (512,043)
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TOTAL EQUITY 2,223,129 800,930
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TOTAL LIABILITIES AND EQUITY $ 2,532,400 $ 890,070
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Page 3 of 12
DENTAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
Three months ended Nine months ended
--------------------- ---------------------
1997 1996 1997 1996
--------- --------- --------- ---------
Revenues earned (A) $ 210,029 $ - $ 608,153 $ -
Cost of revenues earned (A) (282,150) - (785,675) -
--------- --------- --------- ---------
Gross Profit (Loss) (A) (72,121) - (177,522) -
--------- --------- --------- ---------
General and administrative
expenses (306,578) (25,625) (533,724) (27,525)
--------- --------- --------- ---------
(378,699) (25,625) (711,246) (27,525)
--------- --------- --------- ---------
Other income and expense
Interest and dividend income - 999 3,720 1,010
Interest expense (2,500) - (6,028) -
--------- --------- --------- ---------
(2,500) 999 (2,308) 1,010
--------- --------- --------- ---------
Total Income (Loss) (381,199) (24,626) (713,554) (26,515)
========= ========= ========= =========
Loss per common share $ (.050) $ (.004) $ (.090) $ (.004)
========= ========= ========= =========
(A) See Footnotes for comments on
discontinued offices, and change in
accounting procedures.
DENTAL SERVICES OF AMERICA, INC.
Page 4 of 12
DENTAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR AND NINE MONTHS ENDED JUNE 30, 1997
Additional
Preferred Stock Common Stock Paid-in
Shares Amount Shares Amount Capital Deficit
----------- ----------- ----------- ----------- ----------- -----------
(000s) (000s)
Balance September 30,
1995 - $ - 5,500 $ 5,500 $ 223,527 $ (237,000)
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)
Exercise of Warrants - - 770 770 359,462 -
Issuance of Class "A"
Preferred Stock 100 1,000 - - 494,000 -
Issuance of Class "C"
Preferred Stock 250 2,500 - - 1,247,500 -
Sale of Common Stock - - 139 139 30,382 -
Net Loss nine months
ended June 30, 1997 - - _ _ - (713,554)
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1997 350 $ 3,500 8,229 $ 8,229 $ 3,436,997 $(1,225,597)
=========== =========== =========== =========== =========== ===========
Page 5 of 12
DENTAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1996
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(713,554) $ (26,515)
Adjustments to reconcile net loss to net cash provided
by operating activities
Depreciation 21,179 -
Amortization 1,550 -
Loss on sale of office equipment 34,415 -
Decrease in accounts receivable 20,278 -
Increase in loan receivable - (100,000)
Decrease in supplies inventory 35,020 -
Increase in prepaid expenses (89,863) -
Increase in other current assets (6,155) -
Change in accounts payable and accrued expenses 70,131 (10,060)
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NET CASH USED BY OPERATING ACTIVITIES (626,999) (136,575)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable securities (4,060) -
Purchase of furniture and equipment (74,506) -
Proceeds from sale of equipment 17,000 -
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NET CASH USED BY INVESTING ACTIVITIES (61,566) -
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CASH FLOWS PROVIDED BY FINANCING
Increase in deferred start-up costs-DentAll Plans (238,973) -
Decrease in prepaid registration costs 34,443 -
Exercise of warrants - 758,500
Cash provided by loan 150,000 -
Increase in Common Stock 909 -
Increase in Preferred Stock Class "A" 1,000 -
Increase in additional Paid In Capital 883,844 -
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CASH PROVIDED BY FINANCING ACTIVITIES 831,223 758,500
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INCREASE (DECREASE) IN CASH 142,658 621,925
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CASH BALANCE OCTOBER 1, 1997 AND 1996 559,272 2,087
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CASH BALANCE JUNE 30, 1996 AND 1997 701,930 $ 624,012
========= =========
SUPPLEMENTARY INFORMATION
Land and building valued at $1,250,000 was exchanged for 250,000 shares of Class
"C" preferred stock, during the nine months ended June 30, 1997.
Interest in the amount of $6,028 was paid during the period ended June 30, 1997.
Page 6 of 12
DENTAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
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.
Income
- ------
In January, 1997, the Company modified its reporting of gross income to reflect
the management agreement between the Independent Professional Associations and
the Company. Under that agreement a percentage of the fees received at the
offices are turned over to the Company for management of those offices. The
figures for the three month and nine month periods ended June 30, 1997 reflect
this accounting method. The figures reported previously for the three months
ended December 31, 1996 reflect the prior method. This change does not affect
the net income or losses reported.
Discontinued offices
- --------------------
See "Management's Discussion and Analysis" for comments on results of closing
certain offices during the first quarter of 1997.
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. At this time accounts receivable primarily represents the amounts
due from Medicaid. An allowance for doubtful accounts is reflected in the
accounts receivable net figure.
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.
Page 7 of 12
DENTAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
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 7,928,377 and 6,628,750 at June 30,1997 at June 30,1996,
respectively.
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 a taxable loss of
approximately $275,000. This loss may be carried forward to offset future
taxable income, for a period of fifteen years.
Additional losses have been incurred through the nine months ended June 30,1997,
which will increase the loss carry forward.
NOTE 2. LEASES
The Company leases office facilities under operating leases, which expire over
the next 2 years. Most of these leases provide for renewals for a like period
of time.
Minimum payments for these leases having initial or remaining non-cancelable
terms in excess of one year are as follows:
Year ended: June 30, 1997 $59,773
June 30, 1998 19,303
June 30, 1999 2,654
Rental expense for the year ended September 30, 1996 was $143,043.
NOTE 3. FURNITURE AND EQUIPMENT
Furniture and equipment less accumulated depreciation as of June 30, 1997 are as
follows:
Estimated
June Life
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Equipment $132,636 5 years
Furniture 7,570 7 years
Leasehold improvements 19,877 31 years
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$160,083
========
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 additional paid-in capital.
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.
Page 8 of 12
DENTAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
The Company also borrowed $150,000 from a private lender. Interest is paid
monthly at the rate of 12% per annum.
NOTE 5. COMMITMENTS AND CONTINGENCIES
The Company had entered into employment contracts with certain of its officers.
Pursuant to these employment agreements, Mr. Paulo Dominguez and Mr. Paul
Rothman will receive approximately $68,741 in severance over the next five
months.
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 738,800 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.
NOTE 7. RETURN OF COMMON STOCK
Shares totaling approximately 1,600,000 will be returned to the Company in
connection with the acquisition of Dental Plan Administrators, Inc.
Page 9 of 12
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 June 30, 1996 consisted entirely of
interest income. Total revenues, for the quarter ended June 30, 1997 was
derived, almost totally, from the Management Fee Income from the Company's
dental clinics and portable operation. 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. The Company closed several offices
during the first quarter: the results of these offices have been reported
separately. Revenues for continuing offices only, and other operations, for the
quarter ended June 30, 1997 were $210,029, and the expenses for all operations
for that period were $282,150. This resulted in a loss from operations of
$72,121 before other income and expenses, from continuing operations.
Total revenues for the nine months ended June 30, 1996 consisted entirely of
interest income. Total revenues for the nine months ended June 30, 1997 was
derived almost totally from the Management Fee Income from the Company's dental
clinics and portable operations. 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. The Company closed several offices during
the first quarter; the results of these offices have been reported separately.
Revenues for continuing offices and other operations for the nine months ended
June 30, 1997 were $479,133 and the expenses for these operations were $524,301.
This resulted in a loss from operations of $45,168 before other income and
expense, from continuing operations. In addition, the Company sustained a loss
of $132,380 from offices closed during the period.
The Company continues to incur losses from operations. The Company's remaining
dental operations consist of two clinics and one portable unit, which should
breakeven during the next quarter. None of the Company's clinics has been in
operation for longer than 15 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 additional losses in
clinical operations.
As the Clinics mature and if their profitability increases, the clinical
operations should be profitable. Management intends to identify and acquire
existing profitable practices that will allow immediate improvements to the
profitability of the clinical operations. The company is presently negotiating
the acquisition of several dental clinics.
The Company's subsidiary, DentAll Plans of Florida, Inc. was granted a license
by the State of Florida to operate a dental health maintenance organization on
April 1, 1997. Management believes, that significant revenue will be derived
from utilizing the Company's clinics to service the plans' patients.
As the Company proceeded through the license period in regards to its
application with the State of Florida for a Dental Health Maintenance
Organization, it has incurred significant costs without any related revenue. As
DentAll begins marketing to future members and prior to the time of those
members joining the plan, significant outflows will occur. As of June 30, 1997
these costs summed to $238,973. These costs will be amortized over a three year
period beginning July 1, 1997, the date that DentAll Plans of Florida, Inc.
begins operations.
Page 10 of 12
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's cash on hand was $701,930 and $559,272 at June 30, 1997, and
September 30, 1996, respectively. Working capital, including cash on hand was
$564,873 and $597,565 at June 30, 1997 and September 30, 1996, respectively,
representing a decrease of $32,692 from September 30, 1996 to June 30, 1997. At
June 30, 1997, the Company has $103,500 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 exercised their warrants in the first quarter
of 1997. (The Company has called the "A" Warrants effective May 1, 1997) Should
these and other warrant holders continue to 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.
CHANGES IN MANAGEMENT
Effective June 23/rd/, 1997 Dr. Luis Cruz joined Dental Services of America,
Inc. as its President and Chief Executive Officer. Dr. Cruz invested $495,000
in cash and sold the corporation an office building and land valued at
$1,250,000 in exchange for stock. The Company will move its headquarters to
this building effective October 1, 1997. Dr. Cruz brings to the company his
previous success in the managed health care industry as well as a respected team
of individuals who have replaced the company's previous management. The new
management team intends to acquire high volume, profitable dental clinics with a
solid financial history. In addition, management believes that strong
investments in marketing and a competitive product will make DentAll Plans of
FL., Inc. a successful and profitable operation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS
The following financial statements of the Company are included in this
report:
1. Balance Sheet as of June 30, 1997 and September 30, 1996
2. Statement of Operations for the three months ended June 30, 1997
and 1996
3. Statement of Operations for the six months ended June 30, 1997 and
1996
4. Statement of Stockholders Equity for the year and nine months
ended June 30, 1997
5. Statement of Cash Flows for the six months ended June 30, 1997 and
1996; and
6. Notes to Financial Statements.
FORM 8-K
Form 8-K was filed on July 9, 1997 relating to the acquisition by Dr. Luis
Cruz on July 22, 1997 during the quarter for which this report is filed.
Page 11 of 12
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 12/th/ day of August, 1997.
DENTAL SERVICES OF AMERICA, INC.
By: /s/ Dr. Luis Cruz
----------------------------------
Dr. Luis Cruz
President, Principal Officer,
Financial Officer
By: /s/ Maria Suarez
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Maria Suarez
Director
Page 12 of 12