Business Context and Reporting Period
This Form 10-QSB covers the quarterly period ended September 30, 2006, for Orthodontix, Inc. (the "Company"). The Company is a shell company that terminated its affiliation with its founding orthodontic practices in 2001. It currently has no operating revenues and is focused exclusively on consummating a business combination. On August 21, 2006, the Company entered into a definitive merger agreement with Protalix Ltd., an Israeli biotechnology company. Upon completion, the Company will change its name to Protalix Biotherapeutics, Inc.
Key Financial Metrics
| Metric | Three Months Ended Sep 30, 2006 | Nine Months Ended Sep 30, 2006 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(106,707) | $(89,056) |
| Net Loss Per Share | $(0.02) | $(0.02) |
| General & Administrative Expenses | $117,620 | $164,843 |
| Interest and Other Income | $10,913 | $75,787 |
| Cash and Cash Equivalents (Sep 30, 2006) | $825,702 | |
| Total Liabilities (Sep 30, 2006) | $12,150 | |
| Accumulated Deficit (Sep 30, 2006) | $(3,901,738) |
Liquidity: The Company reported net cash used in operating activities of $159,536 for the nine months ended September 30, 2006. Management believes current cash reserves are sufficient to fund operations for at least the next twelve months.
Material Changes vs. Prior Period
- Expense Increase: General and administrative expenses for the quarter increased significantly to $117,620 from $35,885 in the same period in 2005. This increase is primarily attributable to costs associated with the proposed merger with Protalix Ltd.
- Other Income: For the nine months ended September 30, 2006, the Company recorded $48,000 in "Other Income" resulting from the reversal of an income tax accrual from 2004. This contributed to a lower net loss for the nine-month period compared to the three-month period.
- Share Count: The weighted average number of shares outstanding increased to 5,830,856 for the 2006 periods, compared to 2,915,428 in 2005, following a June 2006 board approval to increase authorized shares.
Outlook, Risks, and Management Commentary
- Merger Status: The merger with Protalix Ltd. is expected to occur in the fourth quarter of 2006. It is subject to customary covenants and approval by Israeli authorities. Post-merger, Orthodontix shareholders will own approximately 0.84% of the combined entity.
- Future Operations: The Company does not expect to generate operating revenues or net income until a business combination is effected. There are no assurances that the combined operation will be profitable.
- Risks: Key risks include the failure to consummate the merger, the inability to manage the combined business successfully, and the concentration of cash deposits ($725,702) exceeding federally insured limits.
- Controls: Management concluded that disclosure controls and procedures were effective as of September 30, 2006, with no significant changes in internal controls.
Investor Verification Checklist
- Verify the status of the merger agreement with Protalix Ltd. and any regulatory approvals received since the filing date.
- Confirm the expected timeline for the name change to Protalix Biotherapeutics, Inc. and the listing on the American Stock Exchange.
- Review the specific terms of the merger to understand the 0.84% ownership stake for existing Orthodontix shareholders.
- Monitor cash burn rates to ensure the $825,702 cash balance remains sufficient if the merger is delayed beyond the projected twelve-month runway.