Apple Orthodontix Inc – ‘S-3’ on 9/14/98

As of:  Monday, 9/14/98   ·   Accession #:  890566-98-1578   ·   File #:  333-63365

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Registration Statement for Securities Offered Pursuant to a Transaction   —   Form S-3
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-3         Registration Statement for Securities Offered         21    131K 
                          Pursuant to a Transaction                              
 2: EX-5.1      Opinion re: Legality                                   2      8K 
 3: EX-23.1     Consent of Experts or Counsel                          1      4K 

S-3   —   Registration Statement for Securities Offered Pursuant to a Transaction
Document Table of Contents

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 14, 1998
                                               REGISTRATION NO. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________

FORM S-3

REGISTRATION STATEMENT
 UNDER
THE SECURITIES ACT OF 1933
______________________

 APPLE ORTHODONTIX, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                                                        [Enlarge/Download Table]

                                                                                     

           DELAWARE                          8021                   74-2795193       
(STATE OR OTHER JURISDICTION OF  (PRIMARY STANDARD INDUSTRIAL    (I.R.S. EMPLOYER    
INCORPORATION OR ORGANIZATION)    CLASSIFICATION CODE NUMBER)  IDENTIFICATION NUMBER)

______________________

APPLE ORTHODONTIX, INC.                W. DANIEL COOK               
2777 ALLEN PARKWAY, SUITE 700         APPLE ORTHODONTIX, INC.             
HOUSTON, TEXAS 77019           2777 ALLEN PARKWAY, SUITE 700      
(713) 852-2500                  HOUSTON, TEXAS 77019        
(ADDRESS, INCLUDING ZIP CODE, AND           (713) 852-2504                    
TELEPHONE NUMBER,          (NAME AND ADDRESS, INCLUDING ZIP   
INCLUDING AREA CODE, OF              CODE, AND TELEPHONE            
REGISTRANT'S PRINCIPAL EXECUTIVE    NUMBER, INCLUDING AREA CODE, OF           
OFFICES)                      AGENT FOR SERVICE)      

------------------------

COPIES TO:

RICHARD S. ROTH 
JACKSON WALKER L.L.P. 
1100 LOUISIANA
SUITE 4200
HOUSTON, TEXAS 77002
_______________________ 

     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.                
_______________________ 

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following 
box: [ ]                                                                        

     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of  
1933, check the following box. [X]                                              

 If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier        
effective registration statement for the same offering, other than securities   
offered only in connection with dividend or interest reinvestment plans. [ ]    

  If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act   
registration statement number of the earlier effective registration statement   
for the same offering. [ ]                                                      

    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]                                             

                                                        [Enlarge/Download Table]


                        CALCULATION OF REGISTRATION FEE                                                  
=========================================================================================================
                                                                                                         
                                                    PROPOSED            PROPOSED                         
 TITLE OF EACH CLASS OF                             MAXIMUM             MAXIMUM                          
    SECURITIES TO BE          AMOUNT TO BE       OFFERING PRICE        AGGREGATE           AMOUNT OF     
       REGISTERED              REGISTERED         PER SHARE(1)     OFFERING PRICE(1)    REGISTRATION FEE 
_________________________________________________________________________________________________________
Class A Common Stock,                                                                                    
  $.001 par value........      1,340,087            $2.9375            $3,936,506            $1,162      
=========================================================================================================

(1) Estimated solely for the purpose of calculating the registration fee        
   pursuant to Rule 457(c) under the Securities Act of 1933 and based upon the
 average of the high and low prices of the Common Stock as reported on the
American Stock Exchange on September 10, 1998.                          
_______________________ 

  THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION       
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF  
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME     
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), 
MAY DETERMINE.                                                                  

================================================================================

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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A           
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE     
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY    
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES  
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE         
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES 
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR  
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.   

SUBJECT TO COMPLETION, DATED SEPTEMBER 14, 1998 

PROSPECTUS                                                                      

1,340,087 SHARES
[LOGO]
CLASS A COMMON STOCK
 _______________________

This Prospectus relates to 1,340,087 shares (the "Shares") of Class A 
Common Stock ("Common Stock") of Apple Orthodontix, Inc. ("Apple" or the        
"Company"). The Shares may be offered for sale or otherwise transferred from    
time to time by the stockholders of Apple named herein (the "Selling            
Stockholders") in transactions (which may include block transactions) on the    
American Stock Exchange, in the over-the-counter market, in negotiated          
transactions or otherwise, at fixed prices, which may be changed, at market     
prices prevailing at the time of sale, at negotiated prices, without            
consideration, or by any other legally available means. The Selling Stockholders
may offer the Shares to third parties (including purchasers) directly or by or  
through brokers, dealers, agents or underwriters who may receive compensation in
the form of discounts, concessions, commissions or otherwise. The Selling       
Stockholders and any brokers, dealers, agents or underwriters that participate  
in the distribution of the Shares may be deemed to be "underwriters" within the 
meaning of the Securities Act of 1933, as amended (the "Securities Act"), in    
which event any discounts, concessions and commissions received by any such     
brokers, dealers, agents or underwriters and any profit on resale of the Shares 
purchased by them may be deemed to be underwriting commissions, concessions or  
discounts under the Securities Act. The aggregate net proceeds to the Selling   
Stockholders from the sale of the Shares will equal the purchase price of such  
Shares less any discounts, concessions or commissions. See "Plan of             
Distribution." The Company will not receive any proceeds from the sale of the   
Shares by the Selling Stockholders. The Company will pay all expenses incurred  
in connection with the offering contemplated hereby (the "Offering"), other than
underwriting discounts and selling concessions or commissions, if any, and fees 
and expenses of counsel for the Selling Stockholders.                           

     All of the shares of Common Stock that may be offered hereby were issued or
may be issued to the Selling Stockholders by the Company in connection with the 
Company's acquisition of certain assets from, and its affiliation in 1997 with, 
orthodontic practices in Alberta, British Columbia and Ontario, Canada. All of  
the Shares are or, upon issuance, will be "restricted securities" under the     
Securities Act prior to their sale hereunder. This Prospectus has been prepared 
for the purpose of registering the Shares under the Securities Act to enable the
Selling Stockholders to make future sales to the public without restriction. See
"Selling Stockholders."                                                         

    The Common Stock is listed on the American Stock Exchange under the symbol
"AOI." On September 11, 1998, the last reported sales price for the Common Stock
as reported on the American Stock Exchange was $3.0625 per share. The Common    
Stock is entitled to one vote per share while the Company's Class B Common Stock
(the "Class B Stock") is entitled to three-tenths (3/10ths) of a vote per share.

_______________________ 

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. 
SEE "RISK FACTORS" COMMENCING ON PAGE 6.  
_______________________ 

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
 HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
 SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
 ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is September   , 1998.

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 AVAILABLE INFORMATION

    The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance       
therewith, files reports, proxy statements and other information with the       
Commission. Such reports, proxy statements and other information may be         
inspected without charge at the Public Reference Section of the Commission at   
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and 
at the following regional offices of the Commission: Citicorp Center, 500 West  
Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center,  
13th Floor, New York, New York 10048. Copies can also be obtained from the      
Commission at prescribed rates. The Commission maintains a Web site             
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the       
Commission. The Common Stock is listed on the American Stock Exchange. The      
Company's reports, proxy statements and other information are available for     
inspection at the offices of the American Stock Exchange, Inc., 86 Trinity      
Place, New York, New York 10006-1881.                                           

    The Company has filed with the Commission a Registration Statement on Form
S-3 with respect to the Common Stock offered hereby. This Prospectus, filed as  
part of the Registration Statement, does not contain all the information        
contained in the Registration Statement, certain portions of which have been    
omitted in accordance with the rules and regulations of the Commission. For     
further information with respect to the Company and the Common Stock offered    
hereby, reference is made to the Registration Statement, including the exhibits 
and schedules thereto. Statements contained in this Prospectus as to the        
contents of any contract or other document filed as an exhibit to the           
Registration Statement are qualified in their entirety by reference to such     
exhibits for complete statements of their provisions. All of these documents may
be inspected without charge at the Commission's offices or copied at prescribed 
rates.                                                                          

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 

   The following documents filed by the Company with the Commission pursuant
to the Exchange Act are incorporated in this Prospectus by reference and are    
made a part hereof:                                                             

         1.  Annual Report on Form 10-K for the fiscal year ended December 31,
1997 and Amendments No. 1 and No. 2 thereto (the "Company 10-K");     

        2. the portions of the Company's Proxy Statement for its 1998 Annual
   Meeting of Stockholders held on July 27, 1998 that have been incorporated
by reference into the Company 10-K;                                   

3. Current Report on Form 8-K, filed on February 24, 1998;  

         4. Quarterly Reports on Form 10-Q for the fiscal quarters ended March
31, 1998 and June 30, 1998; and                                       

   5. the description of the Common Stock that is contained in the
Registration Statement on Form 8-A filed on May 12, 1997 pursuant to  
Section 12 of the Exchange Act.                                       

     All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the    
termination of the Offering shall be deemed to be incorporated by reference     
herein and to be a part hereof from the date of filing of such documents. Any   
statement contained herein or in any document incorporated or deemed to be      
incorporated by reference herein shall be deemed to be modified or superseded   
for the purposes of this Prospectus to the extent that a statement contained    
herein or in any other subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any  
such statement so modified or superseded shall not be deemed to constitute a    
part of this Prospectus, expect as so modified or superseded. The Company will  
provide without charge to each person, including any beneficial owner, to whom a
copy of this Prospectus is delivered, upon written or oral request of such      
person, a copy of any or all of the information that has been incorporated by   
reference in this Prospectus (excluding exhibits to such information which are  
not specifically incorporated by reference into such information). Requests for 
such information should be directed to Apple Orthodontix, Inc., 2777 Allen      
Parkway, Suite 700, Houston, Texas 77019, Attention: Investor Relations,        
Telephone (713) 852-2500.                                                       

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PROSPECTUS SUMMARY

     UNLESS OTHERWISE INDICATED BY THE CONTEXT, REFERENCES HEREIN TO (I) "APPLE"
OR THE "COMPANY" MEAN APPLE ORTHODONTIX, INC. TOGETHER WITH ITS SUBSIDIARIES,   
(II) "AFFILIATED PRACTICES" MEAN THE ORTHODONTIC PRACTICES WITH WHICH THE       
COMPANY HAS AFFILIATED AND THOSE, IF ANY, WITH WHICH THE COMPANY AFFILIATES IN  
THE FUTURE, (III) "NEW CASE STARTS" MEAN THE NUMBER OF NEW PATIENTS BEGINNING   
TREATMENT DURING A PERIOD OF TIME AND (IV) "CASE ACCEPTANCE RATE" MEAN, FOR ANY 
SPECIFIED PERIOD OF TIME, THE PERCENTAGE OF POTENTIAL PATIENTS WHO UNDERGO AN   
INITIAL EXAMINATION AT AN ORTHODONTIC PRACTICE WHO IN FACT ELECT TO BEGIN       
TREATMENT WITH SUCH EXAMINING ORTHODONTIST.                                     

 THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING    
ELSEWHERE IN THIS PROSPECTUS. AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY  
INVOLVES A HIGH DEGREE OF RISK, AND INVESTORS SHOULD CAREFULLY CONSIDER THE     
INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS."                         

THE COMPANY 

    Apple is a leading provider of practice management services (which exclude
the management and delivery of orthodontic services) to orthodontic practices in
the United States and Canada. The Company offers its Affiliated Practices a full
range of such services designed to facilitate the delivery of high-quality,     
affordable orthodontic treatment to consumers. The Company's Affiliated         
Practices benefit from a sophisticated, Company-developed practice operating    
approach designed to (i) stimulate demand in their local markets by increasing  
consumer awareness of the benefits, availability and affordability of           
orthodontic treatment, (ii) improve the productivity and profitability of their 
practices and (iii) leverage the benefits of orthodontist affiliation by        
providing basic services that include clinical and financial information        
management, access to capital and sophisticated technology, group purchasing and
comprehensive marketing techniques.                                             

    The Company seeks to grow through affiliations with additional orthodontic
practices and the development of new offices that complement geographic areas   
served by Affiliated Practices. The Company earns revenue by providing          
management, administrative, development and other services to its Affiliated    
Practices. As of August 12, 1998, the Company provided management services to 66
orthodontic practices representing 90 orthodontists operating in 19 states in   
the United States and 3 provinces in Canada.                                    

  The orthodontic services industry is highly fragmented, with over 90% of
the approximately 9,000 orthodontists in the United States operating as sole    
practitioners and approximately 3% being affiliated with public orthodontic     
practice management companies. The industry currently generates approximately   
$3.5 billion in annual gross revenues, which have grown steadily at an average  
rate of 7.5% per year in recent years. Seventy percent of orthodontic services  
are performed on a private pay, fee-for-service basis, 25% are covered by       
traditional dental insurance (generally with a 50% or greater copayment by the  
patient) and less than 5% are reimbursed from managed care payor sources because
of the elective nature of the service. Management believes that the potential   
market for orthodontic services could be significantly increased based on       
growing acceptance among adult consumers and industry data that indicate that   
only one out of five children who could benefit from orthodontics receives      
treatment. According to the most recent statistics available from studies by the
Journal of Clinical Orthodontists, the median orthodontic practice in the United
States generated $518,800 in revenues and started 180 new cases in 1996 and     
experienced a case acceptance rate of 60% in 1994. The traditional orthodontic  
practice relies primarily on referrals from general dentists and less than 8% of
practices utilize sophisticated marketing techniques such as commercial         
advertising.                                                                    

 Through its practice operating approach, the Company seeks to stimulate
productivity and internal growth within its Affiliated Practices. To accomplish 
this objective, the Company has developed an operating approach consisting      
primarily of (i) implementing practice-building and external marketing programs 
designed to generate new case starts through increased referrals from existing  
and former patients                                                             

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and the use of multimedia advertising to stimulate demand for treatment         
services, (ii) offering more affordable payment plans to patients to broaden the
market for orthodontic services, (iii) increasing the operating efficiency of   
the Affiliated Practices by relieving the orthodontists from various            
time-consuming administrative responsibilities and realizing economies of scale,
(iv) providing a systems-oriented approach to training and education of clinic  
personnel to improve communications with patients and prospective patients and  
increase productivity, (v) developing new offices to expand the scope of the    
geographic markets served by Affiliated Practices and (vi) utilizing a          
customized management information system to provide detailed financial and      
operating data and related analyses to Affiliated Practices and management. The 
Company believes that its approach has resulted in local market expansion,      
increased new case starts and practice profitability, greater orthodontist      
productivity and heightened patient satisfaction within its existing Affiliated 
Practices.                                                                      

The Company is pursuing an aggressive expansion program designed to   
strengthen its position in its current markets and expand its network of        
Affiliated Practices into markets it does not currently serve. The Company      
intends to expand its network of Affiliated Practices through future            
affiliations and new office development. Management believes that, because of   
the highly fragmented nature of the industry, there are numerous orthodontic    
practices that are attractive candidates to become Affiliated Practices. The    
Company focuses on candidates that have favorable reputations in their local    
markets and the desire to implement the Company's practice operating approach.  
The Company seeks to build upon the reputations and relationships of the        
orthodontists associated with the existing Affiliated Practices to identify and 
develop candidates to become future Affiliated Practices. Many of these         
orthodontists hold, or have previously held, leadership roles in various state, 
regional and national associations or are affiliated with or teach at graduate  
orthodontic programs at dental schools. The Company believes the visibility and 
reputation of these individuals, combined with the acquisition experience of    
management, provides the Company with advantages in identifying, negotiating and
consummating future affiliations.                                               

RECENT DEVELOPMENTS 

     In connection with its initial public offering (the "IPO") in May 1997, the
Company acquired substantially all the tangible and intangible assets and       
assumed certain liabilities of, and entered into agreements to provide long-term
management services to, 31 orthodontists operating in 58 offices located in 13  
states in the United States and in Alberta, Canada (the "Founding Affiliated    
Practices"). From the date of the IPO through August 12, 1998, the Company has  
affiliated with an additional 59 orthodontists, increasing the total number of  
existing Affiliated Practices to 66, which are operating in 122 offices. In     
addition to these affiliations, the Company is negotiating and will continue to 
negotiate to affiliate with additional orthodontic practices; however, although 
the Company intends to aggressively pursue these and other affiliations, there  
can be no assurance that any of such affiliations will be consummated.          

On August 12, 1998, the Company announced (i) A. Stone Douglass had   
replaced John G. Vondrak, D.D.S. as the Chief Executive Officer of the Company  
and (ii) James E. Bobbitt had replaced Michael W. Harlan as Chief Financial     
Officer of the Company. Mr. Douglass is also the President of the Company and   
has been elected to the Company's Board of Directors, which Dr. Vondrak will    
continue to serve on as Chairman of the Board.                                  

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THE OFFERING

Common Stock that may be offered for                                            
sale hereby...........................  1,340,087 shares                    
Common Stock outstanding after the                                              
Offering..............................  11,117,624 shares(1)                
Class B Stock outstanding after the                                             
Offering..............................  2,759,828 shares                    
Voting Rights...........................  Holders of Common Stock are entitled  
                                         to one vote per share and the holders
                                    of Class B Stock are entitled to
                                        three-tenths (3/10ths) of a vote per
                                      share. In addition, holders of the
                                        Class B Stock are currently entitled
                                         to elect as a class one member of the
                                          Board of Directors, and the holders of
                                          the Common Stock are entitled to elect
                                       as a class all other members of the
                                        Board of Directors. The Common Stock
                                          and the Class B Stock possess ordinary
                                        voting rights and vote together as a
                                    single class in respect of other
                                        corporate matters. The Class B Stock
                                       is convertible into Common Stock in
                          certain circumstances.
American Stock Exchange Symbol..........  AOI                                   
________                                                                        

(1) Includes the 1,340,087 shares that may be offered for sale hereby but       
   excludes (i) an aggregate of approximately 1,239,367 shares of Common Stock
 issuable upon exercise of stock options outstanding at a weighted average
exercise price of approximately $6.67 per share under Apple's 1997 Stock
  Compensation Plan (the "1997 Stock Compensation Plan"), (ii) approximately
   94,747 shares available for future awards under the 1997 Stock Compensation
   Plan and (iii) 180,000 shares of Common Stock issuable upon the exercise of
a warrant issued to an affiliate of TriCap Funding I, L.L.C. ("TriCap"),
 with an exercise price per share of $7.00, which warrant was subsequently
distributed to three investors in such affiliate, including William     
Sherrill, a director of the Company.                                    

EXCEPT WHERE OTHERWISE SPECIFIED, INDUSTRY INFORMATION USED IN THIS   
PROSPECTUS IS DERIVED FROM THE 1995 JOURNAL OF CLINICAL ORTHODONTISTS           
ORTHODONTIC PRACTICE STUDY ("1995 JCO STUDY"), A BIENNIAL STUDY, AND RELATES TO 
1994 UNLESS OTHERWISE INDICATED. PARTS I AND II OF THE 1997 JOURNAL OF CLINICAL 
ORTHODONTISTS ORTHODONTIC PRACTICE STUDY (THE "1997 JCO STUDY"), WHICH CONTAIN  
CERTAIN COMPARABLE INFORMATION FOR 1995 AND 1996, HAVE RECENTLY BECOME AVAILABLE
AND ARE CITED HEREIN AS APPROPRIATE. THE INFORMATION COMPILED IN THE 1995 JCO   
STUDY AND THE 1997 JCO STUDY RELATES TO ORTHODONTISTS WHO HAVE COMPLETED        
ACCREDITED GRADUATE ORTHODONTIC TRAINING PROGRAMS AND NEITHER THAT INFORMATION  
NOR ANY OTHER INDUSTRY INFORMATION SET FORTH IN THIS PROSPECTUS RELATES TO      
GENERAL AND SPECIALTY DENTISTS WHO ALSO PERFORM ORTHODONTIC SERVICES.           

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RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS,    
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING FACTORS IN EVALUATING THE   
COMPANY AND ITS BUSINESS BEFORE PURCHASING ANY OF THE SHARES OF THE COMMON STOCK
OFFERED HEREBY. THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS     
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.     
THESE STATEMENTS ARE BASED ON CERTAIN ASSUMPTIONS AND ANALYSES MADE BY THE      
COMPANY IN LIGHT OF ITS EXPERIENCE AND ITS PERCEPTION OF HISTORICAL TRENDS,     
CURRENT CONDITIONS, EXPECTED FUTURE DEVELOPMENTS AND OTHER FACTORS THE COMPANY  
BELIEVES ARE IMPORTANT UNDER THE CIRCUMSTANCES. SUCH STATEMENTS ARE SUBJECT TO A
NUMBER OF ASSUMPTIONS, 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 ACTIVITIES AND RESULTS TO DIFFER INCLUDE, WITHOUT LIMITATION, THOSE SET  
FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS, MANY OF WHICH ARE BEYOND THE      
CONTROL OF THE COMPANY.                                                         

LIMITED COMBINED OPERATING HISTORY                                              

The Company was incorporated in July 1996 and conducted no operations 
before its IPO in May 1997 other than in connection with the IPO and affiliation
with the Founding Affiliated Practices. Although each of the existing Affiliated
Practices operated independently before affiliation with the Company, the       
Company has a limited combined operating history. As a result, there can be no  
assurance that the process of integrating the management and administrative     
functions of the Affiliated Practices will be successful or that the Company's  
management will be able to effectively or profitably manage these operations or 
successfully implement the Company's operating or expansion strategies. Failure 
by the Company to successfully implement its operating or expansion strategies  
would have a material adverse effect on the Company's business, financial       
condition and results of operations.                                            

RELIANCE ON AFFILIATED PRACTICES AND ORTHODONTISTS                              

     The Company receives fees for services provided to the Affiliated Practices
under long-term service agreements (the "Service Agreements"). It does not      
employ orthodontists or control the practice of orthodontics by the             
orthodontists employed by the Affiliated Practices, and its services revenue    
generally depends on revenue generated by the Affiliated Practices. In some     
cases, the fees are based on the costs and expenses the Company incurs in       
connection with providing services. The profitability of the Affiliated         
Practices, as well as the performance of the individual orthodontists employed  
by the Affiliated Practices, affect the Company's profitability.                

  The revenues of the Affiliated Practices (and, therefore, the success of
the Company) are dependent on fees generated by the orthodontists employed by   
the Affiliated Practices. In connection with the Service Agreements, each       
orthodontist affiliated with an Affiliated Practice enters into an employment   
agreement, generally with a term ranging from five to seven years, with the     
professional corporation or association in which that orthodontist owns an      
equity interest (and which is a party to a Service Agreement). A substantial    
reduction in the number of orthodontists employed by or associated with the     
Affiliated Practices could have a material adverse effect on the financial      
performance of the Company. The ability of the Affiliated Practices to replace  
existing orthodontists by attracting new orthodontists may be constrained by the
limited number of new orthodontists completing post-graduate orthodontic        
programs each year. In addition, a shortage of available orthodontists with the 
skills and experience sought by the Company would have a material adverse effect
on the Company's expansion opportunities. Failure by the Affiliated Practices to
employ a sufficient number of orthodontists (whether by renewals of existing    
employment agreements or otherwise) would have a material adverse effect on the 
Company's business, financial condition and results of operations.              

RISKS ASSOCIATED WITH EXPANSION STRATEGY                                        

The success of the Company's expansion strategy depends on a number of
factors, including the Company's ability to (i) identify attractive candidates  
to become Affiliated Practices, (ii) affiliate with Affiliated Practices on     
favorable terms, (iii) adapt the Company's structure to comply with present or  
future                                                                          

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legal requirements affecting the Company's arrangements with Affiliated         
Practices and comply with regulatory and licensing requirements applicable to   
orthodontists and facilities operated and services offered by orthodontists,    
(iv) expand the Company's infrastructure and management to accommodate expansion
and (v) obtain suitable financing to facilitate its expansion program.          
Identifying candidates to become Affiliated Practices and proposing, negotiating
and implementing advantageous affiliations with such groups can be a lengthy,   
complex and costly process. There can be no assurance that the Company's        
expansion strategy will be successful, that modifications to the Company's      
strategy will not be required, that the Company will be able to provide services
effectively and enhance the profitability of additional Affiliated Practices or 
that the Company will be able to obtain adequate financing on reasonable terms  
to support its expansion program. Furthermore, using shares of Common Stock as  
consideration for (or in order to provide financing for) future affiliations    
could result in significant dilution to then-existing stockholders. In addition,
future affiliations accounted for as purchases may result in substantial noncash
amortization charges for intangible assets in the Company's statements of       
operations.                                                                     

COMPETITION                                                                     

     The Company faces substantial competition from other companies to establish
affiliations with additional orthodontic practices. The Company is aware of a   
number of other public and private practice management companies focused on     
orthodontics, as well as several companies pursuing similar strategies in       
dentistry and other segments of the health care industry. The Company is aware  
that general dental practice management companies have, or intend to, provide   
orthodontic services and seek to affiliate with or employ orthodontists. Certain
of these competitors have greater financial and other resources than the        
Company. Additional companies with similar objectives may enter the Company's   
markets and compete with the Company. In addition, the business of providing    
orthodontic services is highly competitive in each market in which the Company  
operates. The Affiliated Practices face local competition from other            
orthodontists, general dentists and pedodontists (dentists specializing in the  
care of children's teeth), some of whom have more established practices.        
Dentists are not restricted by law or any governmental authority from providing 
orthodontic services. Management believes the increase in recent years in       
dentists providing orthodontic services has limited the growth of patient case  
starts performed by orthodontists. There can be no assurance that the Company or
the Affiliated Practices will be able to compete effectively, that additional   
competitors will not enter their markets or that additional competition will not
have a material adverse effect on the Company.                                  

GOVERNMENT REGULATION                                                           

Various U.S. federal and state laws as well as Canadian laws prohibit 
business corporations such as the Company from engaging in the practice of      
orthodontics or employing orthodontists to practice orthodontics and prohibit   
orthodontists from splitting fees with non-orthodontists, as well as certain    
other activities. The specific restrictions against the corporate practice of   
orthodontics, as well as the interpretation of those restrictions by state      
regulatory authorities, vary from jurisdiction to jurisdiction. The restrictions
are generally designed to prohibit an entity not wholly owned by orthodontists  
(such as the Company) from controlling the professional assets of an orthodontic
practice (such as patient records and payor contracts), employing orthodontists 
to practice orthodontics (or, in certain states, employing dental hygienists or 
orthodontic assistants), or controlling the content of an orthodontist's        
advertising or professional practice. Apple does not acquire any professional   
assets or employ any orthodontists who provide orthodontic services at any of   
the Affiliated Practices' locations. The laws of many jurisdictions also        
prohibit orthodontists from sharing professional fees with non-orthodontic      
entities. Dental boards do not generally interpret these prohibitions as        
preventing a non-orthodontic entity from owning non-professional assets used by 
an orthodontist in an orthodontic practice or providing management services to  
an orthodontist for a fee, provided certain conditions are met. There can be no 
assurance that a review of the Company's business relationships by courts or    
regulatory authorities will not result in determinations that could prohibit or 
otherwise adversely affect the operations of the Company or that the regulatory 
environment will not change, requiring the Company to reorganize or restrict its
existing or future operations. The laws regarding fee-splitting and the         
corporate practice of orthodontics and their interpretation are enforced by     
regulatory                                                                      

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authorities that have broad discretion. There can be no assurance that the      
legality of the Company's business or its relationship with the Affiliated      
Practices will not be successfully challenged or that the enforceability of the 
provisions of any Service Agreement will not be limited.                        

EXTENT OF PROTECTION OF PROPRIETARY RIGHTS                                      

     Apple relies in part on trademark, service mark, trade dress, trade secret,
unfair competition and copyright laws to protect its intellectual property      
rights. There can be no assurance that actions taken by the Company will be     
adequate to protect its intellectual property rights from misappropriation by   
others, that the Company's proprietary information will not become known to     
competitors, that others will not independently develop substantially equivalent
or better intellectual properties that do not infringe on the Company's         
intellectual property rights or that others will not assert rights in, and      
ownership of, proprietary rights of the Company. Furthermore, the Company's     
rights to its "APPLE ORTHODONTIX" common law service mark may be limited in     
market areas where a similar trademark or service mark may already be in use.   
The Company has not applied for or obtained any registrations of its trademarks 
or service marks. The Company is aware of several other businesses that utilize 
an "APPLE" service mark in connection with the provision of general dental      
services, some of which have obtained federal or state trademark registrations. 
The Company is aware of one other orthodontic practice in the United States that
utilizes a service mark similar to the Company's, which practice is not located 
in a market where any of the existing Affiliated Practices' offices are located.

DEPENDENCE ON KEY PERSONNEL                                                     

The Company's future performance depends in significant part on the   
continued service of its senior management and other key personnel. There can be
no assurance that the Company's senior management and other key employees will  
continue to work for the Company. Loss of services of those employees could have
a material adverse effect on the Company's business, results of operations and  
financial condition. The success of the Company's growth strategy also depends  
on the Company's ability to attract and retain additional high-quality          
personnel.                                                                      

RISK OF PROVIDING ORTHODONTIC SERVICES; ADEQUACY OF INSURANCE COVERAGE          

     The Affiliated Practices provide orthodontic services to the public and are
exposed to the risks of professional liability and other claims. Such claims, if
successful, could result in substantial damage awards to the claimants that may 
exceed the limits of any applicable insurance coverage. Although the Company    
does not control the practice of orthodontics by the Affiliated Practices, it   
could be asserted that the Company should be held liable for malpractice of an  
orthodontist employed by an Affiliated Practice. Each Affiliated Practice has   
undertaken to comply with all applicable regulations and legal requirements, and
the Company maintains liability insurance for itself and is named as an         
additional insured party on the liability insurance policies of the Affiliated  
Practices. The existing Affiliated Practices maintain comprehensive professional
liability insurance, generally with limits of not less than $1.0 million per    
claim and with aggregate policy limits of not less than $3.0 million per        
orthodontist. The Company expects that it will require future Affiliated        
Practices to maintain comparable insurance coverage. In the event an Affiliated 
Practice employs more than one orthodontist, that practice will maintain        
insurance with a separate limit for claims against that practice in an amount   
acceptable to Apple. There can be no assurance that a future claim or claims    
will not be successful or, if successful, will not exceed the limits of         
available insurance coverage or that such coverage will continue to be available
at acceptable costs.                                                            

POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK    

The market price of the Common Stock of the Company could be adversely
affected by the sale of substantial amounts of the Common Stock in the public   
market. The shares being sold in the Offering will be freely tradable unless    
acquired by affiliates of the Company.                                          

Concurrently with the closing of its IPO in May 1997, the orthodontist
owners of the Founding Affiliated Practices received, in the aggregate,         
3,682,554 shares of Common Stock as a portion of the                            

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consideration for the purchase by the Company of the assets of their practices. 
As of August 13, 1998, certain other stockholders of the Company held, in the   
aggregate, an additional 2,759,828 shares of Class B Stock. None of the         
foregoing shares was acquired in a transaction registered under the Securities  
Act of 1933, as amended (the "Securities Act"), and, accordingly, such shares   
may not be sold except in transactions registered under the Securities Act or   
pursuant to an exemption from registration. Such shares are eligible for resale 
in accordance with Rule 144 under the Securities Act, subject to the applicable 
volume limitations and other requirements of Rule 144.                          

   In June 1997, the Company registered 2,000,000 shares of Common Stock for
use by the Company as all or a portion of the consideration to be paid in future
affiliation transactions. As of August 13, 1998, approximately 1,433,917 of     
these shares had been issued to the orthodontist owners of the Company's new    
Affiliated Practices. These shares are, and the remaining approximately 566,083 
of these shares will be, generally freely tradeable upon issuance; however, each
party that has received these shares of Common Stock has contractually agreed   
with the Company not to sell any of such shares for a period of one year from   
receipt. The Company anticipates that the agreements entered into the connection
with future affiliations will contractually restrict the resale of all or a     
portion of the shares issued in these transactions for varying periods of time. 

 Between May 29, 1997 and December 31, 1997, the Company affiliated with
several practices in Canada. For Canadian legal reasons, the stock issued to the
owners of those practices (which was not registered under the Securities Act)   
was of a Canadian subsidiary of the Company, rather than of the Company itself. 
Under certain circumstances, the subsidiary stock is exchangeable by the holders
for an aggregate of 1,340,087 shares of Common Stock, which are contractually   
restricted for one year from the date of issuance of the subsidiary stock. Such 
shares of Common Stock would not be permitted to be sold without registration   
under the Securities Act or an applicable exemption therefrom; however, the     
Company has filed the Registration Statement of which this Prospectus           
constitutes a part for the resale of such shares of Common Stock. Pursuant to   
this Prospectus, the holders will be permitted to sell such shares of Common    
Stock without restriction.                                                      

   As of September 1, 1998, the Company had outstanding under the 1997 Stock
Compensation Plan options to purchase approximately 1,239,367 shares of Common  
Stock. In October 1997, the Company filed a registration statement on Form S-8  
to register 980,000 shares issuable in connection with awards under the 1997    
Stock Compensation Plan.                                                        

NEED FOR ADDITIONAL FINANCING                                                   

  The Company's expansion strategy requires substantial capital resources.
Capital is needed not only for the affiliation with future Affiliated Practices,
but for the effective integration, operation and expansion of the existing and  
future Affiliated Practices. In addition, the Affiliated Practices may from time
to time require capital for renovation and expansion and for the addition of    
equipment and technology. The Service Agreements provide for loans by the       
Company to Affiliated Practices under various circumstances. Such loans         
generally bear interest at prime plus one percent and are to be repaid over     
varying periods of time not to exceed five years. The extent to which the       
Company is able or willing to use shares of Common Stock to enter into future   
affiliations or provide future financing will depend on the market value of the 
Common Stock from time to time and, in the case of affiliations, the willingness
of owners of potential Affiliated Practices to accept Common Stock as full or   
partial payment of consideration for affiliations. Using shares of Common Stock 
for these purposes may result in significant dilution to then-existing          
stockholders. The Company will require additional capital from outside financing
sources in order to continue its expansion program. There can be no assurance   
that the Company will be able to obtain additional funds when needed on         
satisfactory terms or at all. Any limitation on the Company's ability to obtain 
additional financing could have a material adverse effect on the Company's      
business, financial condition and results of operations.                        

FLUCTUATIONS IN OPERATING RESULTS                                               

The Company's results of operations may fluctuate significantly from  
quarter to quarter or year to year. Results may fluctuate due to a number of    
factors, including the timing of future affiliations and new                    

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office openings, seasonal fluctuations in the demand for orthodontic services   
and competitive factors. Accordingly, quarterly comparisons of the Company's    
revenues and operating results should not be relied on as an indication of      
future performance, and the results of any quarterly period may not be          
indicative of results to be expected for a full year.                           

POSSIBLE VOLATILITY OF STOCK PRICE                                              

 The securities markets have, from time to time, experienced significant
price and volume fluctuations that may be unrelated to the operating performance
of particular companies. These fluctuations often substantially affect the      
market price of a company's common stock. The market prices for securities of   
physician practice management companies have been, and can in the future be     
expected to be, particularly volatile. The market price of the Common Stock may 
be subject to volatility from quarter to quarter depending on announcements     
regarding the Affiliated Practices and the Company's ability to open new        
offices, affiliations by the Company or its competitors, government relations,  
developments or disputes concerning proprietary rights, changes in health care  
policy in the United States and Canada, the issuance of stock market analyst    
reports and recommendations, and economic and other external factors beyond the 
control of the Company, as well as operating results of the Company and         
fluctuations in the Company's financial results.                                

CERTAIN ANTI-TAKEOVER PROVISIONS                                                

   Certain provisions of the Company's Restated Certificate of Incorporation
(the "Restated Certificate of Incorporation") and Bylaws and of Delaware        
corporation law could, together or separately, discourage potential acquisition 
proposals, delay or prevent a change in control of the Company or limit the     
price that certain investors might be willing to pay in the future for shares of
Common Stock. The Restated Certificate of Incorporation provides for "blank     
check" preferred stock, which may be issued without stockholder approval,       
provides for a "staggered" Board of Directors and provides that stockholders may
act only at an annual or special meeting of stockholders and may not act by     
written consent. In addition, certain provisions of the Company's Bylaws        
restrict the right of the stockholders to call a special meeting of             
stockholders, to nominate directors, to submit proposals to be considered at    
stockholders' meetings and to adopt amendments to the Bylaws. The Company also  
is subject to Section 203 of the Delaware General Corporation Law, which,       
subject to certain exceptions, prohibits a Delaware corporation from engaging in
any of a broad range of business acquisitions with an "interested stockholder"  
for a period of three years following the date such stockholder became an       
interested stockholder.                                                         

ABSENCE OF DIVIDENDS                                                            

The Company has never paid any cash dividends and does not anticipate 
paying cash dividends on its Common Stock or Class B Stock in the foreseeable   
future. In addition, the Company's existing credit facility prohibits the       
payment of dividends.                                                           

THE COMPANY 

    Apple is a leading provider of practice management services (which exclude
the management and delivery of orthodontic services) to orthodontic practices in
the United States and Canada. The Company offers its Affiliated Practices a full
range of such services to facilitate the efficient and productive delivery of   
high-quality, affordable orthodontic treatment to consumers. As of August 12,   
1998, the Company provided services to 66 orthodontic practices representing 90 
orthodontists in 19 states in the United States and 3 provinces in Canada.      

The Company's principal executive offices are located at 2777 Allen   
Parkway, Suite 700, Houston, Texas 77019, and its telephone number is (713)     
852-2500.                                                                       

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RECENT DEVELOPMENTS 

    In connection with its IPO in May 1997, the Company acquired substantially
all the tangible and intangible assets and assumed certain liabilities of, and  
entered into agreements to provide long-term services to, the Founding          
Affiliated Practices, comprised of 31 orthodontists operating in 58 offices     
located in 13 states in the United States and in Calgary, Alberta. Since the    
date of the IPO through August 12, 1998, the Company has affiliated with an     
additional 59 orthodontists, increasing the total number of existing Affiliated 
Practices to 66, which are operating in 122 offices. In addition to these       
affiliations, the Company is negotiating and will continue to negotiate to      
affiliate with additional orthodontic practices; however, although the Company  
intends to aggressively pursue these and other affiliations, there can be no    
assurance that any of such affiliations will be consummated.                    

In connection with the consummation of affiliations with Canadian     
orthodontic practices (i) Canadian subsidiaries of Apple created and issued to  
the Selling Stockholders shares in certain series of exchangeable preferred     
stock (the "Exchangeable Shares") and (ii) Apple, under certain circumstances,  
obligated itself to either pay a redemption price for each Exchangeable Share   
equal to the market price per share of Common Stock or issue up to an aggregate 
of 1,340,087 shares of Common Stock, upon the exchange of the outstanding       
Exchangeable Shares by the holders thereof. Apple also agreed to register all of
the shares of Common Stock it has issued or will issue upon exchange of the     
outstanding Exchangeable Shares to enable the resale of such shares of Common   
Stock without restriction. In connection with such acquisitions, the Company    
agreed to file the Registration Statement of which this Prospectus constitutes a
part.                                                                           

On August 12, 1998, the Company announced (i) A. Stone Douglass had   
replaced John G. Vondrak, D.D.S. as the Chief Executive Officer of the Company  
and (ii) James E. Bobbitt had replaced Michael W. Harlan as Chief Financial     
Officer of the Company. Mr. Douglass is also the President of the Company and   
has been elected to the Company's Board of Directors, which Dr. Vondrak will    
continue to serve on as Chairman of the Board.                                  

USE OF PROCEEDS 

    The Company will not receive any proceeds from the sale of the Shares that
may be offered for sale hereby. All of the Shares may be offered for sale by the
Selling Stockholders.                                                           

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SELLING STOCKHOLDERS(1) 

The following table sets forth certain information with respect to the
shares of Common Stock that, under certain circumstances, may be exchanged for  
the Exchangeable Shares, and be offered for sale hereby, by the Selling         
Stockholders as of September 1, 1998. The table also sets forth certain         
information with respect to shares of Class B Stock beneficially owned by the   
Selling Stockholders. Each Selling Stockholder has sole voting and investment   
power with respect to the shares of Common Stock and Class B Stock held by such 
Selling Stockholder.                                                            

                                                        [Enlarge/Download Table]

                                                                                                        BENEFICIAL 
                                                                                                        OWNERSHIP  
                                                                                                        OF CLASS B 
                                                                                            NUMBER OF     STOCK    
                                                                                            SHARES OF     AFTER    
                                           NUMBER OF                                         CLASS B     OFFERING  
                                           SHARES OF                                          STOCK     -----------
                                         COMMON STOCK   PERCENT OF   BENEFICIAL OWNERSHIP     OWNED       NUMBER   
                NAME OF                  OWNED BEFORE  OUTSTANDING      OF COMMON STOCK       BEFORE    OF SHARES  
          SELLING STOCKHOLDER              OFFERING       SHARES       AFTER OFFERING(1)     OFFERING     OWNED    
          -------------------            ------------  ------------   --------------------   ---------  -----------
                                                                                                                   
Mark E. Antosz, D.D.S...................     141,936         1.3%          --                  --          --      
Douglas Brandt, D.D.S...................      24,055       *               --                  --          --      
Duncan Y. Brown, D.D.S..................     315,612         2.8           --                  32,702      32,702  
Terry D. Carlyle, D.D.S.................      97,003       *               --                  --          --      
John D. Doucet, D.D.S...................     118,668         1.1           --                  --          --      
William Finnegan, D.D.S.................      76,441       *               --                  --          --      
John F. Kalbfleisch, D.D.S..............     128,502         1.2           --                  --          --      
Paul C. Levin, D.D.S....................     128,503         1.2           --                  --          --      
Federick Murrell, D.D.S.................     128,503         1.2           --                  --          --      
Charles Smith, D.D.S....................      66,486       *               --                  --          --      
Gary F. Stauffer, D.D.S.................      84,697       *               --                  --          --      
Donald G. Woodside, D.D.S...............      29,681       *               --                  --          --      
                                           ---------     ---------      ---------              ------      ------  
    Total...............................   1,340,087        12.1%          --                  32,702      32,702  
                                           =========     =========      =========              ======      ======  

                PERCENT OF
NAME OF                   OUTSTANDING           
SELLING STOCKHOLDER                SHARES                   
----------------------------------------  ------------                          
Mark E. Antosz, D.D.S...................     --                                 
Douglas Brandt, D.D.S...................     --                                 
Duncan Y. Brown, D.D.S..................        1.2%                            
Terry D. Carlyle, D.D.S.................     --                                 
John D. Doucet, D.D.S...................     --                                 
William Finnegan, D.D.S.................     --                                 
John F. Kalbfleisch, D.D.S..............     --                                 
Paul C. Levin, D.D.S....................     --                                 
Federick Murrell, D.D.S.................     --                                 
Charles Smith, D.D.S....................     --                                 
Gary F. Stauffer, D.D.S.................     --                                 
Donald G. Woodside, D.D.S...............     --                                 
                ------------
Total...............................        1.2%                        
                ============
----------                                                                      

* Less than 1%.                                                                 

(1) The exact number of Shares to be sold by a Selling Stockholder at any time  
  or from time to time cannot be determined but each Selling Stockholder may
    offer for sale all of the shares of Common Stock he receives in exchange for
   the Exchangeable Shares. Assuming the sale of the Shares registered hereby,
none of the Selling Stockholders will own 1% or more of the outstanding 
Common Stock after each sale.                                           

   The Company will pay certain expenses of registering the shares of Common
Stock to be offered by the Selling Stockholders under the Securities Act,       
including registration and filing fees, printing expenses and the fees and      
disbursements of the counsel and accountants for the Company. The Selling       
Stockholders will pay all fees and disbursements of their own counsel and all   
brokerage fees, commissions and expenses, if any, applicable to the shares of   
Common Stock being sold by them. The Company will indemnify each of the Selling 
Stockholders against certain civil liabilities, including liabilities under the 
Securities Act, or contribute to payments the Selling Stockholders may be       
required to make in respect thereof. Each of the Selling Stockholders has agreed
to indemnify the Company against certain liabilities, including liabilities     
under the Securities Act, with respect to information provided by that Selling  
Stockholder in connection with the Offering.                                    

The Selling Stockholders are the orthodontist owners of Affiliated    
Practices in Canada who received the Exchangeable Shares held by them as a      
portion of the consideration for the purchase by the Company of the assets of   
their practices. None of the Selling Stockholders is an officer or director of  
the Company.                                                                    

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PLAN OF DISTRIBUTION

   The Selling Stockholders have advised the Company that the Shares covered
hereby may be offered and sold by the Selling Stockholders, or by purchasers,   
transferees, donees, pledgees or other successors in interest, in private or    
public transactions, directly or by or through brokers, dealers, agents or      
underwriters who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Stockholders and/or from purchasers 
of the Shares for whom they may act as agent. Sales and transfers of the Shares 
may be effected from time to time in one or more transactions on the American   
Stock Exchange, in the over-the-counter market, in negotiated transactions or   
otherwise, at a fixed price or prices, which may be changed, at market prices   
prevailing at the time of sale, at negotiated prices, or without consideration, 
or by any other legally available means. Any or all of the Shares may be sold or
transferred from time to time by means of (a) a block trade in which the broker 
or dealer so engaged will attempt to sell the Shares as agent but may position  
and resell a portion of the block as principal to facilitate the transaction;   
(b) purchases by a broker or dealer as principal and resale by such broker or   
dealer for its account pursuant to this Prospectus; (c) ordinary brokerage      
transactions and transactions in which the broker solicits purchasers; (d) the  
writing of options on the Shares; (e) pledges as collateral to secure loans,    
credit or other financing arrangements and subsequent foreclosure, if any,      
thereunder; (f) gifts, donations and contributions; and (g) any other legally   
available means. To the extent required, the number of Shares to be sold or     
transferred, the purchase price, the name of any such agent, broker, dealer or  
underwriter and applicable discounts, concessions, allowances, discounts or     
commissions and any other required information with respect to a particular     
offer of the Shares will be set forth in an accompanying Prospectus Supplement. 
The aggregate net proceeds to the Selling Stockholders from the sale of the     
Shares will be the purchase price of such Shares less any underwriting          
discounts, concessions or commissions. This Prospectus also may be used, with   
the Company's prior written consent, by donees and pledgees of the Selling      
Stockholders.                                                                   

  In connection with distributions of the Shares or otherwise, the Selling
Stockholders may enter into hedging transactions with broker-dealers or other   
financial institutions. In connection with such transactions, broker-dealers or 
other financial institutions may engage in short sales of the Company's Common  
Stock in the course of hedging the positions they assume with Selling           
Stockholders. The Selling Stockholders also may take a short position in shares 
of the Company's Common Stock and redeliver the Shares to close out such short  
positions.                                                                      

   The Selling Stockholders and any brokers, dealers, agents or underwriters
that participate in the distribution of the Shares may be deemed to be          
"underwriters" within the meaning of the Securities Act, in which event any     
discounts, concessions and commissions received by such brokers, dealers, agents
or underwriters and any profit on the resale of the Shares purchased by them may
be deemed to be underwriting commissions or discounts under the Securities Act. 
The Selling Stockholders may agree to indemnify any broker-dealer that          
participates in transactions involving the sale of the Shares against certain   
liabilities arising under the Securities Act.                                   

    Each of the Selling Stockholders is acting independently of the Company in
making decisions with respect to the timing, price, manner and size of each     
sale. No underwriter, broker, dealer or agent has been engaged by the Company in
connection with the distribution of the Shares. There is no assurance,          
therefore, that the Selling Stockholders will sell any or all of the Shares. The
Company has agreed to make copies of this Prospectus available to the Selling   
Stockholders in connection with the offer or sale of the Shares and has informed
them of the need to deliver copies of this Prospectus to purchasers at or prior 
to the time of any sale of the Shares offered hereby.                           

The Shares covered by this Prospectus may qualify for sale pursuant to
Section 4(1) of the Securities Act or Rule 144 promulgated thereunder, and may  
be sold thereunder rather than pursuant to this Prospectus. The Selling         
Stockholders may transfer, devise or gift the Shares by other means not         
described herein.                                                               

  The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders. The Company will pay all of the expenses incident to  
the registration of the Shares, other than underwriting                         

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discounts and selling concessions or commissions, if any, and fees and expenses 
of counsel for the Selling Stockholders, if any. Pursuant to the agreements     
executed in connection with the Company's affiliations with its Affiliated      
Practices in Canada, the Company agreed to file the Registration Statement of   
which this Prospectus constitutes a part. The Company intends to de-register any
of the Shares not sold by the Selling Stockholers.                              

LEGAL MATTERS 

  The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Jackson Walker L.L.P., Houston, Texas.                  

EXPERTS 

     The financial statements of Apple Orthodontix, Inc. as of December 31, 1997
and for the period from inception, July 15, 1996, through December 31, 1996     
included in the Company 10-K and incorporated herein by reference have been     
audited by Arthur Andersen LLP, independent public accountants, as indicated in 
their report with respect thereto, and are incorporated herein by reference in  
reliance upon the authority of said firm as experts in giving said report.      

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================================================================================
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE 
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING  
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH       
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE SELLING STOCKHOLDERS OR ANY BROKER, DEALER OR AGENT. THIS 
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THE        
SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN     
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR          
SOLICITATION IS NOT AUTHORIZED, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE 
SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT  
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE    
DATE HEREOF.                                                                    

_________________ 

TABLE OF CONTENTS 

    PAGE
    ----
Additional Information...............       2                                   
Incorporation of Certain Documents                                              
by Reference.......................       2                                 
Prospectus Summary...................       3                                   
Risk Factors.........................       6                                   
The Company..........................      10                                   
Recent Developments..................      11                                   
Use of Proceeds......................      11                                   
Selling Stockholders.................      12                                   
Plan of Distribution.................      13                                   
Legal Matters........................      14                                   
Experts..............................      14                                   

1,340,087 SHARES
[LOGO]
COMMON STOCK
------------------------
PROSPECTUS
------------------------

SEPTEMBER   , 1998  

================================================================================

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PART II 
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.                          

    The following table sets forth the various expenses in connection with the
sale and distribution of securities being registered, other than discounts,     
concessions and brokerage commissions. All amounts are estimates, except the SEC
Registration Fee.                                                               

SEC Registration Fee.................  $   1,570                                
Legal Fees and Expenses..............     10,000                                
Accounting Fees and Expenses.........      3,000                                
Miscellaneous........................     75,430                                
       ---------
Total...........................  $  90,000                           
       =========

ITEM 15.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.                            

DELAWARE GENERAL CORPORATION LAW                                            

     Section 145(a) of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a corporation may indemnify any person who was or is a    
party or is threatened to be made a party to any threatened, pending or         
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by  
reason of the fact that such person is or was a director, officer, employee or  
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,  
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgements, fines and amounts paid in settlement actually and reasonably 
incurred by such person in connection with such action, suit or proceeding, if  
such person acted in good faith and in a manner such person reasonably believed 
to be in or not opposed to the best interests of the corporation, and, with     
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful. The termination of any action, suit or      
proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO   
CONTENDERE or its equivalent, shall not, of itself, create a presumption that   
the person did not act in good faith and in a manner which such person          
reasonably believed to be in or not opposed to the best interests of the        
corporation, and, with respect to any criminal action or proceeding, had        
reasonable cause to believe that such person's conduct was unlawful.            

Section 145(b) of the DGCL states that a corporation may indemnify any
person who was or is a party, or is threatened to be made a party, to any       
threatened, pending or completed action or suit by or in the right of the       
corporation to procure a judgment in its favor by reason of the fact that such  
person is or was a director, officer, employee or agent of the corporation, or  
is or was serving at the request of the corporation as a director, officer,     
employee or agent of another corporation, partnership, joint venture, trust or  
other enterprise against expenses (including attorneys' fees) actually and      
reasonably incurred by such person in connection with the defense or settlement 
of such action or suit if such person acted in good faith and in a manner such  
person reasonably believed to be in or not opposed to the best interests of the 
corporation, and except that no indemnification shall be made in respect of any 
claim, issue or matter as to which such person shall have been adjudged to be   
liable to the corporation unless and only to the extent that the Court of       
Chancery or the court in which such action or suit was brought shall determine  
upon application that, despite the adjudication of liability but in view of all 
the circumstances of the case, such person is fairly and reasonably entitled to 
indemnity for such expenses which the Court of Chancery or such other court     
shall deem proper.                                                              

  Section 145(c) of the DGCL provides that to the extent that a present or
former director or officer of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in           
subsections (a) and (b) of Section 145, or in defense of any claim, issue or    
matter therein, such                                                            

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person shall be indemnified against expenses (including attorneys' fees)        
actually and reasonably incurred by such person in connection therewith.        

Section 145(d) of the DGCL states that any indemnification under      
subsections (a) and (b) of Section 145 (unless ordered by a court) shall be made
by the corporation only as authorized in the specific case upon a determination 
that indemnification of the present or former director, officer, employee or    
agent is proper in the circumstances because such person has met the applicable 
standard of conduct set forth in subsections (a) and (b). Such determination    
shall be made with respect to a person who is a director or officer at the time 
of such determination, (1) by the board of directors by a majority vote of the  
directors who were not parties to such action, suit or proceeding, even though  
less than a quorum, or (2) by a committee of such directors, even though less   
than a quorum, or (3) if such a quorum is not obtainable, or, even if           
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (4) by the stockholders.                       

 Section 145(e) of the DGCL provides that expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,      
administrative or investigative action, suit or proceeding may be paid by the   
corporation in advance of the final disposition of such action, suit or         
proceeding upon receipt of an undertaking by or on behalf of such director or   
officer to repay such amount if it shall ultimately be determined that such     
person is not entitled to be indemnified by the corporation as authorized in    
Section 145. Such expenses (including attorneys' fees) incurred by former       
directors and officers or other employees and agents may be so paid upon such   
terms and conditions, if any, as the operator deems appropriate.                

    Section 145(f) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, the other subsections of       
Section 145 shall not be deemed exclusive of any other rights to which those    
seeking indemnification or advancement of expenses may be entitled under any    
bylaw, agreement, vote of stockholders or disinterested directors or otherwise, 
both as to action in such person's official capacity and as to action in another
capacity while holding such office.                                             

     Section 145(g) of the DGCL provides that a corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was a      
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of     
another corporation, partnership, joint venture, trust or other enterprise,     
against any liability asserted against such person and incurred by such person  
in any such capacity, or arising out of such person's status as such, whether or
not the corporation would have the power to indemnify such person against such  
liability under the provisions of Section 145.                                  

    Section 145(j) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, Section 145 shall, unless      
otherwise provided when authorized or ratified, continue as to a person who has 
ceased to be a director, officer, employee or agent, and shall inure to the     
benefit of the heirs, executors and administrators of such a person.            

RESTATED CERTIFICATE OF INCORPORATION                                       

  The Restated Certificate of Incorporation of the Company provides that a
director of the Company shall not be personally liable to the Company or its    
stockholders for monetary damages for breach of fiduciary duty as a director,   
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or    
which involve intentional misconduct or a knowing violation of law, (iii) under 
Section 174 of the DGCL or (iv) for any transaction from which the director     
derived an improper personal benefit. If the DGCL is amended to authorize the   
further elimination or limitation of the liability of directors, then the       
liability of a director of the Company, in addition to the limitation on        
personal liability described above, shall be limited to the fullest extent      
permitted by the amended DGCL. Further, any repeal or modification of such      
provision of the Restated Certificate of Incorporation by the stockholders of   
the Company shall be prospective only, and shall not adversely affect any       
limitation on the personal liability of a director of the Company existing at   
the time of such repeal or modification.                                        

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BYLAWS                                                                      

    The Bylaws of the Company provide that the Company will indemnify and hold
harmless any director or officer of the Company to the fullest extent permitted 
by applicable law, as in effect as of the date of the adoption of the Bylaws or 
to such greater extent as applicable law may thereafter permit, from and against
all losses, liabilities, claims, damages, judgments, penalties, fines, amounts  
paid in settlement and expenses (including attorneys' fees) whatsoever arising  
out of any event or occurrence related to the fact that such person is or was a 
director or officer of the Company, and further provide that the Company may,   
but is not required to, indemnify and hold harmless any employee or agent of the
Company or a director, officer, employee or agent of any other corporation,     
partnership, joint venture, trust, employee benefit plan or other enterprise who
is or was serving in such capacity at the written request of the Company;       
provided, however, that the Company is only required to indemnify persons       
serving as directors, officers, employees or agents of the Company for the      
expenses incurred in a proceeding if such person is a party to and is           
successful, on the merits or otherwise, in such proceeding, or if unsuccessful  
in the proceeding, but successful as to a matter in such proceeding, the        
expenses attributable to such matter; and provided further, that the Company    
may, but is not required to, indemnify such persons who are serving as a        
director, officer, employee or agent of any other corporation, partnership,     
joint venture, trust, employee benefit plan or other enterprise at the written  
request of the Company for the expenses incurred in a proceeding if such person 
is a party to and is successful, on the merits or otherwise, in such proceeding.
The Bylaws further provide that, in the event of any threatened, or pending     
action, suit or proceeding in which any of the persons referred to above is a   
party or is involved and that may give rise to a right of indemnification under 
the Bylaws, following written request by such person, the Company will promptly 
pay to such person amounts to cover expenses reasonably incurred by such person 
in such proceeding in advance of its final disposition upon the receipt by the  
Company of (i) a written undertaking executed by or on behalf of such person,   
providing that such person will repay the advance if it is ultimately determined
that such person is not entitled to be indemnified by the Company as provided in
the Bylaws and (ii) satisfactory evidence as to the amount of such expenses.    

UNDERWRITING AGREEMENT                                                      

The Underwriting Agreement provides for the indemnification of the    
directors and officers of the Company in certain circumstances.                 

INSURANCE                                                                   

    The Company maintains liability insurance for the benefit of its directors
and officers.                                                                   

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.                           

(a)  Exhibits.                                                        
EXHIBIT                                                         
     NUMBER                                                  DESCRIPTION
    -------                                                  -----------
5.1       --   Opinion of Jackson Walker L.L.P.           
23.1       --   Consent of Arthur Andersen LLP              

  23.2       --   Consent of Jackson Walker L.L.P. (contained in
Exhibit 5.1)                
         24.1       --   Power of Attorney (contained on the signature page of
this Registration Statement)

(b)  Financial Statement Schedules.                                   

  All schedules are omitted because they are not applicable or because the
required information is contained in the Financial Statements or Notes thereto. 

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ITEM 17.  UNDERTAKINGS.                                                         

(a) The undersigned registrant hereby undertakes as follows:          

     (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:      

            (i)  To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;                                         

             (ii) To reflect in the prospectus any facts or events arising after
    the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the 
      aggregate, represent a fundamental change in the information set forth
in the Registration Statement;                                  

            (iii) To include any material information with respect to the plan
      of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration  
Statement.                                                      

PROVIDED, HOWEVER, that paragraphs (i) and (ii) do not apply if the   
    information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant   
     pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the Registration Statement.          

    (2) That, for the purpose of determining any liability under the
    Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered 
   therein, and the offering of such securities at that time shall be deemed
to be the initial BONA FIDE offering thereof.                         

          (3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the     
termination of the offering.                                          

(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the  
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the    
Securities Exchange Act of 1934 that is incorporated by reference in the        
Registration Statement shall be deemed to be a new Registration Statement       
relating to the securities offered therein, and the offering of such securities 
at that time shall be deemed to be the initial BONA FIDE offering thereof.      

     (c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of  
the registrant pursuant to the provisions described in Item 15, or otherwise,   
the registrant has been advised that in the opinion of the Commission such      
indemnification is against public policy as expressed in the Securities Act of  
1933 and is, therefore, unenforceable. In the event that a claim for            
indemnification against such liabilities (other than the payments by the        
registrant of expenses incurred or paid by a director, officer or controlling   
person of the registrant in the successful defense of any action, suit or       
proceeding) is asserted by such director, officer or controlling person in      
connection with the securities being registered, the registrant will, unless in 
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such      
indemnification by it is against public policy as expressed in the Securities   
Act of 1933 and will be governed by the final adjudication of such issue.       

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SIGNATURES

 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
APPLE ORTHODONTIX, INC. HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF     
HOUSTON, STATE OF TEXAS, ON SEPTEMBER 14, 1998.                                 

                           APPLE ORTHODONTIX, INC.

                             By: /s/ A. STONE DOUGLASS
                                 ---------------------
                                     A. STONE DOUGLASS
                                             CHIEF EXECUTIVE OFFICER

 POWER OF ATTORNEY

  EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY APPOINTS W. DANIEL COOK
AND CHARLES C. SOMMER AND EACH OF THEM, ANY OF WHOM MAY ACT WITHOUT THE JOINDER 
OF THE OTHER, AS HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL    
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND    
STEAD, IN ANY AND ALL CAPACITIES TO SIGN ANY AND ALL AMENDMENTS (INCLUDING      
POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT AND ANY REGISTRATION  
STATEMENT FOR THE SAME OFFERING FILED PURSUANT TO RULE 462 UNDER THE SECURITIES 
ACT OF 1933, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND ALL OTHER      
DOCUMENTS IN CONNECTION THEREWITH, WITH THE COMMISSION, GRANTING UNTO SAID      
ATTORNEYS-IN-FACT AND AGENTS FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND
EVERY ACT AND THING APPROPRIATE OR NECESSARY TO BE DONE, AS FULLY AND FOR ALL   
INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND    
CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR THEIR SUBSTITUTE OR    
SUBSTITUTES MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.               

 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE     
CAPACITIES INDICATED AND ON SEPTEMBER 14, 1998.                                 

       SIGNATURES                                          TITLE
       ----------                                          -----

/s/ A. STONE DOUGLASS                                       
----------------------------------------   Chief Executive Officer and Director 
      A. Stone Douglass            (Principal Executive Officer)

/s/ JAMES E. BOBBITT                                        
----------------------------------------   Vice President and Chief Financial   
         James E. Bobbitt             Officer (Principal Financial and
                         Accounting Officer)

/s/ ROBERT L. BREWTON                                       
----------------------------------------   Director                             
ROBERT L. BREWTON                                   

/s/ W. DANIEL COOK                                          
----------------------------------------   Director                             
W. DANIEL COOK                                      

/s/ ROD L. CROSBY, JR.                                      
----------------------------------------   Director                             
ROD L. CROSBY, JR.                                  

/s/ RICHARD J. MARXEN                                       
----------------------------------------   Director                             
RICHARD J. MARXEN                                   

/s/ WILLIAM W. SHERRILL                                     
----------------------------------------   Director                             
WILLIAM W. SHERRILL                                 

/s/ JOHN G. VONDRAK, D.D.S                                  
----------------------------------------   Director                             
JOHN G. VONDRAK                                     

/s/ CLYDE C. WADDELL, JR.                                   
----------------------------------------   Director                             
CLYDE C. WADDELL, JR.                               

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Dates Referenced Herein   and   Documents Incorporated by Reference

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Filed on:		9/14/98		1		21
		9/11/98		2
		9/10/98		1					SC 13G/A
		9/1/98		10		13
		8/13/98		10
		8/12/98		4		12
		7/27/98		3					DEF 14A
		6/30/98		3					10-Q
		3/31/98		3					10-K405,  10-Q
		2/24/98		3					8-K
		12/31/97		3		15			10-K405,  10-K405/A
		5/29/97		10
		5/12/97		3					8-A12B,  S-1/A
		12/31/96		15
		7/15/96		15
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