SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3152648
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 NORTH WESTLAKE BOULEVARD, SUITE 202, WESTLAKE VILLAGE, CALIFORNIA 91362
(805) 381-2700
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
----------------------
STEPHEN F. ROSS
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
200 NORTH WESTLAKE BOULEVARD, SUITE 202
WESTLAKE VILLAGE, CALIFORNIA 91362
(805) 381-2700
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
----------------------
Copies to:
MURRAY MARKILES,ESQ.
TROOP STEUBER PASICH REDDICK & TOBEY, LLP
2029 CENTURY PARK EAST, 24TH FLOOR
LOS ANGELES, CALIFORNIA 90067
(310) 728-3000
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities 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, other than securities offered only in connection
with dividend or interest reinvestment plans, 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 for the same offering.
[ ]
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 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. [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------------
<CAPTION>
Proposed Maximum Proposed Maximum
Title Of Shares Amount To Be Aggregate Price Aggregate Amount Of
To Be Registered Registered Per Share(1) Offering Price(1) Registration Fee
------------------ -------------- --------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Common Stock 100,000 $3.10 $310,000.00 $81.84
------------------ -------------- --------------------- ------------------ -----------------
<FN>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) on the basis of the average high and low prices of
Registrant's Common Stock reported on the Nasdaq SmallCap Market on January 14,
2000.
</FN>
</TABLE>
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.
<PAGE>
PROSPECTUS
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
100,000 SHARES OF COMMON STOCK
The persons listed in this Prospectus under the caption "Selling Security
Holders" may from time to time offer and sell up to 100,000 shares of our common
stock. The selling security holder(s) may offer their shares through public or
private transactions, on or off the Nasdaq SmallCap Market, at prevailing market
prices or at privately negotiated prices. We will not receive any of the
proceeds from this offering.
Our common stock is quoted on the Nasdaq SmallCap Market under the symbol
"DMDS" and is listed on the Boston Stock Exchange under the symbol "DMD." On
January 14, 2000, the high and low prices of the common stock on the Nasdaq
SmallCap Market was $3.3125 and $2.875, respectively.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
INVESTING IN THE SHARES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 5.
---------------
The date of this prospectus is _________, 2000
Page 2
<PAGE>
TABLE OF CONTENTS
PAGE
ABOUT DENTAL/MEDICAL DIAGNOSTIC SYSTEMS...................................4
RISK FACTORS..............................................................5
USE OF PROCEEDS..........................................................10
SELLING SECURITY HOLDERS.................................................11
PLAN OF DISTRIBUTION.....................................................12
WHERE YOU CAN FIND MORE INFORMATION......................................13
LEGAL MATTERS............................................................14
EXPERTS..................................................................14
Page 3
<PAGE>
ABOUT DENTAL/MEDICAL DIAGNOSTIC SYSTEMS
Dental Medical Diagnostic Systems, Inc. designs, develops, manufactures and
sells high technology dental equipment as well as tooth whitening and composite
materials. Up until the third quarter of 1998, our primary product emphasis for
approximately the past two years has been on the manufacture and sale of an
intraoral camera system known as the "TeliCam II System," an updated version of
the intraoral camera system, the "TeliCam Elite," and an intraoral camera
network known as the InTELInet, for use in connection with the TeliCam II
System. TeliCam System II and Elite systems sales have recently been below
levels of prior comparable periods, a trend that we expect to continue. During
approximately the last 18 months we shifted our primary product emphasis toward
a tooth whitening and curing device known as the Apollo 95E, which we now market
both domestically and internationally. We believe that the Apollo 95E produces
faster results than other products currently available in the marketplace. This
product is designed to harden composite material in three seconds or less, and
to produce teeth whitening in a dental office in less than one hour in
conjunction with out Apollo Secret formula.
We also market the whitening materials, Apollo Secret, to be used with the
Apollo 95E. Apollo Secret power whitening offers the following benefits:
o the procedure causes less patient discomfort compared to competing
technologies;
o the procedure can be performed by a dental assistant or hygienist in most
states generally in less than 40 minutes;
o the procedure may whiten the patient's teeth up to ten shades lighter; and
o the procedure causes no surface damage to the tooth enamel or pulp.
We have the exclusive rights to market products to the dental market
incorporating certain digital x-ray technology developed by Suni Imaging
Microsystems, Inc. Suni keeps the rights to developed microchip technology
underlying the x-ray system it developed for us. Digital x-ray systems,
including competitive systems currently on the market, reduce radiation exposure
compared to conventional x-ray systems and allow dentists to view x-ray images
in real-time without the time-consuming process of film development and
eliminate the need to use and dispose of chemicals required to develop
conventional x-ray film. The technology developed for us by Suni offers the
following benefits:
o improved image quality;
o competitive pricing; and
o database storage and recall of images.
We were organized in New York in 1981 under the name Edudata Corporation and
reincorporated in Delaware in 1983. Our principal executive offices are located
at 200 North Westlake Boulevard, Suite 202, Westlake Village, California 91362.
Our telephone number is (805) 381-2700.
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<PAGE>
RISK FACTORS
Investment in the shares covered by this prospectus involves a significant
degree of risk. You should carefully consider all of the information in this
prospectus, and, in particular, should evaluate the following risks related to
an investment in the shares.
WE HAVE A LIMITED OPERATING HISTORY UPON WHICH TO EVALUATE OUR LIKELIHOOD OF
SUCCESS.
We have only manufactured and distributed our digital x-ray systems since
September 1999, our TeliCam systems since October 1995 and our Apollo 95E since
March 1998. Therefore, we have a limited relevant operating history upon which
to evaluate the likelihood of our success. Factors such as the risks, expenses
and difficulties frequently encountered in the operation and expansion of a new
business and the development and marketing of new products must be considered in
evaluating the likelihood of our success.
WE HAVE A HISTORY OF LOSSES AND ACCUMULATED DEFICIT AND THIS TREND OF LOSSES MAY
CONTINUE IN THE FUTURE.
For the fiscal year ended December 31, 1997 we had a net loss of $2,044,729 and
for the fiscal year ended December 31, 1998 we had a net loss of $1,816,702. For
the nine-month period ended September 30, 1999, we incurred a net loss of
$756,931. As of September 30, 1999, our accumulated deficit was $6,106,424. Our
ability to obtain and sustain profitability will depend, in part, upon the
successful marketing of our existing products and the successful and timely
introduction of new products. We can give no assurances that we will achieve
profitability or, if achieved, that we will sustain profitability.
FLUCTUATION IN QUARTERLY RESULTS MAY RESULT IN DECLINES IN OUR STOCK PRICE.
Certain quarterly influences may affect our business. Historically, sales have
been generally higher in the fourth quarter due to the purchasing patterns of
dentists in the United States and have been generally lower in the first quarter
due primarily to the effect upon demand of increased purchases in the prior
quarter. Historically we have experienced lower sales in the summer months as a
result of holiday vacations and fewer trade shows. These fluctuations in
quarterly operating results could result in increased volatility, including
significant declines, of the trading price of our common stock.
ONE OF OUR PRIMARY PRODUCTS HAS HAD A SIGNIFICANT DECLINE IN SALES AND IF THIS
DECLINE CONTINUES WE MAY NOT BE ABLE TO ACHIEVE OR SUSTAIN PROFITABILITY.
The TeliCam systems, together with related products such as the InTELInet
system, and the Apollo 95E have been our primary products since inception. We
believe that the market for intraoral cameras, such as the TeliCam systems, is a
market that has declined. TeliCam systems sales have recently been at or below
levels of prior comparable periods, a trend which we expect to continue.
AS A RESULT OF THE DECLINE IN SALES OF THE TELICAM, OUR FUTURE DEPENDS ON OUR
ABILITY TO DEVELOP AND INTRODUCE NEW PRODUCTS.
As a result of the decline in the intraoral camera market, our future depends
upon our ability to develop and successfully introduce new products to make up
for the diminished sales of the Telicam systems. Development of new product
lines is risk intensive and often requires:
o long-term forecasting of market trends;
o the development and implementation of new designs;
o compliance with extensive governmental regulatory requirements; and
o a substantial capital commitment.
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<PAGE>
Also, the medical and dental device industry is characterized by rapid
technological change. As technological changes occur in the marketplace, we may
have to modify our products in order to become or remain competitive or to
ensure that our products do not become obsolete. If we fail to anticipate or
respond in a cost-effective and timely manner to government requirements, market
trends or customer demands, or if there are any significant delays in product
development or introduction, our revenues and profit margins may decline which
could adversely affect our cash flows, liquidity and operating results.
IF WE ARE UNABLE TO RAISE ADDITIONAL CAPITAL TO FINANCE RESEARCH AND DEVELOPMENT
OF OUR NEW PRODUCTS WE MAY BE FORCED TO FOREGO THE DEVELOPMENT OF NEW PRODUCTS
AND LIMIT CURRENT OPERATIONS.
We anticipate that we will need to raise additional capital during the next 12
months to satisfy our expected increased working capital and research and
development requirements. We are currently exploring alternatives to fulfill
these requirements, but cannot assure that additional financing will be
available when needed or that, if available, it will be on terms favorable to us
or our stockholders. If needed funds are not available, we may be required to
limit or forego the development of new products or limit the scope of our
current operations, which could have a material adverse effect on our business,
operating results and financial condition. If we raise needed funds through the
sale of additional shares of our common stock or securities convertible into
shares of our common stock it may result in dilution to current stockholders.
WE SUBSTANTIALLY DEPEND UPON UNAFFILIATED THIRD PARTIES FOR SEVERAL CRITICAL
ELEMENTS OF OUR BUSINESS, INCLUDING THE DEVELOPMENT AND LICENSING FOR
DISTRIBUTION OF OUR PRODUCTS.
We are dependent upon unaffiliated third party developers and suppliers for the
development and manufacture of all of the components used in our dental
equipment and for the development and manufacture of our consumable products.
Outside of updating our current products, we do not develop any of our
technology. Instead of developing technology, we continually seek out third
parties that own new and innovative technology that they may be willing to
license to us or develop into new dental products under a development agreement.
We have had problems in the past obtaining a marketable product from companies
with whom we had entered into a licensing arrangement. We entered into a
licensing agreement with Ion Laser Technology under which ILT was unable to
develop a product in accordance with the delivery schedule established by our
agreement that met our specifications; as a result, we were forced to find an
alternative product to that which we had contracted with ILT.
IF WE DO NOT MAKE CERTAIN REQUIRED MINIMUM ROYALTY PAYMENTS TO SUNI AND IF WE DO
NOT PURCHASE REQUIRED AMOUNTS OF CERTAIN PRODUCTS MANUFACTURED BY SUNI, WE WILL
LOSE OUR EXCLUSIVE RIGHTS TO THE DIGITAL X-RAY TECHNOLOGY DEVELOPED FOR US BY
SUNI.
In order to maintain our right to be the exclusive dental licensee of the
digital x-ray technology developed by Suni, we must make significant minimum
periodic royalty payments to Suni, and we must purchase a significant amount of
certain products manufactured by Suni. We cannot guarantee that we will be able
to make the minimum periodic royalty payments, nor can we guarantee that we will
be able to purchase the amount of products that are required to maintain our
right to be the exclusive distributor. If we do not make the required periodic
royalty payments and purchase the required products, Suni will be able to
license the developed technology to our competitors, or grant an exclusive
license to a competitor, which could have a material adverse effect on our
operating results and financial condition.
THE GOVERNMENT EXTENSIVELY REGULATES OUR PRODUCTS AND FAILURE TO COMPLY WITH
APPLICABLE REGULATIONS COULD RESULT IN FINES, SUSPENSIONS, SEIZURE ACTIONS,
PRODUCT RECALLS, INJUNCTIONS AND CRIMINAL PROSECUTIONS.
The United States Food and Drug Administration, as well as state and foreign
agencies, regulate almost all aspects of our medical devices including:
o entry into the marketplace;
o design;
o testing;
o manufacturing procedures;
o reporting of complaints;
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<PAGE>
o labeling; and
o promotional activities.
Under the Federal Food, Drug, and Cosmetic Act, the FDA has the authority to
control the introduction of new products into the marketplace. Unless
specifically exempted by the agency, medical devices enter the marketplace
through either FDA clearance of premarket approval application or FDA approval
of an application for 510k clearance. The FDA conducts periodic inspections to
assure compliance with its regulations.
Unless specifically exempted by the FDA's regulations, we will need to file a
510k submission or PMA application for any new products developed in the future
including any using digital x-ray technology. The process of obtaining a
clearance or approval can be time-consuming and expensive. Compliance with the
FDA's regulatory requirements can be expensive and time consuming. We do not
guarantee that the required regulatory approvals or clearances will be obtained.
Any approval or clearance obtained from the FDA may include significant
limitations on the use of the medical device which is the subject of the
approval or clearance. We cannot market a medical device if needed FDA approval
or clearance is not granted. Inability to obtain such approval or clearance
could result in a delay or suspension of the manufacture and sale of affected
medical devices. Any such delay or suspension would have a material adverse
effect on our business. In addition, changes in existing regulations or the
adoption of new regulations could make regulatory compliance by us more
difficult in the future. The failure to obtain the required regulatory
clearances or to comply with applicable regulations could result in one or more
of the following:
o fines;
o delays or suspensions of device clearances;
o seizure actions;
o mandatory recalls;
o injunction action; and
o criminal prosecution.
THE LOSS OF OUR CHIEF EXECUTIVE OFFICER COULD RESULT IN THE LOSS OF A
SIGNIFICANT PORTION OF OUR BUSINESS BECAUSE OF HIS PERSONAL RELATIONSHIPS IN THE
INDUSTRY.
Our success is highly dependent upon our Chairman of the Board and Chief
Executive Officer, Robert H. Gurevitch. Unlike larger companies, we rely heavily
on a small number of officers to conduct a large portion of our business. The
loss of service of Robert H. Gurevitch along with the loss of his numerous
contacts and relationships in the industry would have a material adverse effect
on our business. We have entered into an Employment Agreement with Robert H.
Gurevitch under which he has agreed to render services to us until October 1,
2001. We have obtained "key person" life insurance on Mr. Gurevitch in the
amount of $2,000,000, of which we are the sole beneficiary, but there can be no
assurance that the proceeds of such insurance will be sufficient to offset the
loss to us in the event of his death.
NONE OF OUR PRODUCTS ARE PROTECTED BY PATENTS, AND THEREFORE, THEY MAY NOT BE
ADEQUATELY PROTECTED FROM COPYING BY COMPETITORS.
Our future success and ability to compete is dependent in part upon our
proprietary technology used in the Apollo 95E. The Apollo 95E is currently only
protected by a patent in France. We are currently seeking patent protection in
all of the countries of the world in which this technology can be marketed.
There can be no assurance that patents outside of France will be granted for the
Apollo 95E system, and, if granted, the patents will provide adequate protection
for the Company's technologies. Consequently, we rely primarily on trademark,
trade secret and copyright laws to protect our technology. However, there can be
no assurance that third parties will not try to copy our products. In addition,
many foreign countries' laws may not protect us from improper use of our
proprietary technology overseas. We may not have adequate remedies if our
proprietary rights are breached and therefore a breach of our proprietary rights
could have a
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material adverse effect on our financial condition.
WE ARE SUSCEPTIBLE TO PRODUCT LIABILITY SUITS AND IF A LAWSUIT IS BROUGHT
AGAINST US IT COULD RESULT IN US HAVING TO PAY LARGE LEGAL EXPENSES AND/OR
JUDGMENTS.
Although we have not yet had any product liability claims, because of the nature
of the medical/dental device industry, there can be no assurance that we will
not be subject to such claims in the future. Our products come into contact with
vulnerable areas of the human body, such as the mouth, tongue, teeth and gums,
and, therefore, the sale and support of dental products makes us susceptible to
the risk of such claims. A successful product liability claim or claim arising
as a result of use of our products brought against us, or the negative publicity
brought up by such claim, could have a material adverse effect upon our
business. We maintain product liability insurance with coverage limits of
$10,000,000 per occurrence and $11,000,000 per year. While we believe that we
maintain adequate insurance coverage, we do not guarantee that the amount of
insurance will be adequate to satisfy claims made against us in the future, or
that we will be able to obtain insurance in the future at satisfactory rates or
in adequate amounts.
OUR RECENT SALE OF SERIES A EXCHANGEABLE PREFERRED STOCK, COMMON STOCK AND
WARRANTS TO PURCHASE COMMON STOCK MAY RESULT IN SUBSTANTIAL DILUTION TO OUR
COMMON SHAREHOLDERS.
On November 23, 1999 we sold an aggregate of 2,000 shares of Series A
Exchangeable Preferred Stock, 2,500 shares of Common Stock and Warrants to
purchase up to 40,000 shares of Common Stock.
Prior to March 15, 2000, holders of Series A Exchangeable Preferred Stock may
exchange their shares into common stock at $4.00 per share based upon a stated
value of $1,000 per share of Series A Exchangeable Preferred Stock. On and after
March 15, 2000, holders of Series A Exchangeable Preferred Stock may exchange
their shares for shares of common stock at the lesser of $4.00 per share or the
average of the closing bid prices of the common stock during any three (3) of
the prior thirty (30) consecutive trading days selected by the holder of the
Series A Shares then being exchanged. As a result, after March 15, 2000 (or
prior to March 15, 2000 if the trading price of our common stock exceeds $4.00
per share) the holders of Series A Exchangeable Preferred Stock will likely be
in a position to exchange their shares for shares of common stock at a discount
to the then current trading price of our common stock.
A LARGE VOLUME OF SALES OF OUR COMMON STOCK RESULTING FROM THE EXCHANGE OF
SHARES OF SERIES A EXCHANGEABLE PREFERRED STOCK AND/OR THE EXERCISE OF WARRANTS
MAY RESULT IN DOWNWARD PRESSURE OR INCREASED VOLATILITY IN THE TRADING PRICE OF
OUR COMMON STOCK.
Because we have agreed to register for resale the 2,500 shares of Common Stock
and the shares of Common Stock issuable upon exchange or exercise of the Series
A Exchangeable Preferred Stock and the Warrants, the holders thereof may sell
without regard to any volume restrictions, including the volume restrictions set
forth in Rule 144 promulgated under the Securities Act of 1933. As a result,
sales by the holders of Series A Exchangeable Preferred Stock and the Warrants
could lead to an excess supply of shares of our Common Stock being sold which
could, in turn, result in downward pressure or increased volatility in the
trading price of our Common Stock.
IF WE FAIL TIMELY TO EFFECT AN EXCHANGE OF SERIES A EXCHANGEABLE PREFERRED STOCK
FOR SHARES OF COMMON STOCK, WE MAY BE LIABLE FOR SIGNIFICANT LIQUIDATED DAMAGES.
We have agreed to effect an exchange of Series A Exchangeable Preferred Stock
into Common Stock within four (4) trading days of receipt of a notice from a
holder of Series A Exchangeable Preferred Stock requesting an exchange. If we
fail to effect an exchange of Series A Exchangeable Preferred Stock into Common
Stock within four (4) trading days of receipt of a valid notice, we have agreed
to pay to the holder of Series A Exchangeable Preferred Stock requesting the
exchange liquidated damages in an amount equal to $100 per day for the first ten
(10) days and $200 per day thereafter for each $5,000 in liquidation preference
amount then being exchanged. An obligation to pay these liquidated damages could
have a material adverse effect on our liquidity and cash flows.
THE YEAR 2000 ISSUE COULD IMPACT OUR INFORMATION TECHNOLOGY AND NON-INFORMATION
TECHNOLOGY SYSTEMS AS WELL AS THOSE OF OUR SUPPLIERS AND/OR CUSTOMERS, ANY OF
WHICH COULD NEGATIVELY AFFECT SALES OF OUR PRODUCTS.
The Year 2000 readiness issue arises from the inability of information systems,
and other time and date sensitive products and systems, to properly recognize
and process date-sensitive information or system failures. Estimates of the
potential cost and
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effects of Year 2000 issues vary significantly among businesses, and it is
extremely difficult to predict the actual impact. Recognizing this uncertainty,
management is continuing to actively analyze, assess and plan for various Year
2000 issues across its businesses.
The Year 2000 issue has an impact on both information technology systems and
non-information technology systems, such as manufacturing systems and physical
facilities including, but not limited to, security systems and utilities. We
have tested all of our information technology systems and non-information
technology systems for Year 2000 readiness and believe that all of our
information and our non-information technology systems are Year 2000 compliant.
As of January 14, 2000, we have not experienced any material Year 2000 related
problems.
We did not investigate whether our customers evaluated or prepared their own
systems to be Year 2000 compliant. Any efforts by customers to address Year 2000
issues may affect the demand for certain products and services; however, the
impact on our revenue is highly uncertain. As of January 14, 2000, we have no
knowledge of any material Year 2000 related problems experienced by any of our
significant customers.
We did investigate the Year 2000 readiness of our key suppliers. Our direction
of this effort was to ensure that there were adequate components and supplies
available to us to minimize any potential business interruptions. We determined
that our policy of maintaining an inventory of components and supplies
sufficient to last a minimum of a one to three months is adequate to minimize
almost any potential business interruptions. We believe that our one to three
month supply of inventories will allow enough time for our suppliers to remedy
Year 2000 problems that may arise in their respective businesses. As of January
14, 2000, we have no knowledge of any material Year 2000 related problems
experienced by any of our key suppliers.
While we continue to believe the Year 2000 issues described above will not
materially affect our financial position, it remains uncertain as to what
extent, if any, we may be impacted. If we, our customers or suppliers are unable
to resolve any Year 2000 compliance problems in a timely manner, we could face
business interruptions or a shutdown, financial loss, regulatory actions,
reputational harm and/or legal liability. Because we believe that all of our
internal systems are Year 2000 compliant and that we will have adequate
components and supplies in our inventories to minimize any potential business
interruptions that may result from Year 2000 compliance problems suffered by our
suppliers, we have determined that we will not develop any contingency plans
that address a reasonably likely worst case scenario.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares offered by the
selling security holders, under this prospectus. We will pay all costs, expenses
and fees in connection with the registration of the shares offered under this
prospectus.
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SELLING SECURITY HOLDERS
The following table sets forth the names of the Selling Security Holders and (i)
the number of shares of Common Stock owned by the Selling Security Holders as of
January 14, 2000, and (ii) the maximum amount of Common Stock which may be
offered for the accounts of the Selling Security Holders under this prospectus.
We do not know if, when, or in what amounts the Selling Security Holders will
sell shares of the common stock. Thus, we cannot estimate how many shares each
of the Selling Security Holders will hold after completion of the offering.
<TABLE>
<CAPTION>
------------ ----------
Number of Number of
Shares of Shares to
Common be Offered
Stock Owned for the
Prior to the Security
Offering Holder's
Account
------------ -----------
<S> <C> <C>
Alan Anderson 25,000 25,000
7931 Shaggy Mountain Road
Herriman, UT 84065
Frank McNeil 25,000 25,000
8420 Willow Creek Drive
Sandy, UT 84093
Doug Arakawa 25,000 25,000
1210 Carmel Terrace
Los Altos, CA 92024
David McCulloch 20,000 20,000
11322 S. O'Henry Road
Sandy, UT 84070
Technology Property 5,000 5,000
Resources
2565 E. Lambourne Ave.
Salt Lake City, UT 84109
</TABLE>
We will bear all costs, expenses and fees in connection with the registration of
the Selling Security Holders' shares. All brokerage commissions, if any,
attributable to the sale of the Selling Security Holders' shares will be borne
by them.
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PLAN OF DISTRIBUTION
We are registering 100,000 shares of common stock on behalf of the Selling
Security Holders. We issued the 100,000 shares of common stock to the Selling
Security Holders as part of the purchase price for our acquisition of a
worldwide license to technology owned by Chrysalis Dental, Inc. in September of
1999. We agreed to register the resale of the common stock on a Form S-3
Registration Statement.
The Selling Security Holders have advised us that the sale or distribution of
the common stock may be effected directly to purchasers or through one or more
underwriters, brokers, dealers or agents from time to time in one or more types
of transactions (which may involve crosses or block transactions):
o on the Nasdaq SmallCap Market or the Boston Stock Exchange,
o in negotiated transactions,
o through put or call options relating to the shares,
o through short sales of shares, or
o a combination of these methods of sale, at market prices or at
negotiated prices.
The Selling Security Holders have advised us that it has not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities.
The Selling Security Holders and any broker-dealers that act in connection with
the sale of shares might be considered "underwriters" within the meaning of
Section 2(11) of the Securities Act. Any commissions received by broker-dealers
and any profit on the resale of the shares sold by them might be considered to
be underwriting discounts or commissions under the Securities Act. Because the
Selling Security Holders may be considered underwriters within the meaning of
Section 2(11) of the Securities Act, the Selling Security Holders will be
required to deliver a prospectus in connection with the sale of their shares.
If required, the following information will be disclosed in a prospectus
supplement or, if necessary, an amendment to the registration statement:
o the specific shares to be sold,
o the respective purchase prices and public offering prices,
o the names of any agent, dealer or underwriter, and
o any applicable commissions or discounts.
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WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires us to file information with the SEC concerning
our business and operations. We file annual, quarterly and special reports,
proxy statements and other information with the SEC. You can read and copy these
documents at the public reference facility maintained by the SEC at Judiciary
Plaza, 450 Fifth Street, NW, Room 1024, Washington, DC 20549. Please call the
SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our
SEC filings are also available on the SEC's Website at "http://www.sec.gov." You
can also inspect such reports, proxy statements and other information at the
offices of the Nasdaq Stock Market.
The SEC allows us to "incorporate by reference" the information we file with it,
which means that we can disclose important information to you by referring to
those documents. The information incorporated by reference is an important part
of this prospectus, and information that we file later with the Commission will
automatically update and supersede this information. We incorporate by reference
the following documents:
o Annual Report on Form 10-KSB for the year ended December 31, 1998.
o Quarterly Report on Form 10-QSB for the period ended March 31, 1999.
Quarterly Report on Form 10-QSB for the period ended June 30, 1999.
o Quarterly Report on Form 10-QSB for the period ended September 30,
1999.
o Current Report on Form 8-K filed on December 8, 1999.
o Description of our capital stock contained on page 45 of our amendment
No. 2 on Form SB-2 (File # 33-22507).
o All documents filed by us with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 after the date of this
prospectus and before the offering of the common stock is terminated.
You may request a copy of the information incorporated by reference, at no cost,
by contacting us at the following address or telephone number:
Bette Smith
Dental/Medical Diagnostic Systems, Inc.
200 North Westlake Boulevard, Suite 202
Westlake Village, California 91362
(805) 381-2700
You should rely only on the information incorporated by reference or provided in
this prospectus or any supplement to this prospectus. We have not authorized
anyone else to provide you with different information. The Selling Security
Holders should not make an offer of these shares in any state where the offer is
not permitted. You should not assume that the information in this prospectus or
any supplement to this prospectus is accurate as of any date other than the date
on the cover page of this prospectus or any supplement.
Page 13
<PAGE>
LEGAL MATTERS
Troop Steuber Pasich Reddick & Tobey, LLP, Los Angeles, California, has rendered
an opinion as to the validity of the common stock covered by this prospectus.
EXPERTS
The financial statements incorporated into this Prospectus by reference to the
Annual Report on Form 10-KSB for the year ended December 31, 1998, have been so
incorporated in reliance on the report of PricewaterhouseCoopers, LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our Bylaws provide that we will indemnify our directors and executive officers
and any of our other officers, employees and agents to the fullest extent
permitted by Delaware law. Our Bylaws also empower us to enter into
indemnification agreements with any such persons and to purchase insurance on
behalf of any person whom we are required or permitted to indemnify.
Our Amended and Restated Certificate of Incorporation provides that, pursuant to
Delaware law, our directors shall not be liable for monetary damages for breach
of the director's fiduciary duty of care to us and to our stockholders. Such
provision does not eliminate the duty of care and, in appropriate circumstances,
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Delaware law. Each director continues to be subject to
liability for breach of the director's duty of loyalty, for acts or omissions
not in good faith or involving intentional misconduct, for knowing violations of
law, for actions leading to improper personal benefit to the director, and for
payment of dividends or approval of stock repurchases or redemptions that are
unlawful under Delaware law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
federal environmental laws.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling us pursuant to the
foregoing provisions, we have been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
Page 14
<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses, to be borne by the Registrant, in connection with the
offering are as follows:
<TABLE>
<CAPTION>
Amount
----------
<S> <C>
Registration Fee Under Securities Act of 1933............ $ 81.84
NASD Filing Fee.......................................... $ *
Blue Sky Fees and Expenses............................... $ *
Printing and Engraving Certificates...................... $ *
Legal Fees and Expenses.................................. $ 7,000.00
Accounting Fees and Expenses............................. $ 5,000.00
Registrar and Transfer Agent Fees........................ $ *
Miscellaneous Expenses................................... $ *
TOTAL.............................................. $ 12,081.84
---------------
<FN>
* Not applicable or none.
</FN>
</TABLE>
ITEM 15 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by the Delaware General Corporation Law ("DGCL"), the Company's
Amended and Restated Certificate of Incorporation limits the personal liability
of directors to Dental/Medical Diagnostic Systems, Inc. for monetary damages for
certain breaches of fiduciary duty. Liability is not eliminated for (i) any
breach of the director's duty of loyalty to Dental/Medical Diagnostic Systems,
Inc. or its stockholders, (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) unlawful
payment of dividends or stock purchases or redemptions pursuant to Section 174
of the DGCL, or (iv) any transaction from which the director derived an improper
personal benefit.
Dental/Medical Diagnostic Systems, Inc. has also entered into indemnification
agreements with each of its directors and executive officers. The
indemnification agreements provide that the directors and executive officers
will be indemnified to the fullest extent permitted by applicable law against
all expenses (including attorneys' fees), judgments, fines and amounts
reasonably paid or incurred by them for settlement in any threatened, pending or
completed action, suit or proceeding, including any derivative action, on
account of their services as a director or officer of Dental/Medical Diagnostic
Systems, Inc. or of any subsidiary of Dental/Medical Diagnostic Systems, Inc. or
of any other company or enterprise in which they are serving at the request of
Dental/Medical Diagnostic Systems, Inc. No indemnification will be provided
under the indemnification agreements, however, to any director or executive
officer in certain limited circumstances, including on account of knowingly
fraudulent, deliberately dishonest or willful misconduct. To the extent the
provisions of the indemnification agreements exceed the indemnification
permitted by applicable law, such provisions may be unenforceable or may be
limited to the extent they are found by a court of competent jurisdiction to be
contrary to public policy.
Dental/Medical Diagnostic Systems, Inc. has purchased a directors and
officers liability insurance policy in the amount of $5,000,000.
Page 15
<PAGE>
ITEM 16 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See the Exhibit Index of this Registration Statement.
ITEM 17 UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement 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;
(2) That, for the purpose of determining liability under the Securities
Act, 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; and
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) 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.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment 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 the appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Page 16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Westlake Village, State of California, on January 18, 2000.
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
(Registrant)
By: /S/ ROBERT H. Gurevitch
-------------------------------------
Robert H. Gurevitch
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert H. Gurevitch and Stephen F. Ross and each
of them, his attorneys-in-fact, each with the power of substitution, 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 to sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, as amended, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or his 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 1993, as amended, this
Registration Statement on Form S-3 has been signed below by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/ Robert H. Gurevitch Chairman of the Board and January 18, 2000
- --------------------------------- Chief Executive Officer
Robert H. Gurevitch
/S/ Stephen F. Ross Chief Financial Officer
- --------------------------------- and Chief Accounting January 18, 2000
Stephen F. Ross Officer
/S/ Marvin H. Kleinberg Director January 18, 2000
- ---------------------------------
Marvin H. Kleinberg
/S/ Jack D. Preston Director January 18, 2000
- --------------------------------
Jack D. Preston
/S/ John Khademi Director January 18, 2000
- --------------------------------
John Khademi
</TABLE>
Page 17
<PAGE>
EXHIBIT INDEX
NO. ITEM
5.1 Opinion of Troop Steuber Pasich Reddick & Tobey, LLP
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Troop Steuber Pasich Reddick & Tobey, LLP (included as part of
Exhibit 5.1)
24.1 Power of Attorney (included in signature page)
99.1 Stock Purchase Agreement, dated as of September 29, 1999, by and between
Dental/Medical Diagnostic Systems, Inc., Chrysalis Dental, Inc., and the
several designated purchasers set forth therein.
Page 18
Exhibit 5.1
OPINION OF TROOP STEUBER PASICH REDDICK & TOBEY
January 18, 2000
Dental/Medical Diagnostic Systems, Inc.
200 North Westlake Boulevard, Suite 202
Westlake Village, CA 91362
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-3
(the "Registration Statement") to which this letter is attached as Exhibit 5.1
filed by Dental/Medical Diagnostic Systems, Inc., a Delaware corporation (the
"Company"), to register under the Securities Act of 1933, as amended (the
"Act"), 100,000 shares of Common Stock of the Company which may be registered
pursuant to Rule 415 under the Act (the "Shares").
We are of the opinion that the Shares have been duly authorized, validly
issued, fully paid and non-assessable.
We consent to the use of this opinion as an Exhibit to the Registration
Statement and to use of our name in the Prospectus constituting a part thereof.
Respectfully submitted,
/S/ Troop Steuber Pasich Reddick & Tobey, LLP
TROOP STEUBER PASICH REDDICK & TOBEY, LLP
Page 19
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated February 5, 1999, except for
subsequent events described in Note 19 as to which the date is March 18, 1999,
relating to the financial statements, which appear in Dental Medical Diagnostic
Systems, Inc.'s Annual Report on Form 10-KSB for the year ended December 31,
1998. We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
/S/ Pricewaterhouse Coopers LLP
Woodland Hills, California
January 13, 2000
EXHIBIT 99.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "AGREEMENT") is made and entered into
as of the 29th day of September, 1999 by and between Dental/Medical Diagnostic
Systems, Inc., a Delaware corporation, ("DMD" or the "COMPANY"), Chrysalis
Dental, Inc. ("CHRYSALIS" ), and the several designated purchasers whose name
and signature appears on the signature page to this Agreement (each a
"PURCHASER" and collectively the "PURCHASERS").
R E C I T A L S
WHEREAS, the Company and Chrysalis have entered into an Exclusive License
Agreement, dated as of September 29, 1999, pursuant to which the Company has
acquired from Chrysalis exclusive world-wide rights to market, sell and
distribute certain teeth whitening products (the "LICENSE");
WHEREAS, as consideration for the granting of rights pursuant to the
License, the Company has agreed to issue to Chrysalis an aggregate of 100,000
shares of the Company's common stock, par value $0.01 per share (the "SHARES");
and
WHEREAS, Chrysalis desires that the Company issue and deliver the Shares to
the Purchasers, in the amounts set forth opposite each Purchaser's name on the
signature page hereto.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement and the License, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. PURCHASE AND SALE OF STOCK. On the terms and subject to the conditions
set forth in this Agreement, the Company agrees to sell and deliver to the
Purchasers, and each Purchaser agrees to purchase and acquire from the Company,
that number of Shares set forth below such Purchaser's signature on the
signature page(s) of this Agreement, free and clear of any and all liens, claims
and encumbrances of any kind.
2. CONSIDERATION. The consideration for the Shares (the "PURCHASE PRICE")
consists of an exclusive world wide license to a tooth whitening formula
designed and developed by Chrysalis, as provided for in License. Chrysalis
hereby represents and warrants to the
<PAGE>
Company that each of the Purchasers is affiliated with Chrysalis, and,
notwithstanding anything to the contrary provided therein, that the issuance to
the Purchasers of the Shares pursuant to this Agreement shall constitute full
and complete performance of the Company's obligations as set forth in Section II
of the License.
3. THE CLOSING. The closing (the "CLOSING") of the purchase and sale of the
Shares shall take place on October 18, 199 at the offices of Troop Steuber
Pasich Reddick & Tobey, LLP, 2029 Century Park East, 24th Floor, Los Angeles,
California 90067. All documents and other deliveries at the Closing may be
exchanged by mail. The date of the Closing is referred to herein as the Closing
Date.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each
Purchaser represents and warrants to the Company as follows:
4.1 It understands an investment in the Shares involves a high degree
of risk, and it is able to bear the risk of an entire loss of the investment; it
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of an investment in the Shares.
4.2 It understands that the Shares have not been registered under the
Securities Act or under any state securities laws. It is familiar with the
provisions of the Securities Act and Rule 144 thereunder and understands that
the restrictions on transfer placed on the Shares may result in it being
required to hold the Shares for a certain period of time.
4.3 It is acquiring the Shares for the its own account, and not as a
nominee or agent for others, and not with a view to resale or distribution of
any part thereof, and it has no present intention of selling or distributing the
Shares.
4.4 It is, and each of its shareholders is, an "accredited" investor
for purposes of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act of 1933.
4.5 It believes that it has received all the information it considers
necessary or appropriate for deciding whether to purchase the Shares, and it has
had an opportunity to ask questions and receive answers from the Company and its
officers and directors regarding the business, prospects and financial condition
of the Company.
4.6 It agrees not to sell, assign, transfer or otherwise dispose of
(collectively, "TRANSFER") any of the Shares except pursuant to an effective
registration statement under the Securities Act or an exemption from
registration. As a further condition to any such Transfer, except in the event
that such Transfer is made pursuant to an effective registration statement under
the Securities Act, if in the reasonable opinion of counsel to the Company any
Transfer of the Shares by the contemplated transferee thereof would not be
exempt from the
Page 2
<PAGE>
registration and prospectus delivery requirements of the Securities Act, the
Company may require the contemplated transferee to furnish the Company with an
investment letter setting forth such information and agreements as may be
reasonably requested by the Company to ensure compliance by such transferee with
the Securities Act.
4.7 Each certificate evidencing the Shares will bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") OR STATE SECURITIES LAWS AND NO TRANSFER
OF THESE SECURITIES MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, OR (B) PURSUANT TO AN EXEMPTION THEREFROM WITH RESPECT
TO WHICH THE COMPANY MAY, UPON REQUEST, REQUIRE A SATISFACTORY OPINION OF
COUNSEL FOR THE HOLDER THAT SUCH TRANSFER IS EXEMPT FROM THE REQUIREMENTS OF THE
ACT."
5. REGISTRATION RIGHTS
5.1 REGISTRATION PROCEDURES AND EXPENSES. The Company shall use
commercially reasonable efforts to effect the registration for resale by the
Purchasers of the Shares on Form S-3 under the Securities Act within six months
of the date hereof by performing the following:
5.1.1 The Company shall use all best efforts to cause to be
prepared and filed with the Commission a registration statement with respect to
the Shares, and use all reasonable efforts to cause such registration statement
to become and remain effective for a period of not less than twelve months
following the effective date of such registration statement or, if shorter,
until all of the Shares have been sold.
5.1.2 The Company shall cause to be prepared and filed with
the Commission such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to update
and keep such registration statement effective for the period set forth in
Section 5.1.1. above and to comply with the provisions of the Securities Act
with respect to the sale of all securities covered by such registration
statement. Notwithstanding anything else to the contrary contained herein,
neither the Company or any of its affiliates shall be required to disclose any
confidential information concerning pending acquisitions not otherwise required
to be disclosed.
5.1.3 The Company shall cause to be furnished to the
Purchasers such number of copies of the final prospectus as the Purchasers may
reasonably request in writing to the Company in order to facilitate the sale of
the Shares. Each Purchaser shall comply with all prospectus delivery
requirements under the Securities Act. It shall be a condition to the Company's
obligations to effect registration of the Shares that Chrysalis, each Purchaser
and others participating in such registration provide the Company and any
underwriter identified
Page 3
<PAGE>
by a majority-in-interest of the Purchasers, with all material facts including,
without limitation, furnishing such certificates, questionnaires and legal
opinions as may be required by the Company or such underwriter concerning such
participating sellers and the Shares to be registered which are reasonably
required to be stated in the registration statement or in the prospectus or are
otherwise required in connection with the offering.
5.1.4 ALLOCATION OF EXPENSES. All expenses incurred by the
Company or its affiliates in complying with this Section, including, without
limitation, all registration and filing fees, printing expenses, and fees and
disbursements of counsel for the Company and its affiliates, are herein called
Registration Expenses. All selling commissions applicable to the sales of the
Shares and all fees and disbursements of counsel for Chrysalis and the
Purchasers are herein called Selling Expenses. The Company will pay all
Registration Expenses in connection with registration pursuant to this Section
5.1. All Selling Expenses in connection with such registration shall be borne by
Chrysalis.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
6.1 ORGANIZATION, STANDING AND CORPORATE POWER. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with adequate corporate power and authority to own its
properties and carry on its business as presently conducted. The Company has the
corporate power to enter into, execute and deliver this Agreement and the
agreements referred to herein and to consummate the transactions contemplated
hereby and thereby.
6.2 EXECUTION, DELIVERY AND PERFORMANCE. The execution, delivery and
performance of this Agreement and the other agreements referred to herein and
the consummation of the transactions contemplated hereby and thereby have been
or will prior to the Closing be duly authorized by the Board of Directors of the
Company, and the Company has taken all other actions required by law, its
Certificate of Incorporation and its Bylaws in order to consummate the
transactions contemplated by this Agreement and the other agreements referred to
herein. This Agreement and the other agreements referred to herein constitute
the valid and binding obligations of the Company and are enforceable in
accordance with their respective terms, except as enforceability may be subject
to or limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally.
6.3 AUTHORIZED AND OUTSTANDING STOCK. The Shares, when issued in
accordance with the provisions of this Agreement, will be duly authorized and
validly issued and fully paid and nonassessable and, assuming the accuracy of
the Purchaser's and Chrysalis' representations and warranties contained
elsewhere herein, will be issued in compliance with federal securities laws.
7. MISCELLANEOUS.
Page 4
<PAGE>
7.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. No party other than the Company may assign any of its rights, or
delegate any of its duties or obligation, under this Agreement without the prior
written consent of the other parties, and any such purported assignment or
delegation shall be void AB INITIO. Notwithstanding the foregoing, the Company,
its affiliates, and its successors and assigns, may assign its rights and
delegate its duties to any successor entity resulting from any liquidation,
merger, consolidation, reorganization, or transfer of all or substantially all
of the assets or stock of the Company.
7.2 NOTICES. All notices, demands and other communications
(collectively, "Notices") given or made pursuant to this Agreement shall be in
writing and shall be deemed to have been duly given if sent by registered or
certified mail, return receipt requested, postage and fees prepaid, by overnight
service with a nationally recognized "next day delivery company such as Federal
Express or United Parcel Service, by facsimile transmission, or otherwise
actually delivered to the following addresses:
(a) if to the Company:
Dental/Medical Diagnostic Systems, Inc.
200 North Westlake Boulevard, Suite 202
Westlake Village, California 91362
Fax No. (805) 374-2137
Attn: Robert H. Gurevitch
(b) if to Chrysalis:
Chrysalis Dental, Inc.
11322 South O'Henry Road
Sandy, Utah 84070
Attention: Dr. Alan H. Anderson
(c) if to the Purchasers, with respect to each Purchaser, to
the address set forth opposite its name on the signature page(s) to this
Agreement.
Any Notice shall be deemed duly given when received by the addressee thereof,
provided that any Notice sent by registered or certified mail shall be deemed to
have been duly given two business days from the date of deposit in the United
States mails, unless sooner received and any notice sent by overnight service as
provided above shall be deemed to have been duly given the next business day
from the date of deposit with the service. Any of the parties to this Agreement
may from time to time change its address for receiving notices by giving written
notice thereof in the manner set forth above.
Page 5
<PAGE>
7.3 AMENDMENT; WAIVER. No provision of this Agreement may be waived
unless in writing signed by all of the parties to this Agreement, and the waiver
of any one provision of this Agreement shall not be deemed to be a waiver of any
other provision. This Agreement may be amended only by a written agreement
executed by all of the parties to this Agreement.
7.4 DISPUTE RESOLUTION. Any dispute or claim arising hereunder shall
be settled by arbitration. Any party may commence arbitration by sending a
written notice of arbitration to the other party. The notice will state the
dispute with particularity. The arbitration hearing shall be commenced thirty
(30) days following the date of delivery of notice of arbitration by one party
to the other, by the American Arbitration Association ("AAA") as arbitrator. The
arbitration shall be conducted in Los Angeles, California in accordance with the
commercial arbitration rules promulgated by AAA, and each party shall retain the
right to cross- examine the opposing party's witnesses, either through legal
counsel, expert witnesses or both. The decision of the arbitrator shall be
final, binding and conclusive on all parties (without any right of appeal
therefrom) and shall not be subject to judicial review. As part of his decision,
the arbitrator may allocate the cost of arbitration, including fees of attorneys
and experts, as he or she deems fair and equitable in light of all relevant
circumstances. Judgment on the award rendered by the arbitrator may be entered
in any court of competent jurisdiction.
7.5 GOVERNING LAW. This Agreement shall be governed by and construed
both as to validity and performance and enforced in accordance with the laws of
the State of California without giving effect to the choice of law principles
thereof.
7.6 REMEDIES CUMULATIVE. Each of the various rights, powers and
remedies shall be deemed to be cumulative with, and in addition to, all the
rights, powers and remedies which the Company may have hereunder or under
applicable law relating hereto or to the subject matter hereof, and the exercise
or partial exercise of any such right, power or remedy shall constitute neither
an exclusive election thereof nor a waiver of any other such right, power or
remedy.
7.7 HEADINGS. The section and subsection headings contained in this
Agreement are included for convenience only and form no part of the agreement
between the parties.
7.8 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be or become
prohibited or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
7.9 EXPENSES. Each party shall pay its own costs, expenses, including
without limitation, the fees and expenses of their respective counsel and
financial advisors.
7.10 ENTIRE AGREEMENT. Except as set forth in the License, this
Agreement constitutes and embodies the entire understanding and agreement of the
parties hereto
Page 6
<PAGE>
relating to the subject matter hereof and there are no other agreements or
understandings, written or oral, in effect between the parties relating to such
subject matter except as expressly referred to herein. Notwithstanding anything
in the License to the contrary, this Agreement constitutes and embodies the
entire understanding and agreement of the parties hereto relating to the
issuance and sale of the Shares.
[Signature Page Follows]
Page 7
<PAGE>
IN WITNESS WHEREOF, this Stock Purchase Agreement has been executed as of
the date first set forth above.
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
200 North Westlake Boulevard, Suite 202
Westlake Village, California 91362
By: /S/ STEPHEN F. ROSS
--------------------------------------
Its: Chief Financial Officer
CHRYSALIS DENTAL, INC.
11322 South O'Henry Road
Sandy, Utah 84070
By: /S/ [ILLEGIBLE]
--------------------------------------
Its: Secretary/Treasurer
PURCHASERS:
/S/ ALAN ANDERSON Name: Alan Anderson
- ----------------------- Address: 7931 Shaggy Mountain Road
Alan Anderson Herriman, UT 84065
No. of Shares: 25,000
/S/ FRANK MCNEIL Name: Frank McNeil
- ----------------------- Address: 8420 Willow Creek Drive
Frank McNeil Sandy, UT 84093
No. of Shares: 25,000
/S/ DOUG ARAKAWA Name: Doug Arakawa
- ----------------------- Address: 1210 Carmel Terrace
Doug Arakawa Los Altos, CA 92024
No. of Shares: 25,000
[Additional Signatures Follow]
Page 8
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/S/ DAVID MCCULLOCH Name: David McCulloch
- ----------------------- Address: 11322 S. O'Henry Road
David McCulloch Sandy, UT 84070
No. of Shares: 20,000
TECHNOLOGY & PROPERTY RESOURCES
By: /S/ TODD ZENGER Address: 2565 E. Lambourne Ave.
- ----------------------- Salt Lake City, UT 84109
Todd Zenger
Manager
No. of Shares: 5,000
