<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 For the
Quarter Ended September 30, 1996.
/ / Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 For the
transition period from ___ to .
Commission File No: 0-19195
AMERICAN DENTAL TECHNOLOGIES, INC.
(Exact Name of Registrant as specified in its charter)
Delaware 38-2905258
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
28411 Northwestern Highway, Suite 1100 48034-5541
Southfield, Michigan
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(810) 353-5300
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
Number of shares outstanding of the registrant's common stock as of
November 12, 1996:
27,526,567 Shares
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
American Dental Technologies, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $4,046,803 $2,286,035 $14,220,805 $10,138,871
Cost of sales 2,239,963 1,266,038 8,160,367 5,034,082
--------- --------- --------- ---------
Gross profit 1,806,840 1,019,997 6,060,438 5,104,789
Selling, general
and administrative 997,924 1,640,997 3,633,071 5,092,450
Research and development 84,905 317,663 488,149 812,324
--------- --------- --------- ---------
Income (loss) from operations 724,011 (938,663) 1,939,218 (799,985)
Other income (expense):
Royalty income:
Related Party (Note 3) 13,500 261,000
Other 3,492 2,000 24,039 30,806
Other 35,944 19,657
Interest expense (14,448) (31,169) (95,664) (67,889)
--------- --------- --------- ---------
Net income (loss) $ 748,999 $(954,332) $1,887,250 $(576,068)
========= ========== ========== ==========
Net income (loss) per share $ 0.02 $ (0.06) $ 0.08 $ (0.04)
========= ========== ========== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
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American Dental Technologies, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,665,833 $1,665,718
Accounts receivable:
Trade, less allowance of $350,000 in 1996
and $375,000 in 1995 989,631 1,220,010
Related parties 1,155,885 724,283
--------- ---------
2,145,516 1,944,293
Inventories 3,131,447 1,905,856
Prepaid expenses and other current assets 730,286 534,074
--------- ---------
Total current assets 7,673,082 6,049,941
Prepaid foreign taxes 300,000 225,000
Deposit (Note 2) 1,410,267
Property and equipment, net 1,438,543 262,042
Intangible assets, net
Goodwill (Note 2) 9,546,102 3,661,200
Air abrasive technology rights 1,133,718 1,267,998
Other 215,337 108,248
----------- -----------
10,895,157 5,037,446
----------- -----------
Total assets $20,306,782 $12,984,696
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to related parties (Notes 2 and 3) $200,000 $1,700,000
Accounts payable:
Trade 2,276,470 2,839,548
Related parties 45,000 884,374
---------- ----------
2,321,470 3,723,922
Compensation and employee benefits 341,979 346,668
Taxes other than income 417,895 607,177
Other accrued liabilities 887,438 1,109,464
---------- ----------
Total current liabilities 4,168,782 7,487,231
Deferred royalty income 3,000,000 3,000,000
Other non-current liabilities 6,285 64,993
Notes payable to related party,
less current portion (Note 3) 400,000 600,000
Stockholders' equity:
Preferred stock, $.01 par value, authorized
10,000,000 shares; none outstanding
Common stock, $.01 par value, authorized
50,000,000 shares; outstanding: 27,526,567 275,265 157,387
Additional paid-in capital 40,182,302 31,288,188
Accumulated deficit (27,725,852) (29,613,103)
------------ ------------
Total stockholders' equity 12,731,715 1,832,472
------------ ------------
Total liabilities and stockholders' equity $ 20,306,782 $ 12,984,696
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
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American Dental Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1996 1995
---------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 1,887,250 $ (576,068)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation 199,053 328,500
Amortization 468,891 355,020
Gain on disposal of fixed assets (960) (11,533)
Changes in operating assets and liabilities:
Decrease in accounts receivable 353,689 142,078
Increase in inventories (166,381) (309,516)
Decrease in prepaid expenses and other
current assets 49,277 41,855
Increase in prepaid foreign taxes (75,000) (225,000)
(Decrease) increase in accounts payable (1,887,683) 44,889
(Decrease) increase in compensation and
employee benefits (4,689) 127,327
Decrease in taxes other than income (189,282) (155,196)
Decrease in other accrued liabilities (473,904) (68,129)
Decrease in other non-current liabilities (25,708) (49,834)
----------- -----------
Net cash provided by (used in) operating activities 134,553 (355,607)
INVESTING ACTIVITIES:
Proceeds from sale of property 960 31,344
Purchases of property and equipment (38,307) (29,621)
Decrease in non-current deposits (Note 2) 1,410,267
Cash acquired from Texas Airsonics, Inc. 217,772
Increase in intangible assets (322,215)
----------- -----------
Net cash provided by investing activities 1,268,477 1,723
FINANCING ACTIVITIES:
Payments on note payable to related parties (Note 3) (200,000) (200,000)
Payments on note payable (Note 2) (1,290,000)
Proceeds from sale of common stock 800,000
Proceeds from exercise of stock options 87,085
Proceeds from note payable to related party 1,500,000
----------- -----------
Net cash provided by (used in) financing activities (1,402,915) 2,100,000
Increase in cash 115 1,746,116
Cash at beginning of period 1,665,718 839,259
----------- -----------
Cash at end of period $ 1,665,833 $ 2,585,375
=========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements
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American Dental Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 1996 (Unaudited)
1. Basis of Presentation and Other Accounting Information
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
American Dental Technologies, Inc. (the "Company" or "ADT") have been prepared
by management in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included.
The results of operations for the three and nine months ended September 30,
1996 are not necessarily indicative of the results to be expected for other
quarters of 1996 or for the year ended December 31, 1996. The accompanying
unaudited condensed consolidated financial statements should be read with the
annual consolidated financial statements and notes contained in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995.
Inventories - Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
<S> <C> <C>
Finished goods $1,330,136 $1,261,853
Work in progress 188,382 39,638
Raw materials, parts and supplies 1,612,929 604,365
---------- ----------
$3,131,447 $1,905,856
========== ==========
</TABLE>
Property and equipment - Accumulated depreciation aggregated $2,249,386 at
September 30, 1996 and $2,065,633 at December 31, 1995.
Intangible Assets - Accumulated amortization aggregated $1,998,291 at
September 30, 1996 and $1,529,400 at December 31, 1995.
2. Texas Airsonics, Inc. Acquisition
On July 31, 1996 the Company acquired 100% of Texas Airsonics, Inc.'s ("Texas
Air's") outstanding common stock in exchange for 11,429,772 shares of the
Company's common stock and warrants to purchase 6,996,913 additional shares of
common stock at $1.4041 per share for a period commencing August 1, 1997 and
ending July 31, 1999. The acquisition has been accounted for as a purchase, and
accordingly, the total value of common stock and warrants issued ($8,572,329)
has been allocated to the acquired assets and assumed liabilities based on their
estimated fair values as of the acquisition date and the excess consideration of
$6,098,599 has been accounted for as goodwill and will be amortized over a
fifteen year period.
The following unaudited pro forma summary of operations is presented as though
Texas Air was acquired at the beginning of each period.
<TABLE>
<CAPTION>
Nine Months Ended September 30
1996 1995
---- ----
<S> <C> <C>
Revenues $14,674,526 $10,832,478
Net income (loss) 1,632,820 (462,873)
Net income (loss) per share $0.05 $(0.02)
</TABLE>
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American Dental Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 1996 (Unaudited)
2. Texas Airsonics, Inc. Acquisition (continued)
Texas Air shared research and development, legal, and marketing costs of
$1,220,000 through July 31, 1996.
On August 7, 1995, ADT obtained a $1,500,000 loan from Texas Air with interest
payable at prime and due on a quarterly basis. Approximately $1,410,000 of
these loan proceeds had been deposited with a California court to stay
enforcement of a judgment against ADT, pending an appeal. That case was
recently settled and the funds were released by the court and the loan repaid
(Note 4). ADT's obligations to Texas Air had been secured by a pledge of all
ADT's assets, which was released upon repayment of the loan.
3. Related Party Transactions
DENICS CO., LTD. The Company has a note payable to Denics Co., Ltd.
("Denics"), with interest at 3% above the discount rate in Japan (0.5% at
September 30, 1996). As of September 30, 1996, $600,000 was outstanding.
Borrowings are being repaid in annual principal installments of $200,000 over a
five year period which began in June 1995. Borrowings are secured by an
assignment of the Company's Japanese patents and related technologies.
Denics manufactured dental lasers in the third quarter of 1994 through 1995 and
pursuant to its agreements, the Company earned a royalty on those laser units
sold in Japan and certain Asian and Pacific markets. The Company earned
royalty payments, net of foreign taxes, of $13,500 and $261,000 during the
three and nine month periods ended September 30, 1995, respectively. No
royalty payments were due from Denics for the three and nine month periods
ended September 30, 1996 because Denics purchased products directly from the
Company. Management expects that during the remainder of 1996, Denics will
continue to purchase products directly from the Company rather than
manufacturing them, which will result in no royalty income, but sales and gross
profits to the Pacific Rim market will increase. Denics has placed an order in
excess of $5,000,000 for PulseMaster lasers, KCP units and related products to
be shipped ratably in 1996.
OTHER On April 15, 1996, the Company acquired an ophthalmic excimer laser from
a principal shareholder and director. The laser has been placed in a surgical
center and is being utilized to perform photo-refractive keratotomy (PRK). The
Company receives a fee from the surgical center on a per use basis. The
purchase price of the laser is approximately $525,800, which is to be paid in
restricted common stock together with a warrant to purchase an equal number of
shares of common stock at market value, exercisable until April 1999. The
first of two installments of restricted common stock and warrants was made in
April 1996 and the second installment is due in April 1997. The laser can be
returned and the second installment canceled at the Company's option, at any
time up to March 31, 1997. The first installment of 155,780 shares, based upon
the average closing sale price of the Company's common stock for the first five
trading days of April, together with a warrant to acquire 155,780 shares at an
exercise price equal to said average price of $1.6875 per share was made on
April 15, 1996.
4. Litigation
On July 30, 1996, American Dental Technologies, Inc. ("ADT") and Sunrise
Technologies International, Inc. ("Sunrise") settled all lawsuits pending
between them. A pending appeal relating to disputes arising out of a February
1994 settlement agreement between the parties has been dismissed and Sunrise
has relinquished and forgiven the $940,178 judgment it received against ADT in
August 1995. The approximately $1,410,000 cash deposit posted by ADT with the
court, pending the appeal of that case, has been released and the loan
referenced in Note 2 was repaid. In addition, all three patent cases between
the parties have been dismissed, with prejudice. Mutual general releases have
also been exchanged. Related patent claims pending between ADT and Danville
Manufacturing, Inc. and Sullivan Dental Products Inc. have also been dismissed.
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American Dental Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 1996 (Unaudited)
4. Litigation (continued)
ADT has licensed Sunrise under its dental air abrasive method and systems
patents in return for a seven percent royalty on all air abrasive products
manufactured (by or on behalf of Sunrise), sold, or leased by Sunrise, in a
country where ADT has patents or patent applications on any dental air abrasive
products or methods. Sunrise has acknowledged the validity of ADT's method and
system patents. ADT has acknowledged that Sunrise's current products are not
infringing ADT's apparatus patents, or any other non-dental air abrasive
patents owned by ADT. Sunrise's patent license is non-exclusive, may not be
sub-licensed and is non-transferable for 18 months.
5. Subsequent Events
In October 1996, the Company obtained a $2,500,000 one year revolving line of
credit from a bank, with interest at prime (8.25% at September 30, 1996). The
line of credit is secured by a pledge of the Company's accounts receivable,
inventory and fixed assets. As of October 31, 1996, $500,000 was outstanding.
On October 31, 1996, the Company entered an agreement with Denics to form a
joint venture to distribute dental products in certain Asian and Pacific
markets beginning April 1, 1997. Under the terms of the agreement, the Company
will issue $1,000,000 of common stock to Denics, in equal installments of
$333,333 in December 1996, April 1997 and April 1998, as consideration for 50%
ownership of the joint venture. The Company will be responsible for the
management of the joint venture.
On October 31, 1996, the Company modified its agreement with Denics relating to
manufacturing rights and royalties for the Company's products in Japan. Denics
confirmed that the Company has earned the $3,000,000 prepaid royalty as of
December 31, 1996 and that ADT has fulfilled all obligations under previous
agreements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
For the three and nine month periods ended September 30, 1996, the Company's
net sales increased 77% and 40% compared to the same periods in 1995. The
increases in 1996 are due primarily to a 157% and 75% increase in the volume of
KCPs sold for the three and nine month periods over the same periods for 1995.
The Company's laser product sales volumes for the three and nine month periods
ended September 30, 1996 decreased 13% and increased 1%, respectively, compared
to the same periods in 1995. The effect of the increase in KCP volumes on net
sales was partially offset by the 13% decrease in volume of lasers sold and a
decrease of 12% in the average price of lasers sold.
Management believes that the sales growth and profitability anticipated from
its laser product line will require broader market acceptance of laser products
in general, increased market share, additional regulatory approvals and
additional cost reductions. The Company is continuing its efforts to obtain
additional regulatory approvals in the United States and Japan and to increase
the Company's market share to improve laser sales growth and to achieve
profitability in the laser product line.
Management anticipates sales will continue to improve in the fourth quarter
of 1996 compared to the fourth quarter of 1995, primarily from improved sales
through the distributors of the KCP 1000 whisperjet and the PulseMaster 600 LE
laser in the United States and the Pacific Rim. The Company has experienced
significant sales increases in the United States during 1996 and
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management expects that trend to continue through at least mid 1997. The
increase in the United States has been partially offset by lower sales in
Germany, due primarily to dealer inventories and unfavorable changes in the
German health care reimbursement system. The foregoing statements are "forward
looking statements" within the meaning of the Securities Exchange Act of 1934,
as amended, and are subject to uncertainties. Such uncertainties include,
without limitation, the potential failure of distributors to meet purchase
commitments, the potential loss of distributor relationships, the potential
failure to receive necessary regulatory approvals, and the extent to which
competition may negatively affect prices and sales volumes.
Gross profit as a percentage of net sales for the three and nine month
periods ended September 30, 1996 was 45% and 43% compared to 45% and 50% for
the same periods in 1995. The decrease in gross profit as a percentage of net
sales for the nine months ended September 30, 1996 is due primarily to an
increase in sales of the KCP 1000 PAC, a lower margin product. As a result of
acquiring Texas Air, the manufacturer of the KCP product line, the Company
anticipates improved gross margins on KCP products due to the addition of
manufacturing margin previously realized by Texas Air. The foregoing
statement is a "forward looking statement" within the meaning of the Securities
Exchange Act of 1934, as amended, and is subject to uncertainties. Such
uncertainties include, without limitation, the extent to which competition
may negatively affect prices and sales volumes and ADT's ability to
successfully integrate Texas Air's business into ADT and to retain key
personnel.
Selling, general and administrative expense decreased $643,073 or 39% and
$1,459,379 or 29% for the three and nine month periods ended September 30, 1996
compared to the same periods in 1995. Pursuant to its manufacturing agreement,
Texas Air shared research and development, legal, and marketing expenses of
approximately $570,000 and $1,220,000 during the three and nine month periods
ended September 30, 1996. In addition, there were reductions in legal and
depreciation expenses for the same nine month period compared to the period
ended September 30, 1995.
Research and development expenses were $84,905 and $488,149 for the three and
nine month periods ended September 30, 1996 compared to $317,663 and $812,324
for the same periods in 1995. The decrease in 1996 primarily relates to sharing
of such expenses with Texas Air.
Related party royalty income is derived from the sale of products by Denics
Co., Ltd. ("Denics"), ADT's distributor in Japan and certain Asian and Pacific
markets. Denics manufactured dental lasers in the third quarter of 1994
through 1995, and pursuant to its agreements, ADT earned a royalty on
units sold in Japan and certain Asian and Pacific markets. There was no
related party royalty income for the three and nine month periods ended
September 30, 1996 because Denics purchased products directly from ADT.
Related party royalty income was $13,500 and $261,000 for the three and nine
month periods ended September 30, 1995. Management expects that during the
remainder of 1996, Denics will continue to purchase products directly from ADT
rather than manufacturing them, which will result in a significant reduction in
royalty income, but sales and gross profits to the Pacific Rim market will
increase.
Business Combination
In late July 1996, the Company and Texas Airsonics, Inc. ("Texas Air")
stockholders approved the merger, which was consummated July 31, 1996. The
Company acquired 100% of Texas Air's outstanding stock in exchange for
11,429,772 shares of the Company's common stock and warrants to purchase
6,996,913 additional shares of common stock at $1.4041 per share for a period
commencing August 1, 1997 and ending July 31, 1999. The acquisition has been
accounted for as a purchase, and accordingly, the total value of common stock
and warrants issued ($8,572,329) has been allocated to the acquired assets and
assumed liabilities based on their estimated fair values as of the acquisition
date and the excess consideration of $6,098,599 has been accounted for as
goodwill and will be amortized over a fifteen year period. The Company expects
to benefit from improved gross margins and cash flow from the manufacturing
operations acquired from Texas Air. The foregoing statement is a "forward
looking statement" within the meaning of the Securities Exchange Act of 1934,
as amended, and is subject to uncertainties. Such uncertainties include,
without limitation, the extent to which competition may negatively affect
prices and sales volumes and ADT's ability to successfully integrate Texas
Air's business into ADT and to retain key personnel.
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Liquidity and Capital Resources
In October 1996, the Company obtained a $2,500,000 one year revolving line of
credit from a bank, with interest at prime (8.25% at September 30, 1996). The
Company's borrowing base is 80% of eligible accounts receivable and 50% of
inventory. The line of credit is secured by a pledge of the Company's accounts
receivable, inventory and fixed assets. As of October 31, 1996, $500,000 was
outstanding.
On August 7, 1995, ADT obtained a $1,500,000 loan from Texas Air with
interest payable at prime and due on a quarterly basis. Approximately
$1,410,000 of these loan proceeds had been deposited with a California court
to stay enforcement of a judgment against ADT, pending an appeal. That case
was recently settled and the funds were released by the court and the loan
repaid. ADT's obligations to Texas Air had been secured by a pledge of all
ADT's assets, which was released upon repayment of the loan.
The Company has a note payable to Denics Co., Ltd. ("Denics"), with interest
at 3% above the discount rate in Japan (0.5% at September 30, 1996). As of
September 30, 1996, $600,000 was outstanding. Borrowings are being repaid in
annual principal installments of $200,000 over a five year period which began
in June 1995. Borrowings are secured by an assignment of the Company's
Japanese patents and related technologies.
The Company's operating activities provided $134,553 in cash resources during
the nine month period ended September 30, 1996, compared to $355,607 used in
the same period of 1995. The cash provided by operations during the nine
months ended September 30, 1996 is primarily due to net income of $1,887,250,
resulting primarily from higher United States KCP sales, and $666,984 in
non-cash adjustments to net income, which were offset by a $1,887,683 decrease
in accounts payable, primarily to Texas Air, and a $473,904 decrease in other
current liabilities, primarily customer deposits of approximately $450,000.
The Company has working capital of $3,557,775 at September 30, 1996 compared
to a working capital deficit of $1,437,290 at December 31, 1995. The
significant increase in working capital is primarily a result of net income
of $1,887,250 for the nine month period ended September 30, 1996, the return of
the non-current deposit of $1,410,000 and the working capital of Texas Air
acquired by the Company.
Management believes it has taken steps to strengthen its financial position
and improve its cash flow by acquiring Texas Air in July 1996, securing a
$2,500,000 revolving line of credit and continuing its efforts to expand sales
and control selling, general and administrative expenses. The Company expects
to benefit from improved gross margins and cash flow from the manufacturing
operations of Texas Air. The foregoing statement is a "forward looking
statement" within the meaning of the Securities Exchange Act of 1934, as
amended, and is subject to uncertainties. Such uncertainties include, without
limitation, the extent to which competition may negatively affect prices and
sales volumes and the Company's ability to successfully integrate Texas Air's
business into the Company and to retain key personnel.
Sales thus far in 1996 are in line with the Company's business plan and
management expects that trend to continue. Although there can be no assurances,
the Company anticipates sales will continue to improve in 1996 compared to 1995,
primarily resulting from sales of the KCP 1000 whisperjet and the PulseMaster
600 LE laser in the United States and the Pacific Rim. The Company has
experienced significant sales increases in the United States during 1996 and
management expects that trend to continue through at least mid 1997. The
increase in the United States has been partially offset by lower sales in
Germany, due primarily to dealer inventories and unfavorable changes in the
German health care reimbursement system. The foregoing statements in this
paragraph are "forward looking statements" within the meaning of the Securities
Exchange Act of 1934, as amended, and are subject to uncertainties. Such
uncertainties include, without limitation, the potential failure of
distributors to meet purchase commitments, the potential loss of distributor
relationships, the potential failure to receive necessary regulatory approvals
and the extent to which competition may negatively affect prices and sales
volumes.
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The Company believes, based upon its current business plan, that current cash
and financing resources and cash generated through operations should be
sufficient to meet the Company's anticipated liquidity needs through at least
the end of 1997.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As reported in the Company's Form 10-Q for June 30, 1996, American Dental
Technologies, Inc. ("ADT") and Sunrise Technologies International, Inc.
("Sunrise") settled all lawsuits pending between them. An appeal pending in
the California Court of Appeal, First Appellate District, Division Four
relating to disputes arising out of a February 1994 settlement agreement
between the parties has been dismissed and Sunrise has relinquished and
forgiven the $940,178 judgment it received against ADT in August 1995 in the
Superior Court for the County of Alameda-Southern Division. The approximately
$1,410,000 cash deposit posted by ADT with the court, pending the appeal of
that case, has been released and returned to ADT. In addition, all three
patent cases between the parties pending in the United States District Court
for the Northern District of California, have been dismissed, with prejudice.
Mutual general releases have also been exchanged. Related patent claims
pending between ADT and Danville Manufacturing, Inc. and Sullivan Dental
Products Inc. have also been dismissed.
ADT has licensed Sunrise under its dental air abrasive method and systems
patents in return for a seven percent royalty on all air abrasive products
manufactured (by or on behalf of Sunrise), sold, or leased by Sunrise, in a
country where ADT has patents or patent applications on any dental air abrasive
products or methods. Sunrise has acknowledged the validity of ADT's method and
system patents (U. S. Patent Numbers 5,275,561, 5,330,354, 5,350,299 and
5,525,058). ADT has acknowledged that Sunrise's current products are not
infringing ADT's apparatus patents (U.S. Patent Numbers 4,635,897, 4,708,534,
4,733,503 and 4,893,440), or any other non-dental air abrasive patents owned by
ADT. Sunrise's patent license is non-exclusive, may not be sub-licensed and is
non-transferable for 18 months. If within two years of July 30, 1996 Sunrise
transfers all of its dental air abrasive business to another, then ADT will
also be entitled to ten percent of the gross consideration Sunrise receives for
the transfer of the license and the dental air abrasive business and the
transferee must assume Sunrise's obligations under the license.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits:
4.1 American Dental Technologies, Inc. Amended and Restated
Long Term Incentive Plan
11.1 Statements re: Computation of Net Income (Loss) Per Share
27.1 Financial Data Schedule
(b) On August 9, 1996, the Company filed a Current Report on Form 8-K
disclosing information under Items 1, 2 and 7 relating to the acquisition of
Texas Airsonics, Inc. The report included audited balance sheets of Texas
Airsonics, Inc. as of December 31, 1994 and 1995 and audited statements of
operations, cash flows and stockholders' equity of Texas Airsonics, Inc. for
the years ended December 31, 1993, 1994 and 1995, an unaudited balance sheet of
Texas Airsonics, Inc. as of March 31, 1996 and unaudited statements of
operations and cash flows of Texas Airsonics, Inc. for the three months then
ended, and unaudited pro forma balance sheets of the Company as of December 31,
1995 and March 31, 1996 and unaudited statements of operations of the Company
for the year ended December 31, 1995 and the three months ended March 31, 1996.
The Company filed a Current Report on Form 8-K on October 1, 1996
disclosing information under Item 1 relating to the September 24, 1996
appointment of Mr. Ben J. Gallant as the Company's President and Chief
Operating Officer. The report contained no financial statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN DENTAL TECHNOLOGIES, INC.
By: Ben J. Gallant
President and
Chief Operating Officer
Dated: November 13, 1996
By: Diane M. Miller
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: November 13, 1996
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INDEX TO EXHIBITS
Exhibit No.
- -----------
Exhibit 4.1 American Dental Technologies, Inc. Amended and Restated
Long Term Incentive Plan
Exhibit 11.1 Statement Re: Computation of Net Income (Loss) Per Share
Exhibit 27.1 Financial Data Schedule
<PAGE> 1
EXHIBIT 4.1
AMERICAN DENTAL TECHNOLOGIES, INC.
AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN
I. GENERAL PROVISIONS
1.1 Adoption. Subject to stockholder approval, the Board of Directors
("Board") of American Dental Technologies, Inc. ("Corporation") on March 23,
1993 approved the Corporation's Long-Term Incentive Plan. Subject to further
stockholder approvals, the Board approved an Amended and Restated Long-Term
Incentive Plan on March 7, 1994 and March 25, 1996, respectively.
1.2 Purpose. The purpose of the Plan is to promote the best interests of
the Corporation and its stockholders by attracting and motivating highly
qualified individuals to serve as Employees, Consultants and Directors,
encouraging Employees, Directors and Consultants to acquire an ownership
interest in the Corporation, thus identifying their interests with those of
stockholders and encouraging Employees, Directors and Consultants to make
greater efforts on behalf of the Corporation to achieve the Corporation's
long-term business plans and objectives.
1.3 Definitions. As used in this Plan, the following terms have the
meaning described below:
(a) "Agreement" means the written agreement that sets forth the
term of a Participant's Option, Restricted Stock grant, or Performance Share
Award.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Change in Control" means the occurrence of the conditions
set forth in either of the following paragraphs.
(i) Any person (as defined in Section 3(a)(9) of the
Exchange Act) or group of persons acting together for the purpose of
acquiring, holding or disposing of shares of Common Stock (other than a
person who on the Effective Date owns 10 percent or more of the
outstanding shares of the Corporation's Common Stock, or other than a
trustee or other fiduciary holding shares of Common Stock under an
employee benefit plan of the Corporation, or a corporation owned directly
or indirectly by the stockholders of the Corporation in substantially the
same proportions as their ownership of shares of the Corporation) becomes
the beneficial owner (as defined in the Exchange Act Rules and
Regulations), directly or indirectly, of 30 percent or more of the
combined voting power of the Corporation's voting securities, or
(ii) The stockholders of the Corporation approve a
dissolution of the Corporation or a definitive agreement (A) to
merge or consolidate the Corporation with or into another entity
in which the Corporation is not the continuing or surviving
corporation or pursuant to which any shares of Common Stock would
be converted into cash, securities, or other property of another
entity, other than a merger of the Corporation in which holders of
shares of Common Stock immediately prior to the merger have the
same proportionate ownership of shares (or equivalent securities)
of the surviving entity immediately after the merger as
immediately before, or (B) to sell or otherwise dispose of
substantially all the assets of the Corporation.
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(d) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(e) "Committee" means a committee of the Board of Directors of the
Corporation comprised of two or more Nonemployee Directors.
(f) "Common Stock" means shares of the Corporation's authorized common
stock, $.01 par value.
(g) "Consultant" means an individual who has a consulting arrangement
with the Corporation or its Subsidiaries.
(h) "Corporation" means American Dental Technologies, Inc., a Delaware
corporation.
(i) "Director" means a member of the Corporation's Board of Directors.
(j) "Disability" means total and permanent disability, as defined in Code
Section 22(e).
(k) "Effective Date" means March 23, 1993.
(l) "Employee" means a full-time salaried employee of the Corporation or
its Subsidiaries, who has an "employment relationship" with the Corporation or
its Subsidiaries, as defined in Treasury Regulation 1.421-7(h), and the term
"employment" means employment with the Corporation or its Subsidiaries.
(m) "Exchange Act" means the Securities and Exchange Act of 1934, as
amended from time to time and any successor thereto.
(n) "Expiration Date" means the date set forth in the Agreement relating
to an Option on which the right to exercise shall expire absent a termination
of the Participant's employment, consulting arrangement or term on the Board.
Unless otherwise provided in the Agreement, the Expiration Date for an Option
shall be the tenth anniversary of its Grant Date.
(o) "Fair Market Value" means, for purposes of determining the value of
Common Stock on the Grant Date, the last sale price on the Nasdaq National
Market or the Nasdaq SmallCap Market, or, if the Common Stock is traded "over
the counter," the average of the bid and asked prices, as reported in The Wall
Street Journal for the Grant Date. In the event that (i) there were no Common
Stock transactions on such date where the Common Stock is traded on the Nasdaq
National Market or the Nasdaq SmallCap Market, or (ii) there were no published
bid and asked prices where the Common Stock is traded "over the counter," the
Fair Market Value shall be determined as of the immediately preceding date on
which there were Common Stock transactions or published last sale prices, as
the case may be. "Fair Market Value" for purposes of determining the value of
Common Stock on the date of exercise or the date Common Stock is tendered or
withheld for purposes of Section 8.6 means the last sale price, or the average
of the published bid and asked prices, as the case may be, of such Common Stock
on the last date preceding the date of the exercise, tender or withholding on
which there were Common Stock transactions, as reported in The Wall Street
Journal.
(p) "Grant Date" means the date on which the Committee authorizes an
individual Option, Restricted Stock grant or Performance Share Award, or such
later date as shall be designated by the Committee. In the case of Options
granted under Article III, the "Grant Date" shall be the date on which the
Option was automatically awarded pursuant thereto.
(q) "Incentive Stock Option" means an Option that is intended to meet the
requirements of Section 422 of the Code.
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(r) "Nonemployee Director" means a Director who (i) is not an Employee;
(ii) is not currently an officer (as defined in Rule 16a-1 under
the Exchange Act) of the Corporation or a parent or Subsidiary of the
Corporation or otherwise employed by a parent of the Corporation; (iii) has
not received compensation for serving as a Consultant or in any other
non-director capacity except for an amount not exceeding the dollar amount for
which disclosures would be required pursuant to Item 404(a) of Regulation S-K,
or does not have an interest in any transaction with the Corporation or a
Subsidiary for which disclosure would be required by Item 404(a) of Regulation
S-K; (iv) is not engaged in a business relationship with the Corporation or a
Subsidiary (such as that of a lawyer or investment banker) which would be
disclosable pursuant to Item 404(b) of Regulation S-K; and (v) qualifies as an
"outside director" for purposes of the approval requirement of Code Section
162(m).
(s) "Nonqualified Stock Option" means an Option that is not intended to
constitute an Incentive Stock Option.
(t) "Option" means either an Incentive Stock Option or a Nonqualified
Stock Option to purchase Common Stock.
(u) "Participant" shall have the meaning ascribed in Section 1.5 of the
Plan.
(v) "Performance Share Award" means an award granted in accordance with
Article V of the Plan.
(w) "Plan" means the American Dental Technologies, Inc. Amended and
Restated Long-Term Incentive Plan, the terms of which are set forth herein, and
amendments thereto.
(x) "Restriction Period" means the period or periods of time during which
a Participant's Restricted Stock grant is subject to restrictions on
transferability.
(y) "Restricted Stock" means Common Stock that is subject to restrictions
on transferability.
(z) "Retirement" means retirement at age 65 or older.
(aa) "Rule 16b-3" means Rule 16b-3 under the Exchange Act, as in effect
from time to time.
(bb) "Subsidiary" means a corporation defined in Code Section 424(f).
1.4 Administration. The Plan shall be administered by the Committee in
accordance with Rule 16b-3. The Committee shall interpret the Plan, prescribe,
amend and rescind rules and regulations relating to the Plan, and make all
other determinations necessary or advisable for its administration. The
decision of the Committee on any question concerning the interpretation of the
Plan or its administration with respect to any Option, Restricted Stock grant
or Performance Shares Award granted under the Plan, shall be final and binding
upon all Participants.
1.5 Participants. Participants in the Plan shall be such Employees
(including Employees who are Directors) and Consultants as the Committee may
select from time to time. Nonemployee Directors of the Corporation may be
Participants. The Committee may grant Options, Restricted Stock and
Performance Share Awards to an individual upon the condition that the
individual becomes an Employee or Consultant, provided that the Option,
Restricted Stock grant or Performance Share Awards shall be deemed to be
granted only on the date that the individual becomes an Employee or Consultant.
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<PAGE> 4
1.6 Stock. The total number of shares of Common Stock available for
grants and awards under the Plan shall not, in the aggregate, exceed two
million five hundred thousand (2,500,000) shares of Common Stock, as adjusted
from time to time in accordance with Article VII. Shares subject to any
unexercised portion of a terminated, forfeited, canceled or expired Option
granted hereunder, and shares subject to any terminated, forfeited, canceled or
expired portion of a Performance Share Award or Restricted Stock grant made
hereunder pursuant to which a Participant never acquired benefits of ownership,
including receipt of a dividend on such shares (but excluding voting rights),
shall be available for subsequent grants and awards under the Plan.
1.7 Agreement. No person shall have any rights under any grant or award
made pursuant to the Plan unless and until the Corporation and the recipient of
the grant or award have executed and delivered an agreement expressly granting
or awarding benefits to such person pursuant to the Plan and containing the
provisions required under the Plan to be set forth in the Agreement. The terms
of the Plan shall govern in the event any provision of any Agreement conflicts
with any term in this Plan as constituted on the Grant Date.
II. STOCK OPTIONS FOR EMPLOYEES, DIRECTORS AND CONSULTANTS
2.1 Grant of Option. The Committee, at any time and from time to time,
subject to Section 8.7, may grant Options to such Employees, Directors and
Consultants and for such number of shares of Common Stock as it shall
designate. Any Participant may hold more than one Option under the Plan and
any other Plan of the Corporation. The Committee shall determine, in its
discretion, subject to the limitations set forth in the Plan, the general terms
and conditions of the Option, including, without limitation, the number of
shares which the Option entitles the holder to purchase, the exercise price,
the time or times during which the Option shall be exercisable and the
Expiration Date of the Option, which terms may designate any Option granted as
either an Incentive Stock Option or a Nonqualified Stock Option, or the
Committee may designate a portion of an Option as an Incentive Stock Option or
a Nonqualified Stock Option.
2.2 Incentive Stock Options. Any Option intended to constitute an
Incentive Stock Option shall comply with the requirements of this Section 2.2.
No Incentive Stock Option shall be granted with an exercise price below its
Fair Market Value on the Grant Date or with an exercise term that extends
beyond 10 years from the Grant Date. An Incentive Stock Option shall not be
granted to any Participant who owns (within the meaning of Code Section 424(d))
stock of the Corporation possessing more than 10% of the total combined voting
power of all classes of stock of the Corporation unless, at the Grant Date, the
exercise price for the Option is at least 110% of the Fair Market Value of the
shares subject to the Option and the Option, by its terms, is not exercisable
more than five years after the Grant Date. The aggregate Fair Market Value of
the underlying Common Stock (determined at the Grant Date) as to which
Incentive Stock Options granted under the Plan may first be exercised by a
Participant in any one calendar year shall not exceed $100,000. To the extent
that an Option intended to constitute an Incentive Stock Option shall violate
the foregoing $100,000 limitation, the portion of the Option that exceeds the
$100,000 limitation shall be deemed to constitute a Nonqualified Stock Option.
Incentive Stock Options shall be granted only to Employees.
2.3 Option Price. The Committee shall determine the per share exercise
price for each Option granted under the Plan. The Committee, at its
discretion, may grant Nonqualified Stock Options with an exercise price below
100% of the Fair Market Value of Common Stock on the Grant Date.
2.4 Payment for Option Shares.
(a) The purchase price for shares of Common Stock to be acquired
upon exercise of an Option granted hereunder shall be paid in full in cash or by
personal check, bank draft or money order at the time of exercise.
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(b) At the discretion of the Committee, as set forth in a
Participant's Agreement, any Option granted under the Plan to an Employee,
Director or Consultant may be deemed exercised by delivery to the Corporation
of a properly executed exercise notice, acceptable to the Corporation, together
with irrevocable instructions to the Participant's broker to deliver to the
Corporation sufficient cash to pay the exercise price and any applicable income
and employment withholding taxes, in accordance with a written agreement
between the Corporation and the brokerage firm ("cashless exercise procedure").
III. STOCK OPTIONS FOR NONEMPLOYEE DIRECTORS
3.1 Annual Grants of Options. Each Nonemployee Director shall be granted
on December 15th of each year during the term of the Plan, a Nonqualified Stock
Option to purchased 1,250 shares of Common Stock (subject to adjustment as
provided in Section 7.1). The first grant of Options under this Section 3.1
shall occur on December 15, 1993.
3.2 Option Agreement. Each Option granted pursuant to this Article III
shall be evidenced by an Agreement that shall specify the exercise price, the
term of the Option, the number of shares to which the Option relates, and other
such provisions as the Committee shall determine.
3.3 Option Price. The purchase price per share of Common Stock for an
Option granted pursuant to this Article III shall be equal to the Fair Market
Value per share of Common Stock on the Grant Date.
3.4 Duration of Options. The Expiration Date of each Option granted
pursuant to this Article III shall be the tenth anniversary of its Grant Date.
3.5 Exercise of Shares Subject to Option. Options granted under this
Article III shall become exercisable according to the following schedule:
one-fourth of the Option shall become exercisable on the first anniversary of
the Grant Date, and one-fourth of the Option shall become exercisable on each
of the second, third and fourth anniversaries of the Grant Date of each Option.
Once exercisable, such Options may be exercised at any time and from time to
time until the Expiration Date of such Options, unless earlier terminated
pursuant to Sections 6.1(a) or 6.1(c).
IV. RESTRICTED STOCK
4.1 Grant of Restricted Stock. Subject to the terms and conditions of
the Plan, the Committee, at any time and from time to time, may grant shares of
Restricted Stock under this Plan to such Participants and in such amounts as it
shall determine.
4.2 Restricted Stock Agreement. Each grant of Restricted Stock shall be
evidenced by an Agreement that shall specify the terms of the restrictions,
including the Restriction Period, the number of shares subject to the grant,
and such other provisions, including performance goals, if any, as the
Committee may determine.
4.3 Transferability. Except as provided in this Article IV of the Plan,
the shares of Restricted Stock granted hereunder may not be sold, transferred,
pledged, assigned, or otherwise alienated, hypothecated or encumbered until the
termination of the applicable Restriction Period established by the Committee
and specified in the Agreement, or upon the earlier satisfaction of other
conditions as specified by the Committee in its sole discretion and set forth
in such Agreement. The Committee may, but is not required to, specify more
than one set of restrictions applicable to a Restriction Period with respect to
a Restricted Stock grant. All rights with respect to the Restricted Stock
granted to a Participant shall be exercised during a Participant's lifetime
only by the Participant or the Participant's legal representative.
4.4 Other Restrictions. The Committee may impose such other restrictions
on any shares of Restricted Stock granted under the Plan as it may deem
advisable including, without
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limitation, restrictions under applicable federal or state securities laws,
and may legend the certificates representing Restricted Stock to give
appropriate notice of such restrictions.
4.5 Certificate Legend. In addition to any legends placed on certificates
pursuant to Sections 4.3 and 4.4, each certificate representing shares of
Restricted Stock shall bear the following legend:
The sale or other transfer of the shares of stock represented by
this certificate, whether voluntary, involuntary or by operation
of law, is subject to certain restrictions on transfer set forth
in the American Dental Technologies, Inc. Amended and Restated
Long-Term Incentive Plan ("Plan"), rules and administrative
guidelines adopted pursuant to such Plan and a Restricted Stock
Agreement dated ________________. A copy of the Plan, such rules
and such Restricted Stock Agreement may be obtained from American
Dental Technologies, Inc.
4.6 Removal of Restrictions. Except as otherwise provided in this Article
IV of the Plan, and subject to applicable federal and state securities laws,
shares covered by each Restricted Stock grant made under the Plan shall become
freely transferable by the Participant after the last day of the Restriction
Period. Once the shares are released from the restrictions, the Participant
shall be entitled to have the legend required by Section 4.5 of the Plan
removed from the certificate representing such shares. The Committee shall
have discretion to waive the applicable Restriction Period with respect to all
or any part of a Restricted Stock grant.
4.7 Voting Rights. During the Restriction Period, Participants holding
shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to the Restricted Stock.
4.8 Dividends and Other Distribution. During the Restriction Period, a
Participant shall be entitled to receive all dividends and other distributions
paid with respect to shares of Restricted Stock. If any dividends or
distributions are paid in shares of Common Stock during the Restriction Period,
the dividend or other distribution shares shall be subject to the same
restrictions on transferability as the shares of Restricted Stock with respect
to which they were paid.
V. PERFORMANCE SHARE AWARDS
5.1 Grant of Performance Share Awards. The Committee, at its discretion,
may grant Performance Share Awards to Employees and Consultants and may
determine, on an individual or group basis, the performance goals to be
attained pursuant to each Performance Share Award.
5.2 Terms of Performance Share Awards. In general, Performance Share
Awards shall consist of rights to receive cash, Common Stock or a combination
of each, if designated performance goals are achieved. The terms of a
participant's Performance Share Award shall be set forth in the Agreement
relating to such Award. Each Agreement shall specify the performance goals
applicable to the Participant, the period over which the goals are to attained,
the payment schedule if the goals are attained, and any other terms, conditions
and restrictions applicable to an individual Performance Share Award and not
inconsistent with the provisions of the Plan. The Committee, at its
discretion, may waive all or part of the conditions, goals and restrictions
applicable to the receipt of full or partial payment of a Performance Share
Award.
VI. TERMINATION
6.1 Options. The time or times at which an Option (other than an Option
granted under Article III) shall terminate prior to its Expiration Date shall
be determined by the Committee in its discretion and set forth in the Agreement
relating to such Option. If a participant's Agreement does not specify such
time or times, the following shall apply:
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(a) If a Participant's employment, consulting arrangement or term of
office as a Director is terminated for any reason prior to the date that an
Option or a portion thereof first becomes exercisable, such Option or portion
thereof shall terminate and all rights thereunder shall cease.
(b) To the extent an Option is exercisable and unexercised on the date a
Participant's (other than a Nonemployee Director's) employment or consulting
arrangement is terminated.
(i) for any reason other than death, Disability or Retirement,
the Option shall terminate on the earlier of (A) the Expiration Date of the
Option; and (B) the first anniversary of such Participant's termination.
(ii) because the Participant has died or become subject to a
Disability, the Option shall terminate on the first anniversary of the date of
such Participant's death or Disability.
(iii) due to Retirement, the Option shall terminate on the
earlier of (A) the Expiration Date; and (B) the second anniversary of such
Participant's termination.
(c) To the extent an Option is exercisable and unexercised on the date a
Nonemployee Director's term of office as a Director is terminated for any
reason, the Option shall terminate on the earlier of (i) the Expiration Date of
the Option, or (ii) the first anniversary of the Participant's termination.
(d) During the period from the Participant's termination until the
termination of the Option, the Participant, or the person or persons to whom
the Option shall have been transferred by will or by the laws of decent and
distribution, may exercise the Option only to the extent that such Option was
exercisable on the date of the Participant's termination.
(e) The Committee may, at any time, accelerate the right of a
Participant to exercise an Option or extend the exercise period of such an
Option; provided, that no Option exercise period may be extended beyond the
Option's Expiration Date.
6.2 Restricted Stock. If a Participant's employment, consulting
arrangement or term of office is terminated for any reason, any shares of
Common Stock owned by a Participant which were the subject of a Restricted
Stock grant under the Plan and at the time of such termination are subject to a
Restriction Period shall be forfeited by the Participant to the Company upon
such termination; provided, that the Committee, in its sole discretion, may
waive the restrictions remaining on any or all shares of Restricted Stock as it
deems appropriate.
6.3 Performance Shares. Performance Share Awards shall expire and be
forfeited by a Participant upon termination of the Participant's employment or
consulting arrangement for any reason; provided; that the Committee, in its
discretion, may waive all or part of the conditions, goals and restrictions
applicable to the receipt of full or partial payment of a Performance Share
Award.
6.4 Other Provisions. The transfer of an Employee from one corporation to
another among the Corporation and any of its Subsidiaries, or a leave of
absence under the Corporation's leave policy, shall not be a termination of
employment for purposes of the Plan.
VII. ADJUSTMENTS AND CHANGE IN CONTROL
7.1 Adjustments. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Common Stock,
other securities, stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase, or exchange of Common Stock or other
securities of the Corporation, issuance of warrants or other rights to purchase
Common Stock or other securities of the Corporation, or other similar corporate
transaction
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or event affects the Common Stock such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
then the Committee shall, in such manner as it may deem equitable, adjust any
or all of (a) the number and type of shares of Common Stock which thereafter
may be made the subject of grants and awards under the Plan; (b) the number and
type of shares of Common Stock subject to outstanding grants and awards; (c)
the exercise price with respect to any Option, or, if deemed appropriate, make
provision for a cash payment to the holder of an outstanding Option; and (d)
any performance related conditions of any outstanding grants and awards based
upon the price of Common Stock; provided, in each case, that with respect to
Incentive Stock Options no such adjustment shall be authorized to the extent
that such authority would cause the Plan to violate Section 422 of the Code or
any successor provision thereto; and provided further, that any such adjustment
shall provide for the elimination of any fractional share which might otherwise
become subject to an Option, Restricted Stock grant or Performance Share Award.
7.2 Change in Control. Notwithstanding anything contained herein to the
contrary, upon a Change in Control, (i) any outstanding Option granted
hereunder immediately shall become exercisable in full, regardless of any
installment provision applicable to such Option; (ii) the remaining Restriction
Period on any Restricted Stock granted hereunder immediately shall lapse and
the shares shall become fully transferable, subject to any applicable federal
or state securities laws; and (iii) all performance goals and conditions shall
be deemed to have been satisfied and all restrictions shall lapse on any
outstanding Performance Share Awards, which immediately shall become payable in
full.
VIII. MISCELLANEOUS
8.1 Partial Exercise/Fractional Shares. The Committee shall permit, and
shall establish procedures for, the partial exercise of Options under the Plan.
No fractional shares shall be issued in connection with the exercise of a
Performance Share Award; instead, the Fair Market Value of the fractional
shares shall be paid in cash, or at the discretion of the Committee, the number
of shares shall be rounded down to the nearest whole number of shares and any
fractional shares shall be disregarded.
8.2 Rule 16b-3 Requirements. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on the exercise of an Option, or
the grant of Restricted Stock or a Performance Share Award (including, without
limitation, the right of the Committee to limit the time of exercise to
specified periods) as may be required to satisfy the requirements of Rule
16b-3.
8.3 Rights Prior to Issuance of Shares. No Participant shall have any
rights as a shareholder with respect to shares covered by an Option, Restricted
Stock grant or Share Performance Award until the issuance of a stock
certificate for such shares. No adjustment shall be made for dividends or
other rights with respect to such shares for which the record date is prior to
the date the certificate is issued.
8.4 Non-Assignability. No Option, Restricted Stock grant or Performance
Share Award shall be transferred by a Participant except by will or the laws
of descent and distribution or pursuant to a qualified domestic relations order
as defined by the Code or Title I of the Employee Retirement Income Security
Act. During the lifetime of a Participant, an Option shall be exercised only
by the Participant. No transfer of an Option, Restricted Stock grant or
Performance Share Award by will or the laws of descent and distribution shall
be effective to bind the Corporation unless the Corporation shall have been
furnished with written notice thereof and a copy of the will or such evidence
as the Corporation may deem necessary to establish the validity of the transfer
and the acceptance by the transferee of the terms and conditions of the Option,
Restricted Stock grant or Performance Share Award.
8.5 Securities Laws.
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(a) Anything to the contrary herein notwithstanding, the Corporation's
obligation to sell and deliver Common Stock pursuant to the exercise of an
Option or deliver Common Stock pursuant to a Restricted Stock grant or
Performance Share Award is subject to such compliance with federal and state
laws, rules and regulations applying to the authorization, issuance or sale of
securities as the Corporation deems necessary or advisable. The Corporation
shall not be required to sell and deliver Common Stock unless and until it
receives satisfactory assurance that the issuance or transfer of such shares
shall not violate any of the provisions of the Securities Act of 1933 or the
Exchange Act, or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder or those of the National Association of
Securities Dealers, Inc. or any stock exchange on which the Common Stock may be
listed, the provisions of any state laws governing the sale of securities, or
that there has been compliance with the provisions of such acts, rules,
regulations and laws.
(b) The Committee may impose such restrictions on any shares of Common
Stock acquired pursuant to the exercise of an Option or the grant of Restricted
Stock or a Performance Share Award under the Plan as it may deem advisable,
including, without limitation, restrictions (i) under applicable federal
securities laws; (ii) under the requirements of the Nasdaq Stock Market
(including, without limitation, with respect to securities traded on the Nasdaq
National Market or the Nasdaq SmallCap Market) or any stock exchange or other
recognized trading market upon which such shares of Common Stock are then listed
or traded; and (iii) under any blue sky or state securities laws applicable to
such shares. No shares shall be issued until counsel for the Corporation has
determined that the Corporation has complied with all requirements under
appropriate securities laws.
8.6 Withholding Taxes.
The Corporation shall have the right to withhold from a Participant's
compensation or require a Participant to remit sufficient funds to satisfy
applicable withholding for income and employment taxes upon the exercise of an
Option or the lapse of the Restriction Period on a Restricted Stock grant or
the payment of a Performance Share Award. At the discretion of the Committee,
a Participant may make a written election to tender previously acquired shares
of Common Stock or have shares of stock withheld from the shares otherwise to
be received pursuant to the Option exercise, Restricted Stock grant or
Performance Share Award, provided that the shares have an aggregate Fair Market
Value sufficient to satisfy in whole or in part the applicable withholding
taxes. The cashless exercise procedure described in Section 2.4 may be
utilized to satisfy the withholding requirements related to the exercise of an
Option.
8.7 Termination and Amendment.
(a) The Board may terminate the Plan, or the granting of Options,
Restricted Stock or Performance Share Awards under the Plan, at any time. No
new grants or awards shall be made under the Plan after March 22, 2003.
(b) The Board may amend or modify the Plan at any time and from time
to time, but no amendment or modification, without the approval of the
stockholders of the Corporation, shall (i) materially increase the benefits
accruing to participants under the Plan; (ii) increase the amount of Common
Stock for which grants and awards may be made under the Plan, except as
permitted under Section 1.6 and 7.1; or (iii) change the provisions relating to
the eligibility of individuals to whom grants and awards may be made under the
Plan, unless permitted by Rule 16b-3 without stockholder approval.
(c) No amendment, modification, or termination of the Plan shall in
any manner affect any Option, Restricted Stock grant or Performance Share Award
granted under the Plan without the consent of the Participant holding the
Option, Restricted Stock grant or Performance Share Award.
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8.8 Effect on Employment or Service. Neither the adoption of the Plan nor
the granting of any Option, Restricted Stock or Performance Share Award
pursuant to the Plan shall be deemed to create any right in any individual to
be retained or continued as an Employee, as a Consultant or as a Director, as
applicable.
8.9 Use of Proceeds. The proceeds received from the sale of Common Stock
pursuant to the Plan shall be used for general corporate purposes of the
Corporation.
8.10 Approval of the Plan. The Plan shall be subject to the approval of
the holders of at least a majority of the Common Stock of the Corporation
present and entitled to vote at a meeting of stockholders of the Corporation
held within 12 months after the adoption of the Plan by the Board. Any Option,
Restricted Stock or Performance Share Award granted under the Plan on or after
March 23, 1993 prior to such stockholder approval shall be conditioned upon
receipt of such approval and may not be exercised in whole or in part unless
the Plan has been approved by the stockholders as provided herein. If not
approved by stockholders within 12 months after approval by the Board, the Plan
shall be rescinded and any Options, Restricted Stock grants or Performance
Share Awards granted under the Plan shall be void retroactive to the Grant
Date.
BOARD APPROVAL: 3/23/93
3/07/94 (as amended and restated)
3/25/96 (as amended and restated)
STOCKHOLDER APPROVAL: 5/25/93
5/24/94 (as amended and restated)
7/29/96 (as amended and restated)
10
<PAGE> 1
EXHIBIT 11.1
AMERICAN DENTAL TECHNOLOGIES, INC.
STATEMENT RE: COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Primary net income (loss) per share
Weighted average shares outstanding 23,644,905 15,716,150 18,480,270 14,990,869
Net effect of dilutive stock options and
warrants based on the treasury stock
method using average market price or
the initial public offering price 6,892,710 252,643 4,748,279 252,643
----------- ----------- ----------- -----------
Weighted average number of common
and common equivalent shares 30,537,615 15,968,793 23,228,550 15,243,512
=========== =========== =========== ===========
Net income (loss) available for common
shareholders $ 748,999 $ (954,332) $ 1,887,250 $ (576,068)
=========== =========== =========== ===========
Net income (loss) per common share $ 0.02 $ (0.06) $ 0.08 $ (0.04)
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1996
------------------ ------------------
<S> <C> <C>
Fully diluted net income per share
Weighted average shares outstanding 23,644,905 18,480,270
Net effect of dilutive stock options and
warrants based on the treasury stock
method using the higher of average or
ending market price or the initial
public offering price 6,892,710 5,906,082
----------- -----------
Weighted average number of common
and common equivalent shares 30,537,615 24,386,353
=========== ===========
Net income available for common
shareholders $ 748,999 $ 1,887,250
=========== ===========
Net income per common share $ 0.02 $ 0.08
=========== ===========
</TABLE>
Note: Fully Diluted Net Loss per share for the three and nine month periods
ended September 30, 1995 are represented by the same calculation as Primary Net
Loss per share. The Net Income (Loss) per share was calculated using the
Treasury Stock Method.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,665,833
<SECURITIES> 0
<RECEIVABLES> 2,495,516
<ALLOWANCES> 350,000
<INVENTORY> 3,131,447
<CURRENT-ASSETS> 7,673,082
<PP&E> 3,687,929
<DEPRECIATION> 2,249,386
<TOTAL-ASSETS> 20,306,782
<CURRENT-LIABILITIES> 4,168,782
<BONDS> 0
<COMMON> 275,265
0
0
<OTHER-SE> 12,456,450
<TOTAL-LIABILITY-AND-EQUITY> 20,306,782
<SALES> 14,220,805
<TOTAL-REVENUES> 14,220,805
<CGS> 8,160,367
<TOTAL-COSTS> 8,160,367
<OTHER-EXPENSES> 4,069,429
<LOSS-PROVISION> 8,095
<INTEREST-EXPENSE> 95,664
<INCOME-PRETAX> 1,887,250
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,887,250
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,887,250
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
