<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 5, 1998
AMERICAN DENTAL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-19195 38-2905258
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
18860 West Ten Mile Road, Southfield, MI 48075
(Address of principal executive offices)(Zip Code)
(248) 395-3900
Registrant's telephone number, including area code:
<PAGE> 2
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the accompanying balance sheet of Dental Vision Direct, Inc., as
of December 31, 1997 and the related statements of operations and accumulated
deficit, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit. We did not audit
the financial statements as of June 30, 1998, for the six months ended June 30,
1998 and 1997, and, accordingly, we do not express an opinion on them.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dental Vision Direct, Inc. as
of December 31, 1997, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Dallas, Texas
September 25, 1998
2
<PAGE> 3
DENTAL VISION DIRECT, INC.
(A SUBSIDIARY OF ULTRAK, INC.)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
ASSETS 1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,000 $ 3,221
Trade accounts receivable, less allowance for doubtful accounts of
$29,794 at December 31, 1997 and $49,757 at June 30, 1998 2,371,175 1,285,122
Inventories 2,813,209 4,203,741
Prepaid expenses and other current assets 189,515 60,033
----------- -----------
Total current assets 5,375,899 5,552,117
PROPERTY, PLANT AND EQUIPMENT, at cost
Furniture and equipment 506,069 584,430
Less: accumulated depreciation 324,066 379,197
----------- -----------
182,003 205,233
GOODWILL, net of accumulated amortization of $66,280 at
December 31, 1997 and $110,467 at June 30, 1998 2,144,195 2,100,008
OTHER ASSETS 11,144 398
----------- -----------
Total assets $ 7,713,241 $ 7,857,756
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable - trade $ 378,714 $ 300,853
Accrued expenses 53,131 29,927
Current maturities of long-term debt 35,092 72,592
Payable to parent, current portion 4,311,968 4,961,410
----------- -----------
Total current liabilities 4,778,905 5,364,782
LONG-TERM DEBT, less current maturities 75,000 37,500
PAYABLE TO PARENT, less current portion 7,000,000 7,000,000
STOCKHOLDERS' DEFICIT
Common stock - authorized, 1,000,000 shares of $.01 par value;
issued and outstanding 11,111 shares 111 111
Accumulated deficit (4,140,775) (4,544,637)
----------- -----------
Total stockholders' deficit (4,140,664) (4,544,526)
----------- -----------
Total liabilities and stockholders' deficit $ 7,713,241 $ 7,857,756
=========== ===========
</TABLE>
3
<PAGE> 4
DENTAL VISION DIRECT, INC.
(A SUBSIDIARY OF ULTRAK, INC.)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
Year ended Six months ended June 30
December 31, ------------------------------
1997 1997 1998
------------ ----------- ------------
(unaudited)
<S> <C> <C> <C>
Net sales $ 7,429,647 $ 2,439,724 $ 3,629,162
Cost of sales 4,965,493 1,663,421 1,835,048
----------- ----------- -----------
Gross profit 2,464,154 776,303 1,794,114
Other operating costs:
Marketing and sales 1,902,646 573,539 1,015,742
General and administrative 592,291 557,787 508,594
Depreciation and amortization 188,956 81,836 99,318
Corporate expense allocation 596,042 244,107 426,367
----------- ----------- -----------
3,279,935 1,457,269 2,050,021
----------- ----------- -----------
Operating loss (815,781) (680,966) (255,907)
Interest expense 608,795 246,500 388,548
Other expense (income) 28,921 2,555 (24,083)
----------- ----------- -----------
637,716 249,055 364,465
----------- ----------- -----------
Loss before income taxes (1,453,497) (930,021) (620,372)
Income tax benefit 507,222 324,577 216,510
----------- ----------- -----------
Net loss (946,275) (605,444) (403,862)
Accumulated deficit - beginning of year (3,194,500) (3,194,500) (4,140,775)
----------- ----------- -----------
Accumulated deficit - end of year $(4,140,775) $(3,799,944) $(4,544,637)
=========== =========== ===========
</TABLE>
4
<PAGE> 5
DENTAL VISION DIRECT, INC.
(A SUBSIDIARY OF ULTRAK, INC.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended
December 31, Six months ended June 30
1997 1997 1998
------------ -------------------------------
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (946,275) $ (605,444) $ (403,862)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 188,956 81,836 99,318
Loss on sale of assets 28,301 - -
Changes in operating assets and liabilities -
net of effects of acquisition of business
Accounts and notes receivable (1,634,444) 449,176 1,086,053
Inventories (674,648) (533,944) (1,390,532)
Prepaid expenses 345,960 481,826 129,482
Other noncurrent assets (8,356) - 10,746
Accounts payable - trade 378,714 23,175 (77,861)
Accrued expenses 36,128 77,556 (23,204)
----------- ---------- -----------
Net cash used in operating activities (2,285,664) (25,819) (569,860)
Cash flows from investing activities:
Purchases of property and equipment (66,908) (53,116) (78,361)
Acquisition of business, net of cash acquired (39,908) - -
----------- ---------- -----------
Net cash used in investing activities (106,816) (53,116) (78,361)
Cash flows from financing activities:
Net borrowings on notes payable 110,092 150,000 -
Change in payable to parent 2,284,388 (69,065) 649,442
----------- ---------- -----------
Net cash provided by financing activities 2,394,480 80,935 649,442
Net increase in cash and cash equivalents 2,000 2,000 1,221
Cash and cash equivalents at beginning of the period - - 2,000
----------- ----------- -----------
Cash and cash equivalents at end of the period $ 2,000 $ 2,000 $ 3,221
=========== =========== ===========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes - - -
Noncash investing and financing activities:
Acquisition of business
Fair value of assets acquired 150,000 150,000 -
Less: Cash paid 39,908 - -
Notes payable 110,092 150,000 -
----------- ----------- -----------
Liabilities assumed $ - $ - $ -
=========== =========== ===========
</TABLE>
5
<PAGE> 6
DENTAL VISION DIRECT, INC.
(A SUBSIDIARY OF ULTRAK, INC.)
NOTES TO FINANCIAL STATEMENTS
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of Operations
Dental Vision Direct, Inc. (the "Company") is a subsidiary of Ultrak, Inc.
(Ultrak). The Company manufactures and distributes intra-oral camera
products for use primarily in the dental market. The Company has a
manufacturing and distribution facility in California, a distribution
facility in Texas, and sells its products worldwide.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
Inventories
Inventories are comprised principally of goods held for resale, which are
valued at the lower of cost (first-in, first-out) or market.
Property, Plant and Equipment and Depreciation
Property, plant and equipment are carried at cost. The provision for
depreciation is computed using the straight-line method over the estimated
useful lives of the assets ranging from three to five years.
Goodwill and Amortization
Goodwill is the cost in excess of the fair value of the net assets of
companies acquired in purchase transactions, and is being amortized over its
estimated useful life using the straight-line method over twenty-five years.
Accounting for Impairment of Long-Lived Assets
The Company evaluates long-lived assets and intangibles for impairment
whenever events or changes in circumstances indicate that the carrying
amounts may not be recoverable. Impairment is recognized when the
undiscounted cash flows estimated to be generated by those assets are less
than the carrying amounts of such assets.
Advertising Expense
The Company expenses advertising costs when incurred. Advertising expenses
for the year ended December 31, 1997 were approximately $104,000.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and debt whose carrying
value approximates fair value at December 31, 1997.
6
<PAGE> 7
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Income Taxes
The Company is included in the consolidated Federal income tax return of
Ultrak. Taxes are allocated to the Company by Ultrak as if it were a
separate taxpayer.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Interim Financial Statements
In the opinion of management, the unaudited interim financial statements as
of June 30, 1998 and for the six months ended June 30, 1998 and 1997
included all adjustments, consisting only of those of a recurring nature,
necessary to present fairly the Company's financial position as of June 30,
1998 and the results of its operations and cash flows for the six month
periods ended June 30, 1998 and 1997. The results of operations for the
interim periods are not necessarily indicative of the results to be expected
for the full year.
NOTE B - BUSINESS COMBINATION
Effective April 1, 1997, the Company acquired all of the issued and
outstanding capital stock of Veravision, Inc. ("Veravision"). The
consideration consisted of $150,000 in promissory notes, approximately $2.0
million in notes and accounts receivable due from Veravision and 10% of the
Company's common stock. Veravision manufactures intra-oral camera products for
use primarily in the dental market.
The acquisition was accounted for as a purchase and the operations of the
purchased company have been included in the Company's statement of operations
since the date of acquisition. Goodwill is being amortized on the
straight-line method over twenty-five years.
NOTE C - MAJOR CUSTOMERS AND SUPPLIERS
One customer accounted for approximately 32% of revenue for the year ended
December 31, 1997. No other customer accounted for over 10% of 1997 revenues.
Although management believes the relationship with this customer is good,
the loss of this customer could have a material adverse effect on the
operations of the Company.
7
<PAGE> 8
NOTE D - LONG-TERM DEBT
Long-term debt consists of a note payable to three individuals and
represents the remaining amount due in connection with the Veravision
acquisition, bears interest at 4%, payable annually, and is due in annual
principal installments as follows:
<TABLE>
<S> <C>
1998 $ 35,092
1999 37,500
2000 37,500
--------
110,092
Less current maturities 35,092
--------
$ 75,000
========
</TABLE>
NOTE E - COMMITMENTS AND CONTINGENCIES
The Company leases office and warehouse space in southern California under a
long-term noncancelable lease, which expires on December 31, 1999. Minimum
future rental payments are as follows:
<TABLE>
<CAPTION>
<S> <C>
Year ending December 31
-----------------------
1998 $ 50,136
1999 50,136
--------
$100,272
========
</TABLE>
NOTE F - INCOME TAXES
Deferred taxes are provided for the temporary differences between the
financial reporting bases and the tax bases of the Company's assets and
liabilities. The temporary differences that give rise to the deferred tax
assets or liabilities at December 31, 1997 are as follows:
<TABLE>
<S> <C>
Deferred tax assets
Accounts receivable $ 10,398
Inventories 9,625
Accrued expenses 108,866
Other 9,612
--------
138,501
Less valuation allowance (117,621)
--------
20,880
Deferred tax liabilities
Goodwill 15,441
Other 5,439
--------
20,880
--------
Net deferred tax asset $ -
========
</TABLE>
The effective income tax rate varies from the statutory rate at December 31,
1997 due to the following:
<TABLE>
<S> <C>
Income tax at statutory rate 34.0%
State tax, net of Federal benefits 1.5
Other (0.6)
--------
34.9%
========
</TABLE>
The income tax benefit reduces the payable to parent, and the change in the
valuation allowance was $108,568 during 1997.
8
<PAGE> 9
NOTE G - RELATED PARTY TRANSACTIONS
Ultrak allocates certain expenses to the Company, including rent, utilities
and other corporate expenses. These expenses totaled approximately $596,000
for the year ended December 31, 1997. Additionally, Ultrak pays substantially
all of the Company's expenses and charges these expenses to the Company. The
payable to parent (Ultrak) as of December 31, 1997 is approximately
$11,312,000.
Interest expense relates to charges from Ultrak based on the payable to parent
balance. Interest is charged at a rate of 8% per annum and is recorded monthly
to the payable to parent account.
NOTE H - SUBSEQUENT EVENT
Effective August 4, 1998, all of the issued and outstanding stock of the
Company was sold to American Dental Technologies, Inc. (ADT). The
consideration consisted of $3 million in cash, a promissory note for $3.9
million, which is due in full on October 5, 1998 and a stock warrant for
600,000 shares of ADT common stock at $5.50 per share.
(b) Pro Forma Financial Statements
INDEX TO
AMERICAN DENTAL TECHNOLOGIES, INC.
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Pro Forma Combined Condensed Statement of Operations
(Unaudited)-Six Months Ended June 30, 1998
Pro Forma Combined Condensed Balance Sheet
(Unaudited)-June 30, 1998
Pro Forma Combined Condensed Statements of Operations
(Unaudited)-Year Ended December 31, 1997
Notes to Pro Forma Combined Condensed Financial Statements
(Unaudited)
9
<PAGE> 10
AMERICAN DENTAL TECHNOLOGIES, INC.
Pro Forma Combined Condensed Statement of Operations (Unaudited)
Six Months Ended June 30, 1998
<TABLE>
<CAPTION>
American Pro Forma Pro Forma
Dental DVD Adjustments Combined
------ --- ----------- --------
<S> <C> <C> <C> <C>
Revenues $12,104,580 $3,629,162 $15,733,742
Cost of products sold 5,297,384 1,835,048 7,132,432
----------------------------------------------------------
Gross profit 6,807,196 1,794,114 8,601,310
Selling, general and administrative
expense 5,050,054 2,050,021 $ (44,184)(A)
- 79,012(B) 7,134,903
----------------------------------------------------------
Income (loss) from operations 1,757,142 (255,907) (34,828) 1,466,407
Other income (expense):
Other income (expense) 92,879 24,083 (60,000)(C) 56,962
Interest expense (6,960) (388,548) 388,548(A)
(136,500)(D) (143,460)
----------------------------------------------------------
Income (loss) before income tax 1,843,061 (620,372) 157,220 1,379,909
Income tax benefit - (216,510) 216,510(A) -
----------------------------------------------------------
Net income (loss) $ 1,843,061 $ (403,862) $ (59,290) $ 1,379,909
==========================================================
Net income per share
assuming dilution $0.25 $0.19
===== =====
</TABLE>
10
<PAGE> 11
AMERICAN DENTAL TECHNOLOGIES, INC.
Pro Forma Combined Condensed Balance Sheet (Unaudited)
June 30, 1998
<TABLE>
<CAPTION>
American Pro Forma Pro Forma
Dental DVD Adjustments Combined
------ --- ----------- --------
ASSETS
<S> <C> <C> <C> <C>
Current assets
Cash $ 3,788,416 $ 3,221 $ (3,221)(E)
(3,000,000)(F) $ 788,416
Accounts receivable 3,276,145 1,285,122 (1,285,122)(E) 3,276,145
Inventories 6,044,952 4,203,741 10,248,693
Prepaid expenses and other
current assets 374,152 60,033 434,185
Note receivable 500,000 500,000
---------------------------------------------------------------------
Total current assets 13,983,665 5,552,117 (4,288,343) 15,247,439
Property and equipment, net 1,851,266 205,233 2,056,499
Intangible assets 10,736,019 2,100,008 (2,100,008)(E)
3,150,595(F) 13,886,614
Other assets 100,000 398 100,398
---------------------------------------------------------------------
TOTAL ASSETS $ 26,670,950 $ 7,857,756 $ (3,237,756) $ 31,290,950
=====================================================================
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Note payable $ 3,900,000(F) $ 3,900,000
Accounts payable $ 1,991,207 $ 300,853 (300,853)(E) 1,991,207
Compensation and employee
benefits 239,582 239,582
Other accrued liabilities 350,760 29,927 (29,927)(E) 350,760
Current maturities of long-term debt 72,592(E) (72,592)(E)
Payable to parent, current portion 4,961,410(E) (4,961,410)(E)
---------------------------------------------------------------------
Total current liabilities 2,581,549 5,364,782 (1,464,782) 6,481,549
Long-term debt, less current maturities 37,500 (37,500)(E)
Payable to parent, less current portion 7,000,000 (7,000,000)(E)
Other non-current liabilities 110,989 110,989
Stockholders' equity
Preferred stock
Warrant 720,000(F) 720,000
Common stock 296,398 111 (111)(F) 296,398
Additional paid in capital 42,329,316 42,329,316
Accumulated deficit (18,519,485) (4,544,637) 4,544,637(E) (18,519,485)
Foreign currency translation (127,817) (127,817)
---------------------------------------------------------------------
Total stockholders' equity 23,978,412 (4,544,526) 5,264,526 24,698,412
---------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 26,670,950 $ 7,857,756 $ (3,237,756) $ 31,290,950
=====================================================================
</TABLE>
11
<PAGE> 12
AMERICAN DENTAL TECHNOLOGIES, INC.
Pro Forma Combined Condensed Statement of Operations (Unaudited)
Year Ended Ended December 31, 1997
<TABLE>
<CAPTION>
American Pro Forma Pro Forma
Dental DVD Adjustments Combined
------ --- ----------- --------
<S> <C> <C> <C> <C>
Revenues $ 21,651,874 $ 7,429,647 $ 29,081,521
Cost of products 9,371,342 4,965,493 14,336,835
---------------------------------------------------------------
Gross profit 12,280,532 2,464,154 14,744,686
Selling, general and administrative
expense 8,980,905 3,279,935 53,724(A)
180,115(B) 12,494,679
---------------------------------------------------------------
Income (loss) from operations 3,299,627 (815,781) (233,839) 2,250,007
Other income (expense):
License transfer fee 375,000 375,000
Other income (expense) (28,921) (28,921)
Interest expense (52,857) (608,795) 608,795(C)
(273,000)(D) (325,857)
---------------------------------------------------------------
Income (loss) before income tax 3,621,770 (1,453,497) 101,956 2,270,229
Income tax benefit (507,222) 507,222(A) -
---------------------------------------------------------------
Net income (loss) $ 3,621,770 $ (946,275) $(405,266) $ 2,270,229
===============================================================
Net income per share
assuming dilution $0.47 $0.30
===== =====
</TABLE>
12
<PAGE> 13
AMERICAN DENTAL TECHNOLOGIES, INC.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
BASIS OF PRESENTATION
The unaudited pro forma combined condensed statement of operations for the six
months ended June 30, 1998 reflects the acquisition of Dental Vision Direct,
Inc., ("DVD") by American Dental Technologies, Inc. as if it had occurred at the
beginning of the period presented. The unaudited pro forma combined condensed
balance sheet at June 30, 1998 reflects the acquisition as if it occurred on
that date.
The unaudited pro forma combined condensed statement of operations for the year
ended December 31, 1997 reflects the acquisition of Dental Vision Direct, Inc.
by American Dental Technologies, Inc. as if it had occurred at the beginning of
the period presented.
PRO FORMA ADJUSTMENTS
The accompanying unaudited pro forma combined condensed financial statements
include adjustments to increase (decrease) pro forma combined net income from
continuing operations available for common shares or increase (decrease) pro
forma combined stockholders' equity, as follows:
A. Elimination of historical amortization of intangible assets, interest
expense and income tax benefit upon application of purchase accounting
B. Amortization of the acquired goodwill
C. Elimination of historical interest income of the Company related to the
cash used to fund the acquisition
D. Interest expense related to the debt incurred upon application of purchase
accounting
E. Elimination of historical DVD assets, liabilities and accumulated deficit
not assumed in the acquisition
F. Adjustment to record goodwill, cash and debt used to fund the acquisition
(c) Exhibits
2.1 Stock Purchase Agreement, dated August 5, 1998, between
American Dental Technologies, Inc. and Ultrak, Inc. is
incorporated by reference to Exhibit 10.56 to the Form
10-Q for the quarter ended June 30, 1998.
4.13 Nontransferable Common Stock Purchase Warrant, dated
August 5, 1998, 540,000 shares (included in initial
filing)
4.14 Nontransferable Common Stock Purchase Warrant, dated
August 5, 1998, 60,000 shares (included in initial filing)
4.15 Promissory Note to Ultrak, Inc. dated August 5, 1998
(included in initial filing)
23 Consent of Independent Auditors
13
<PAGE> 14
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 hereunto duly authorized.
AMERICAN DENTAL TECHNOLOGIES, INC.
/s/ Diane M. Miller
---------------------------------------
Diane M. Miller
Chief Financial Officer
October 20, 1998
14
<PAGE> 15
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
23 Consent of Independent Auditors
15
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated September 25, 1998, accompanying the financial
statements of Dental Vision Direct, Inc. contained herein. We hereby consent to
the incorporation by reference of said report in the Registration Statements of
American Dental Technologies, Inc. on Form S-8 (File Nos. 33-66552, 33-86062,
333-13061 and 33-52664).
GRANT THORTON LLP
DALLAS, TEXAS
October 19, 1998
16
