<PAGE> 1
UNITED STATES
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, 1999.
[ ] 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)
5555 Bear Lane, Corpus Christi, TX 78405
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(361) 289-1145
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 2, 1999:
7,432,047 Shares
<PAGE> 2
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
1999 1998 1999 1998
--------------------------- ------------------------------
<S> <C> <C> <C> <C>
Revenues:
Equipment $4,519,124 $6,522,218 $16,819,430 $18,462,853
Royalties 57,004 49,430 742,256 213,375
---------- ---------- ----------- -----------
4,576,128 6,571,648 17,561,686 18,676,228
Cost of products sold 2,365,680 3,197,609 8,878,660 8,494,993
---------- ---------- ----------- -----------
Gross profit 2,210,448 3,374,039 8,683,026 10,181,235
Selling, general and administrative 2,412,147 2,532,704 7,892,373 7,184,578
Research and development 310,504 258,258 695,648 656,437
---------- ---------- ----------- -----------
Income (loss) from operations (512,203) 583,077 95,005 2,340,220
Other income (expense):
Other income 606,441 38,692 648,089 131,571
Interest expense (90,697) (71,910) (266,825) (78,871)
---------- ---------- ----------- -----------
Net income before taxes 3,541 549,859 476,269 2,392,920
Income taxes 53,430 --- 360,612 ---
---------- ---------- ----------- -----------
Net income (loss) $ (49,889) $ 549,859 $ 115,657 $ 2,392,920
========== ========== =========== ===========
Net income (loss) per share $(0.01) $0.07 $0.02 $0.33
====== ===== ===== =====
Net income (loss) per share assuming dilution $(0.01) $0.07 $0.02 $0.33
====== ===== ===== =====
</TABLE>
See accompanying notes.
2
<PAGE> 3
American Dental Technologies, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30 December 31
1999 1998
---------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 583,933 $ 1,409,404
Accounts receivable:
Trade, less allowance of $175,000
in 1999 and 1998 2,803,286 4,423,633
Related party 1,951,528 1,143,475
------------- ------------
4,754,814 5,567,108
Inventories 10,834,979 11,225,208
Deferred taxes 1,557,479 1,857,143
Prepaid expenses and other current assets 974,861 919,633
Note receivables-related party --- 300,000
------------- ---------
Total current assets 18,706,066 21,278,496
Deferred taxes 3,445,476 3,445,476
Property and equipment, net 3,052,835 2,462,747
Intangible assets, net:
Goodwill 12,074,039 12,170,149
Air abrasive technology rights 596,598 730,878
Other 1,670,170 1,667,439
------------- ----------
14,340,807 14,568,466
Other receivable 100,000 100,000
------------- -----------
Total assets $ 39,645,184 $41,855,185
============= ===========
</TABLE>
See accompanying notes.
3
<PAGE> 4
American Dental Technologies, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30 December 31
1999 1998
----------------------------------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,776,281 $ 2,877,517
Compensation and employee benefits 264,908 405,850
Other accrued liabilities 317,383 491,180
------------- ---------------
Total current liabilities 2,358,572 3,774,547
Notes payable 5,150,000 5,950,000
Other non-current liabilities 228,350 321,336
Stockholders' equity:
Preferred stock, $.01 par value, authorized
10,000,000 shares; none outstanding
Common stock, $.04 par value, authorized
12,500,000 shares; outstanding: 7,432,047
shares in 1999; and 7,409,865 shares in 1998 297,285 296,773
Warrants and options 801,000 772,500
Additional paid-in capital 42,401,407 42,359,016
Accumulated deficit (11,397,571) (11,513,230)
Foreign currency translation (193,859) (105,757)
-------------- ----------------
Total stockholders' equity 31,908,262 31,809,302
-------------- ----------------
Total liabilities and stockholders' equity $ 39,645,184 $ 41,855,185
============== ================
</TABLE>
See accompanying notes.
4
<PAGE> 5
American Dental Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1999 1998
----------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 115,657 $2,392,920
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 270,000 133,000
Amortization 1,007,600 843,675
Deferred income taxes 299,664 ---
Changes in operating assets and liabilities:
Accounts receivable 833,627 (644,275)
Inventories 451,943 (2,802,965)
Prepaid expenses and other current assets (13,906) 19,264
Notes receivable 300,000 200,000
Accounts payable (1,071,088) 707,645
Compensation and employee benefits (139,921) (7,654)
Other accrued liabilities (301,768) 237,434
Other non-current liabilities (762,204) (24,736)
--------------- -------------
Net cash provided by operating activities 989,604 1,054,308
INVESTING ACTIVITIES:
Purchases of property and equipment (858,395) (859,141)
Acquisition of business --- (6,900,000)
Increase in intangible assets (199,583) (345,515)
--------------- ------------
Net cash used in investing activities (1,057,978) (8,104,656)
FINANCING ACTIVITIES:
Payments on notes payable to related parties --- (250,000)
Payments on notes payable to bank (800,000) ---
Proceeds from notes payable --- 5,400,000
Proceeds from exercise of stock warrants --- 1,564,000
Proceeds from exercise of stock options 42,903 37,165
-------------- ------------
Net cash provided by (used in) financing activities (757,097) 6,751,165
-------------- ------------
Decrease in cash (825,471) (299,183)
Cash at beginning of year 1,409,404 1,831,683
-------------- ------------
Cash at end of period $ 583,933 $ 1,532,500
============== ============
</TABLE>
See accompanying notes.
5
<PAGE> 6
American Dental Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 1999 (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 nine months ended September 30, 1999 are not
necessarily indicative of the results to be expected for other quarters of 1999
or for the year ended December 31, 1999. 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, 1998.
Inventories - Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Finished goods $ 1,488,373 $ 1,255,608
Raw materials, parts and supplies 9,346,606 9,969,600
------------- --------------
$ 10,834,979 $ 11,225,208
============= ==============
</TABLE>
Property and equipment - Accumulated depreciation aggregated $2,014,673 at
September 30, 1999 and $1,744,673 at December 31, 1998.
Intangible Assets - Accumulated amortization aggregated $5,359,248 at
September 30, 1999 and $4,351,647 at December 31, 1998.
Earnings Per Share - The following table sets forth the computation for basic
and diluted earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
--------------------------- -------------------------
<S> <C> <C> <C> <C>
Numerator:
Net Income (Loss) $ (49,889) $549,859 $115,657 $2,392,920
------------- ------------ ---------- ----------
Numerator for basic and diluted earnings
per share - income available to common
stockholders after assumed conversions (49,889) 549,859 115,657 2,392,920
Denominator:
Denominator for basic earnings per share
- weighted average shares 7,432,047 7,413,615 7,429,157 7,272,928
Effect of dilutive securities:
Employee stock options 20,071 43,665 22,937 54,012
Warrants --- 10,629 --- 17,338
------------- ------ ----------- -----------
Dilutive potential common shares
Denominator for diluted earnings per
share - adjusted weighted average
shares and assumed conversions 7,452,118 7,467,909 7,452,094 7,344,278
========= ========= =========== ===========
Basic earnings per share ($0.01) $0.07 $0.02 $0.33
====== ===== ===== =====
Diluted earnings per share ($0.01) $0.07 $0.02 $0.33
====== ===== ===== =====
</TABLE>
6
<PAGE> 7
American Dental Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 1999 (Unaudited)
Reclassifications - Certain amounts in prior year financial statements have been
reclassified to conform with the presentation used in 1999.
2. Comprehensive Income (Loss)
Total comprehensive income (loss), net of the related estimated tax, was
$(137,991) and $573,874 for the three months ended September 30, 1999 and 1998,
respectively, and $27,555 and $2,393,682 for the nine months ended September 30,
1999 and 1998, respectively.
3. Segment Reporting
The Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information, for the year ended December 31, 1998. SFAS No. 131
established standards for reporting information about operating segments in
annual financial statements and requires selected information about operating
segments in interim financial reports issued to stockholders. It also
established standards for related disclosures about products and services, and
geographic areas. Operating segments are defined as components of the enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision making group, in
deciding how to allocate resources and in assessing performance.
The Company develops, manufactures, markets and sells high technology dental
products, such as air abrasive equipment, lasers, curing lights and intra oral
cameras. The Company sells these products to national and regional dental
distributors in its four fundamental business segments: North America, Japan,
Europe and Other International. The reportable segments are managed separately
because selling techniques and market environments differ from country to
country. The remaining activities of the Company, which are reported as "Other",
include industrial, parts and accessories and royalty income.
The accounting policies of the business segments are consistent with those
described in Note 1. The Company's Chief Operating Decision Maker evaluates
segmental performance and allocates resources based on operational earnings
(gross profit less selling and marketing expenses).
7
<PAGE> 8
American Dental Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30
1999 1998
------------------------------
<S> <C> <C>
Revenues:
North America $10,581,778 $14,028,876
Europe 1,409,021 917,336
Japan 3,149,000 2,230,000
Other international 16,200 136,085
----------- ------------
$15,155,999 $17,312,297
=========== ===========
Reconciliation of revenues:
Total segment revenues $15,155,999 $17,312,297
Other 2,405,687 1,363,931
----------- -----------
Total revenues $17,561,686 $18,676,228
=========== ===========
Operational earnings (loss):
North America $ 964,545 $ 3,810,341
Europe (90,605) 4,497
Japan 1,511,520 1,032,754
Other international 8,360 47,861
------------ ------------
$ 2,393,820 $ 4,895,453
============ ============
Reconciliation of operation earnings to
income from operations:
Total segment operational earnings $ 2,393,820 $ 4,895,453
Other operational earnings 1,202,168 719,617
Research & development expenses (695,648) (656,437)
Administrative expenses (2,805,335) (2,618,413)
-------------- -------------
Income from operations $ 95,005 $ 2,340,220
============= =============
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Long lived assets (excluding deferred taxes):
North America $16,599,240 $16,265,245
Europe 19,395 15,968
Other international 775,007 850,000
----------- -----------
$17,393,642 $17,131,213
=========== ===========
</TABLE>
4. Litigation
On December 20, 1996, American Dental filed a lawsuit against Kreativ, Inc.
("Kreativ") and two individuals in the United States District Court for the
Eastern District of Michigan, Southern Division. In February 1999, the Company
was awarded $635,203 in damages, plus attorney fees and interest. On August 2,
1999, the Company settled the judgment it had been awarded against Kreativ by
the Federal District Court in Michigan for false advertising violations of the
Lanham Act. Kreativ paid the Company $582,500 in settlement of the previously
awarded judgment which was recorded by the Company in the third quarter of 1999.
The Company is not currently involved in any litigation.
8
<PAGE> 9
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward Looking Statements
The following discussion and analysis contains statements which 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 lack of product acceptance, the
potential failure of distributors to meet purchase commitments, the potential
loss of distributor relationships, the potential failure to receive or maintain
necessary regulatory approvals, the extent to which competition may negatively
affect prices and sales volumes or necessitate increased sales expenses, and any
other uncertainties described in the discussion below.
Results of Operations
For the three month period ended September 30, 1999, the Company had a
net loss of $49,889 compared to net income of $549,849 in the same period in
1998. For the nine month period ended September 30, 1999, the Company earned
$115,657 compared to $2,392,920 for the same period in 1998. Net income in 1999
includes recognition of income tax expense of $53,430 and $360,612 for the three
and nine month periods ended September 30, 1999, respectively. In 1998, the
Company offset current income tax expense with a deferred income tax benefit
related to net operating loss carryforwards that were previously reserved.
The Company had revenues of $4,576,128 for the three month period ended
September 30, 1999 as compared to $6,571,648 for the same period in 1998. The
Company had revenues of $17,561,686 for the nine month period ended September
30, 1999 as compared to $18,676,228 for the same period in 1998. The decreases
in revenues are due to a decline in North American sales partially offset by an
increase in international sales. This decline in North American sales is
primarily attributable to the liquidation of dealer inventories and a soft air
abrasion market. Management is actively working to liquidate dealer inventories
in North America and stimulate air abrasion sales.
Royalty income increased $7,574 for the three month period ended
September 30, 1999, compared to the same period in 1998. Royalty income
increased $528,881 for the nine month period ending September 30, 1999 as
compared to the same period in 1998. These increases are due to the licensing
agreement with ESC Medical Systems, Ltd. recorded in the first quarter of 1999
and the settlement of $300,000 from Kreativ, Inc. regarding patent litigation
recorded during the second quarter of 1999.
Gross profit as a percentage of revenues was 48% and 49% for the three
and nine month periods ended September 30, 1999 compared to 52% and 55% for the
same periods in 1998. The gross profit decline during 1999 compared to 1998 is
primarily attributable to sales in 1999 of camera systems which generally have
lower gross margins than the other products of the Company combined with price
reductions due to increased competition.
Selling, general and administrative expenses decreased $120,557 or 5% for
the three month period ended September 30, 1999 compared to the same period in
1998. The decrease in the third quarter is primarily due to management's effort
to return selling, general and administrative expenses to historical norms
by reducing marketing expenses to be in line with current levels of sales.
Selling, general and administrative expenses increased $707,795 or 10% for the
nine month period ended September 30, 1999 compared to the same period in 1998.
These increases are primarily due to increased expenses related to the camera
business acquired from Dental Vision Direct ("DVD") in August 1998 and
amortization of goodwill related to the camera business.
Research and development expenses increased $52,246 for the three month
period ended September 30,1999, compared to the same period in 1998. Research
and development expenses increased $39,211 for the nine month period ended
September 30, 1999 compared to the same period in 1998. These increases are due
to managements focus on development of new products.
Interest expense increased by $18,787 and $187,954 for the three and nine
month periods ended September 30, 1999. The increase during 1999 is primarily
due to increased borrowings on the Company's revolving line of credit that was
primarily used to fund the acquisition of the camera business.
9
<PAGE> 10
Liquidity and Capital Resources
The Company's operating activities provided $989,604 in cash resources
during the nine month period ended September 30, 1999. The cash provided by
operations in 1999 was primarily due to net income of $115,657, decreases in
accounts receivable of $833,627, inventories of $451,943, notes receivable of
$300,000 and $1,577,264 of non-cash expenses including depreciation,
amortization and deferred taxes. Cash provided by operating activities was
reduced primarily by decreases in accounts payable of $1,071,088, compensation
and employee benefits of $133,921, other non-current liabilities of $762,204 and
other accrued liabilities of $301,768.
The Company's investing activities used $1,057,978 in cash resources
during the nine month period ended September 30, 1999. The cash used in
investing activities in 1999 related primarily to the expansion of the
manufacturing facility in Corpus Christi, Texas.
The Company's financing activities used $757,097 in cash resources during
the nine month period ended September 30, 1999. The cash used in financing
activities was primarily used to reduce borrowings on the Company's revolving
line of credit.
The Company has a $7,500,000 revolving line of credit from a bank, with
interest at prime or the LIBOR rate (Eurodollar rates, which were approximately
6% at September 30, 1999) plus 1.5%, which is due in September 2000. The
Company's borrowing is secured by a pledge of the Company's accounts receivable,
inventory, equipment, instruments, patents, copyrights and trademarks. As of
September 30, 1999, the Company had $5,150,000 outstanding and $2,350,000
available under this line of credit.
The Company believes, based upon its current business plan, that current
cash, available financing resources and cash generated through operations should
be sufficient to meet the Company's anticipated short term and long term
liquidity needs for the foreseeable future.
Year 2000 Issue
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. The Company
established a team that has completed an awareness program and assessment
project to address the Year 2000 issue including information technology (IT) and
non-IT systems. The Company determined that it will be required to upgrade or
replace portions of its software so that its computer and phone systems will
properly utilize dates beyond December 31, 1999 and that certain non-IT systems,
such as alarms, equipment, and heating and cooling systems may need to be
upgraded or replaced. In April 1999, the Company upgraded its business software
and believes that it is Year 2000 compliant. The Company expects to be able to
complete the remaining Year 2000 remediation by the end of the November 1999 and
believes that all of its systems will then be Year 2000 compliant. If such
planned remediation cannot be completed prior to the end of 1999, the Year 2000
issue could cause production interruptions that could have a material impact on
the operations of the Company. Anticipated spending for Year 2000 remediation,
expected to cost approximately $50,000, will be expensed as incurred and is not
expected to have a significant impact on the Company's ongoing results of
operations. Through September 30, 1999, the Company incurred approximately
$40,000 attributable to Year 2000 remediation.
The Company has initiated communications with a substantial majority of
its significant suppliers and large customers to determine their plans to
address the Year 2000 issue. While the Company expects a successful resolution
of all issues, there can be no guarantee that the systems of other companies
will be converted in a timely manner, or that a failure to convert by a supplier
or customer would not have a material adverse effect on the Company. The Company
considers the failure of a supplier or customer to be Year 2000 compliant to be
the most reasonably likely worst case scenario, since it expects to be Year 2000
compliant prior to the end of August 1999 and has determined it has no material
exposure to contingencies related to the Year 2000 issue for the products it has
sold. The Company has substantially completed its contingency planning after
assessing which third parties are most likely to have an adverse effect on the
Company and continues to review potential exposure. The plan is expected to be
complete by the end of 1999. Some material adverse effect could result despite
such contingency planning.
10
<PAGE> 11
The costs of the project and the date by which the Company plans to
complete the Year 2000 upgrades are based on management's best estimates, which
were derived utilizing third party plans and other factors. However, there can
be no guarantee that these estimates will be achieved and actual results could
differ materially from those plans. Specific factors that might cause such
material differences include, but are not limited to, the compatibility of the
upgrades and conversions, availability of personnel to correct capability issues
and similar uncertainties. The disclosure in this section contains information
regarding Year 2000 readiness which constitutes "Year 2000 Readiness Disclosure"
as defined in the Year 2000 Readiness Disclosure Act.
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk
There have been no material changes from the information reported in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
On December 20, 1996, American Dental filed a lawsuit against Kreativ, Inc.
("Kreativ") and two individuals in the United States District Court for the
Eastern District of Michigan, Southern Division. In February 1999, the Company
was awarded $632,203 in damages, plus attorney fees and interest. On August 2,
1999, the Company settled the judgment it had been awarded against Kreativ by
the Federal District Court in Michigan for false advertising violations of the
Lanham Act. Kreativ paid the Company $582,500 in settlement of the previously
awarded judgment.
These suits are described in detail in Item 3 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1998 and in the Companys'
Quarterly Report on Form 10-Q for the period ended June 30, 1999.
The Company is not currently involved in any litigation.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibit Description
Exhibit 10.59 Employment agreement dated September 7, 1999 between
American Dental Technologies, Inc. and Barbara A. Danieli.
Exhibit 10.60 Amended Employment Agreement dated August 1, 1999 between
American Dental Technologies, Inc. and Ben J. Gallant.
Exhibit 27 Financial Data Schedule
(b) There were no Form 8-Ks filed during the quarter ended September 30, 1999.
11
<PAGE> 12
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
Dated: November 15, 1999 Chief Executive Officer
By: Barbara A. Danieli
Chief Financial Officer
(Principal Financial Officer and
Dated: November 15, 1999 Principal Accounting Officer)
12
<PAGE> 13
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
10.59 Employment Agreement dated September 7, 1999
between American Dental Technologies, Inc. and
Barbara A. Danieli.
10.60 Amended Employment Agreement dated August 1, 1999
between American Dental Technologies, Inc. and
Ben J. Gallant.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.59
[AMERICAN DENTAL TECHNOLOGIES LETTERHEAD]
- ------------------------------------------------------------
September 7, 1999
Mr. Ben Gallant
American Dental Technologies, Inc.
5555 Bear Lane
Corpus Christi, TX 78405
Dear Ben:
As previously discussed, my employment transfer from Michigan to Texas
requires the following:
1) Moving costs paid for by the Company as outlined below:
- Moving expenses which cover the move of my personal effects (i.e.,
furniture, clothing, automobile, etc.)
- Six months rent of a furnished apartment in Texas
- Two round trip airline tickets from Texas to Michigan (December and
February travel)
2) On October 1, 1999, a salary increase to $100,000 per annum.
In the event that my employment is terminated by the Company for reasons other
than death, disability or "good cause" as set forth below, or by myself for
"good reason" as set forth below, prior to October 1, 2000, severance of six
months salary, including health insurance, 401(k) contributions and any unused
vacation will be paid.
<PAGE> 2
Good cause for the Company's termination of employment with me shall be
defined as the occurrence of any of the following events:
a) misconduct
b) personal dishonesty
c) violation of any law (other than traffic laws or misdemeanors)
d) breach of fiduciary duty
e) engaging in any conduct which adversely affects or conflicts with
the Company
Good reason for my termination of employment with the Company shall be
defined as the occurrence of any of the following events without the my
consent:
a) any material dimunition of my position, duties and responsibilities
with the company
b) any reduction in my base salary from $100,000 per annum
c) required relocation of my principal place of employment more than 50
miles from Corpus Christi, Texas
d) the Company's breach of any provision in this Agreement.
In the event my employment is terminated after a change in control of the
Company, I shall receive the greater of the amount I am entitled to receive
under the foregoing or entitled to receive under my change of control agreement
with the Company.
By signing below, each party agrees to the above terms and conditions as
outlined above (effective as of the date of these signatures).
/s/ Barbara A. Danieli /s/ Ben J. Gallant
- --------------------------- ---------------------------------
Ms. Barbara A. Danieli, CFO Mr. Ben J. Gallant, President/CEO
9/9/99 9/9/99
- --------------------------- ---------------------------------
Date Date
<PAGE> 1
1ST AMENDMENT TO EMPLOYMENT AGREEMENT
This Agreement shall be effective as of the 1st day of August, 1999
between American Dental Technologies, Inc., a Delaware Corporation (the
"Company") and Ben J. Gallant ("Gallant").
WHEREAS, the Company and Gallant entered into an Employment Agreement
dated August 1, 1999, and (the "Employment Agreement") and
WHEREAS, the Company and Gallant desire to extend the Employment Agreement;
NOW THEREFORE, for good and for valuable consideration, the parties agree
as follows:
The Employment Agreement is extended from August 1, 1999 through
July 31, 2001 on the same terms and conditions with the sole exception
being that Gallant shall be Chief Executive Officer and President of the
Company.
IN WITNESS WHEREOF, the parties have hereunto set their hands as of the
day and year first above written.
American Dental Technologies, Inc.
By: /s/ John Vickers, III
-----------------------------------------------
John Vickers, III, Executive Vice President and
Secretary by Authority of Board of Directors on
October 14, 1999.
/s/ Ben J. Gallant
-----------------------------------------------
Ben J. Gallant
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 583,933
<SECURITIES> 0
<RECEIVABLES> 4,929,814
<ALLOWANCES> 175,000
<INVENTORY> 10,834,979
<CURRENT-ASSETS> 18,706,066
<PP&E> 5,067,508
<DEPRECIATION> 2,014,673
<TOTAL-ASSETS> 39,645,184
<CURRENT-LIABILITIES> 2,358,572
<BONDS> 0
0
0
<COMMON> 297,285
<OTHER-SE> 31,610,977
<TOTAL-LIABILITY-AND-EQUITY> 39,645,184
<SALES> 16,819,430
<TOTAL-REVENUES> 17,561,686
<CGS> 8,878,660
<TOTAL-COSTS> 8,878,660
<OTHER-EXPENSES> 8,588,021
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 266,825
<INCOME-PRETAX> 476,268
<INCOME-TAX> 360,612
<INCOME-CONTINUING> 115,657
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 115,657
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
