<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 quarterly period
ended June 30, 2000.
[ ] 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 MEDICAL 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 No.)
5555 Bear Lane, Corpus Christi, TX 78405
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(361) 289-1145
American Dental Technologies, Inc.
(Former name, former address and former fiscal year,
if changed since last report)
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 July 31,
2000:
7,302,047 Shares
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
American Medical Technologies, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
2000 1999 2000 1999
----------------------------- -------------------------------
<S> <C> <C> <C> <C>
Revenues:
Equipment $ 5,420,273 $ 6,211,951 10,060,871 $ 12,300,307
Royalties 69,605 56,854 129,113 85,252
------------ ----------- ------------- ------------
5,489,878 6,268,805 10,189,984 12,385,559
Cost of products sold 2,363,499 3,536,617 5,107,989 6,512,980
------------ ----------- ------------- ------------
Gross profit 3,126,379 2,732,188 5,081,995 5,872,579
Selling, general and administrative 2,615,359 2,597,727 5,345,531 5,480,227
Research and development 236,962 209,672 456,113 385,143
------------ ----------- ------------- ------------
Income (loss) from operations 274,058 (75,211) (719,649) 7,209
Other income (expense):
License transfer fees --- 300,000 --- 600,000
Other income 33,467 31,957 60,058 41,647
Interest expense (86,408) (88,594) (175,273) (176,128)
------------ ----------- ------------- ------------
Net income (loss) before taxes 221,117 168,152 (834,864) 472,728
Income taxes (benefit) 83,000 131,282 (227,000) 307,182
------------ ----------- ------------- ------------
Net income (loss) $ 138,117 $ 36,870 $ (607,864) $ 165,546
============ =========== ============= ============
Net income (loss) per share $ 0.02 $ 0.01 $ (0.08) $ 0.02
============ =========== ============= ============
Net income (loss) per share assuming dilution $ 0.02 $ 0.01 $ (0.08) $ 0.02
============ =========== ============= ============
</TABLE>
See accompanying notes.
2
<PAGE> 3
American Medical Technologies, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30 December 31
2000 1999
----------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,404,514 $ 3,230,647
Accounts receivable:
Trade, less allowance of $175,000
in 2000 and 1999 3,922,093 4,716,252
Inventories 9,955,485 9,938,205
Deferred taxes 1,097,000 870,000
Prepaid expenses and other current assets 721,530 569,903
Other receivables 550,001 775,000
------------- ------------
Total current assets 17,650,623 20,100,007
Deferred taxes 3,874,000 3,874,000
Property and equipment, net 2,517,974 2,447,906
Intangible assets, net:
Goodwill 11,403,554 11,850,523
Air abrasive technology rights 462,317 551,838
Other 1,442,252 1,523,539
------------- ------------
13,308,123 13,925,900
------------- ------------
Total assets $ 37,350,720 $ 40,347,813
============= ============
</TABLE>
See accompanying notes.
3
<PAGE> 4
American Medical Technologies, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30 December 31
2000 1999
----------------------------------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 944,152 $ 2,311,903
Compensation and employee benefits 197,244 217,141
Accrued warranty 200,001 150,000
Other accrued liabilities 459,184 277,108
---------- ------------
Total current liabilities 1,800,581 2,956,152
Other non-current liabilities 230,512 223,278
Notes payable 4,155,000 5,150,000
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: 7,302,047
shares in 2000; and 7,367,847 shares in 1999 292,082 294,717
Warrants and options 801,000 801,000
Additional paid-in capital 42,200,664 42,312,636
Accumulated deficit (11,729,487) (11,121,624)
Foreign currency translation (399,631) (268,346)
------------- ------------
Total stockholders' equity 31,164,627 32,018,383
------------ ------------
Total liabilities and stockholders' equity $ 37,350,720 $ 40,347,813
============ ============
</TABLE>
See accompanying notes.
4
<PAGE> 5
American Medical Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
2000 1999
----------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (607,864) $ 165,546
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation 201,099 180,000
Amortization 690,277 701,067
Loss on sale of assets 119 ---
Deferred income taxes (227,000) 246,233
Changes in operating assets and liabilities:
Accounts receivable 810,960 337,333
Inventories 22,077 682,803
Prepaid expenses and other current assets (135,639) (91,674)
Notes receivable --- 180,000
Accounts payable (1,341,589) (181,044)
Compensation and employee benefits (19,592) (141,903)
Other accrued liabilities 133,186 (72,973)
Other non-current liabilities (124,815) (756,702)
----------- ----------
Net cash provided by (used in) operating activities (598,781) 1,248,686
INVESTING ACTIVITIES:
Purchases of property and equipment (271,246) (515,303)
Collections on notes receivable 225,000 ---
Proceeds from sale of assets 1,000 ---
Increase in intangible assets (72,500) (141,373)
----------- ----------
Net cash used in investing activities (117,746) (656,676)
FINANCING ACTIVITIES:
Payments on notes payable (995,000) (800,000)
Repurchase of common stock (114,606) ---
Proceeds from exercise of stock options --- 42,903
----------- ----------
Net cash used in financing activities (1,109,606) (757,097)
----------- ----------
Decrease in cash (1,826,133) (165,087)
Cash at beginning of period 3,230,647 1,409,404
----------- ----------
Cash at end of period $ 1,404,514 $1,244,317
=========== ==========
</TABLE>
See accompanying notes.
<PAGE> 6
American Medical Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2000 (Unaudited)
1. Basis of Presentation and Other Accounting Information
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
American Medical Technologies, Inc. (the "Company" or "AMT") 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 six months ended June 30, 2000 are not
necessarily indicative of the results to be expected for other quarters of 2000
or for the year ended December 31, 2000. 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, 1999.
Inventories - Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Finished goods $ 1,320,866 $ 1,310,448
Raw materials, parts and supplies 8,634,619 8,627,757
----------- -----------
$ 9,955,485 $ 9,938,205
=========== ===========
</TABLE>
Property and equipment - Accumulated depreciation aggregated $2,315,988 at June
30, 2000 and $2,122,046 at December 31, 1999.
Intangible Assets - Accumulated amortization aggregated $6,496,326 at June 30,
2000 and $5,806,049 at December 31, 1999.
6
<PAGE> 7
American Medical Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2000 (Unaudited)
1. Basis of Presentation and Other Accounting Information (continued)
Net Income (Loss) Per Share - The following table sets forth the computation for
basic and diluted earnings (loss) per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
2000 1999 2000 1999
----------------------------- -------------------------
<S> <C> <C> <C> <C>
Numerator:
Net Income (Loss) $ 138,117 $ 36,870 $ (607,864) $ 165,546
--------- ----------- ---------- -----------
Numerator for basic and diluted earnings
(loss) per share - income available to
common stockholders after assumed
conversions 138,117 36,870 (607,864) 165,546
Denominator:
Denominator for basic earnings (loss)
per share - weighted average shares 7,309,618 7,431,796 7,315,218 7,427,688
Effect of dilutive securities:
Employee stock options --- 23,126 --- 24,721
Dilutive potential common shares
Denominator for diluted earnings (loss)
per share - adjusted weighted average
shares and assumed conversions 7,309,618 7,454,922 7,315,218 7,452,409
Basic earnings (loss) per share $0.02 $0.01 $ (0.08) $0.02
Diluted earnings (loss) per share $0.02 $0.01 $ (0.08) $0.02
</TABLE>
Use of Estimates - In preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities, the 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 these estimates.
Reclassifications - Certain amounts in prior period financial statements have
been reclassified to conform with the presentation used in 2000.
2. Comprehensive Income (Loss)
Total comprehensive income (loss), net of the related estimated tax, was
$116,227 and ($76,617) for the three months ended June 30, 2000 and 1999,
respectively, and ($739,149) and $52,059 for the six months ended June 30, 2000
and 1999, respectively.
7
<PAGE> 8
American Medical Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2000 (Unaudited)
3. Segment Reporting
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 directly to dentists in North America
except for Canada. It sells these products to national and regional dental
distributors in its other fundamental business segments: 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).
<TABLE>
<CAPTION>
Six Months Ended June 30
2000 1999
---------------------------------------------
<S> <C> <C>
Revenues:
North America $ 4,984,058 $ 7,848,143
Europe 1,500,765 1,118,662
Japan 1,841,564 2,136,500
Other international 108,645 16,200
------------ ------------
$ 8,435,032 $ 11,119,505
============ ============
Reconciliation of revenues:
Total segment revenues $ 8,435,032 $ 11,119,505
Other 1,754,952 1,866,054
------------ ------------
Total revenues $ 10,189,984 $ 12,985,559
============ ============
Operational earnings (loss):
North America $ (126,701) $ 647,160
Europe 299,768 (45,434)
Japan 920,782 1,004,155
Other international (3,512) 8,375
------------ ------------
$ 1,090,337 $ 1,614,256
============ ============
Reconciliation of operational earnings to
income (loss) from operations:
Total segment operational earnings $ 1,090,337 $ 1,614,256
Other operational earnings 874,142 1,442,653
Research & development expenses (456,113) (385,143)
Administrative expenses (2,228,015) (2,064,557)
------------ ------------
Income (loss) from operations $ (719,649) $ 607,209
============ ============
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Long lived assets:
North America $ 2,485,473 $ 2,436,122
Europe 32,501 11,784
------------ ------------
$ 2,517,974 $ 2,447,906
============ ============
</TABLE>
8
<PAGE> 9
American Medical Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2000 (Unaudited)
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 possible failure to maintain the Company's line
of credit, the Company's potential inability to hire and retain qualified sales
and service personnel, the potential for an extended decline in sales, the
potential failure of revenues to offset additional costs associated with the new
business model, 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.
New Business Model
On February 14, 2000, the Company commenced selling its dental products
directly to dentists in the United States through its own sales force. The new
business model for the United States does not merely encompass direct selling by
the Company's own sales force. The Company intends to become a distributor of
dental equipment by establishing the infrastructure to support direct selling of
its own products as well as other manufacturer's products. The Company will not
only sell dental products it manufactures, but also intends to actively pursue
OEM or strategic relationships with other manufacturers. Within five years, the
Company plans to be able to supply 80% to 90% of the equipment used by dentists
in the United States.
The new business model calls for the establishment of twenty dental sales
and service centers in the year 2000 and twenty additional centers in the
following two years. Each center will be staffed with an office coordinator
responsible for scheduling, coordinating local marketing and reporting to
corporate headquarters. Additionally, each center will have a technician for
installation and technical service support. Outside of the United States, the
Company will continue selling its dental products through its distributor
network.
As of July 24, 2000, the Company had thirteen sales and service centers
operational and a fourteenth location leased and partially staffed. Several
trends from the first quarter of 2000 to the second quarter of 2000 reflect the
positive impact of the implementation of the new business model. North American
revenues increased 22% to $2,742,960 in the second quarter compared to
$2,241,098 in the first quarter. Gross profits increased to 57% in the second
quarter from 42% in the first quarter. Finally, income from operations in the
second quarter improved by $1,267,764 from a loss of $993,706 in the first
quarter to income from operations of $274,058 for the second quarter on a
revenue increase of $789,772.
As a part of its new business model, the Company is also pursuing
internal development and OEM/strategic relationships for technology products
outside of the dental field, which is the reason for the change of the Company
name to American Medical Technologies, Inc. To date, the Company has announced
two such relationships. On May 24, 2000 the Company announced that it had
entered into a 3-year contract to manufacture a laser for the ophthalmology
field with an initial order for $170,000. The contract requires the customer to
make a minimum purchase of $510,000 of lasers during the first twelve months and
approximately $1,000,000 in the second and third years in order to maintain
exclusive rights to the laser in the ophthalmic field. The Company also
announced that it has entered into an OEM contract to manufacture a private
label ultrasonic scaler for use by veterinarians. In addition, the Company plans
to introduce a new line of ultrasonic scalers and inserts along with a
prophylaxis air polisher for the dental field in the fourth quarter of 2000.
9
<PAGE> 10
Results of Operations
For the three-month period ended June 30, 2000, income before taxes was
$221,117 compared to income before taxes of $168,152 for the same period in
1999. The increase is primarily attributable to a $394,191 increase in gross
profit for the second quarter of 2000. For the six-month period ended June 30,
2000, loss before taxes was $834,864 compared to income before taxes of $472,728
for the same period in 1999. The difference for the six-month period was
primarily attributable to a decline in revenues and gross margins in the first
quarter due to the initial adoption of the new business model discussed above
and to $600,000 of non-recurring license fees received in the first half of
1999.
The Company had revenues of $5,489,878 for the three-month period ended
June 30, 2000 compared to $6,268,805 for the same period in 1999, a decrease of
12%. The Company had revenues of $10,189,984 for the six-month period ended June
30, 2000 compared to $12,385,559 for the same period in 1999, a decrease of 18%.
The decreases in revenues are primarily due to a $1,644,000 decline in North
American sales due to decreased sales to dealers during January and February
2000 and the initial implementation of the new business model. Until full
implementation of the new business model, expected to occur in the third quarter
of 2000, management anticipates lower revenues in North America for 2000
compared to 1999.
Gross profit as a percentage of revenues was 57% and 50% for the three
and six month periods ended June 30, 2000, compared to 44% and 47% for the same
periods in 1999. As a result of this improvement, gross profit for the second
quarter of 2000 increased $384,191 over the same period in 1999 despite a
$778,927 decrease in revenues. The increase in gross profit as a percentage of
revenues is due to the transition to the new business model. Under the new
business model, the Company sells its products directly to the retail customer
rather than selling to dealers at reduced wholesale prices. Management
anticipates that gross profit margins will continue to improve as the new
business model is fully implemented.
Selling, general and administrative expenses were $2,615,359, or 48%, and
$5,345,531, or 52%, for the three and six-month periods ended June 30, 2000
compared to $2,597,727, or 41%, and $5,480,227, or 44%, for the same periods in
1999, constituting increases of 7% and 8%, respectively. The increases in
selling, general and administrative expenses were primarily due to the increased
expenses of opening and operating the branch locations associated with the
implementation of the new business model.
Research and development expenses were $236,962 and $456,113 for the
three and six-month periods ended June 30, 2000 compared to $209,672 and
$385,143 for the same periods in 1999, increases of 13% and 18%, respectively.
The increases in research and development expenses related to the continued
design and development of new products, including the products described above,
which are scheduled to be rolled out in the fourth quarter of 2000.
Liquidity and Capital Resources
The Company's operating activities used $598,781 in cash resources during
the six-month period ended June 30, 2000. The cash used by operations was
primarily due to the net loss of $607,864, a decrease in accounts payable of
$1,341,589, and the non-cash provision for future income tax benefits of
$227,000. Cash used by operating activities was primarily offset by a decrease
in accounts receivable of $810,960, and non-cash depreciation and amortization
expenses totaling $891,376.
The Company's investing activities used $117,746 in cash resources during
the six-month period ended June 30, 2000. The cash used in investing activities
related primarily to the expansion of the sales and service centers nationwide
to implement the new business model in the United States.
The Company's financing activities used $1,109,606 in cash resources
during the six-month period ended June 30, 2000, representing amounts used to
reduce borrowings on the Company's revolving line of credit by $995,000 and to
repurchase the Company's common stock.
During the first six months of 2000, the Company repurchased 65,800
shares, representing approximately $115,000 of the $1 million repurchase
authorized by the Board. The repurchased shares constitute less than 1% of the
total number of shares currently outstanding
10
<PAGE> 11
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
6.74% at June 30, 2000) plus 1.5%, which expires in September 2001. The
Company's borrowing is secured by a pledge of the Company's accounts receivable,
inventory, equipment, instruments, patents, copyrights and trademarks. As of
June 30, 2000, the Company had $4,155,000 outstanding and $3,345,000 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.
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,
1999.
PART II OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on May 26, 2000, at
which time the stockholders considered and voted on the election of three
directors and a proposal to change the Company's name to "American Medical
Technologies, Inc." Each of the nominees for director was an incumbent and all
nominees were elected. The following table sets forth the number of shares voted
for and withheld with respect to each nominee.
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
------- --------- --------------
<S> <C> <C>
William D. Maroney 6,073,066 50,228
Bertrand R. Williams, Sr. 6,072,577 50,717
Charles A. Nichols 6,053,345 69,949
</TABLE>
The proposal to change the Company's name was ratified by the
shareholders. The following table sets forth the number of shares voted for,
against, and abstained, and broker non-votes:
<TABLE>
<CAPTION>
Votes For Votes Against Abstained Broker Non-Votes
--------- ------------- --------- ----------------
<S> <C> <C> <C>
6,098,294 9,861 15,139 --
</TABLE>
ITEM 6. Exhibits and Reports on Form 8-K:
(a) Exhibit Description
------- -----------
3 Certificate of Incorporation, as amended June 13, 2000
27 Financial Data Schedule
(b) There were no Form 8-Ks filed during the quarter ended June 30, 2000
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 MEDICAL TECHNOLOGIES, INC.
By: /s/ Ben J. Gallant
-------------------------------
Dated: August 14, 2000 Ben J. Gallant
Chief Executive Officer
(on behalf of the registrant)
By: /s/ Justin W. Grubbs
--------------------------------
Dated: August 14, 2000 Justin W. Grubbs
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
12
<PAGE> 13
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
