AMERICAN DENTAL TECHNOLOGIES INC, 10-K, 2000-03-30

AMERICAN DENTAL TECHNOLOGIES INC
10-K, 2000-03-30
ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended December 31, 1999, or

[ ] 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)

(361) 289-1145
(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class Name of Exchange on which registered
None Not Applicable

Securities registered pursuant to Section 12(g)of the Act:
Common Stock, $.04 par value per share
(Title of Class)

Indicate by check mark whether the registrant (1) filed all reports required to
be filed 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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant was approximately $10,500,000 on March 30,
2000, based upon the last sales price reported on The Nasdaq National Market on
that date. For purposes of this calculation only, all directors, executive
officers and owners of more than five percent of registrant's common stock are
assumed to be affiliates. There were 7,432,047 shares of the registrant's Common
Stock issued and outstanding on March 30, 2000.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrants' Proxy Statement for its 2000
Annual Meeting of Stockholders are incorporated by
reference into Part III of this report on Form 10-K

<PAGE> 2

PART I

ITEM 1. Description of Business

INTRODUCTION

American Dental Technologies, Inc. ("American Dental" or "Company")
develops, manufactures and markets high technology dental products designed for
general dentistry. American Dental's primary products are air abrasive kinetic
cavity preparation systems ("KCP"); pulsed dental lasers, primarily the
PulseMaster models; high speed curing lights ("PAC"); and intra oral cameras
("Ultracam") which are developed and manufactured at its manufacturing facility
in Corpus Christi, Texas. American Dental also develops, manufactures and
markets precision air abrasive jet machining ("AJM") systems for industrial
applications. American Dental, incorporated in Delaware in November 1989,
completed its initial public offering in June 1991.

On February 14, 2000, American Dental announced that it would now sell its
dental products in the United States directly to dentists through its own sales
force. The Company plans to establish twenty sales and service centers in 2000
and add twenty additional sales and service centers over the next two years.
American Dental plans to continue to sell outside the United States through its
distributor network. The goal of the Company is to become an equipment
distributor which supplies 80% to 90% of a dentist's equipment requirements. To
that end, the Company will pursue OEM relationships and strategic alliances with
other manufacturers.

PRODUCTS

KCP Cavity Preparation Systems

American Dental currently offers several KCP models which vary in size,
power and features, from the KCP 5 counter top model to the deluxe KCP 1000PAC
model. American Dental's KCP products remove tooth decay and tooth structure,
including enamel, by means of a narrow stream of minute particles of alpha
alumina propelled at high velocity by compressed air and delivered to the tooth
via a lightweight handpiece. The KCP shapes restoration sites, removes old
composites and modifies underlying hard tissue, often helping to increase bond
strength. It is also used for sealant preparations, stain removal and intraoral
porcelain removal and repair. The KCP can often be used in place of a drill and
may be used in many cases without anesthesia. The dentist controls the cutting
speed by selecting particle size (27 or 50 micron) and air pressure (40 psi to
160 psi) with touch pads on a control panel. The air abrasive stream is
activated by a foot pedal. The KCP floor models (KCP 100 and KCP 1000) are
contained in a movable cabinet the size of a medium suitcase and plug into a
standard electrical outlet.

The KCP is best used in conjunction with modern tooth-colored composite
restoration materials. It is not recommended for removing large amalgam
fillings. The precision of the KCP, and the manner in which it prepares surfaces
for restorations, allow for earlier treatment of decay and less destruction of
the tooth while restoring it. In many cases, the KCP may be used without
anesthesia, allowing a dentist to treat teeth in different quadrants of the
mouth during a single visit. This is generally not possible when conventional
instruments and anesthesia are used.

American Dental also markets a Plasma Arc Curing System ("PAC") as an
accessory to its KCP and as a stand alone unit. The PAC utilizes a high
intensity light source to rapidly cure composite fillings. Curing occurs in five
to ten seconds, or at least twice as fast as most conventional curing lights.
The KCP1000 PAC combines an air abrasive cavity preparation system together with
a composite curing light in a single instrument. This allows dentists to
efficiently switch from cavity preparation to curing.

The KCP is sold primarily in North America, certain Asian and Pacific
markets and Europe. The KCP and PAC represented approximately 41%, 65%, and 76%
of American Dental's total revenues in 1999, 1998 and 1997, respectively.

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Laser Products

The PulseMaster 600-IQ, one of two instruments in American Dental's laser
product line, is a neodymium yttrium-aluminum-garnet (Nd:YAG) laser that
delivers pulses of laser energy through a flexible fiber optic delivery system
that can reach into difficult recesses of the mouth. The PulseMaster can deliver
a 100-microsecond energy pulse at rates varying from 10 to 200 times per second,
up to six watts of average power. The PulseMaster is contained in a movable
cabinet the size of a medium suitcase, weighs approximately 75 pounds and plugs
into a standard electrical outlet.

American Dental introduced a diode laser, "Diolase", in October 1998. The
diode laser delivers a continuous wave or gated continuous wave through a
flexible fiber optic delivery system that can reach difficult recesses of the
mouth. The Diolase delivers up to 6 watts of power depending upon the fiber size
used. The Diolase is compact and portable in size, weighs approximately 11
pounds and plugs into a standard electrical outlet.

American Dental's dental lasers, components and accessories are sold
primarily in certain Asian and Pacific markets, Europe and North America. Lasers
represented approximately 27%, 17% and 15% of American Dental's total revenues
during 1999, 1998 and 1997, respectively.

American Dental believes one important feature of its dental lasers is
their ability to help reduce the pain associated with the procedures for which
they are used. Additionally, because the laser is more precise than standard
dental instruments, its use results in less cellular destruction. The laser
minimizes bleeding during soft tissue surgery, creating a cleaner field in which
to operate by eliminating time-consuming removal of blood from the operative
site. The laser also reduces the risk of post-operative infection.

American Dental's dental lasers are used for both soft tissue and hard
tissue applications. Soft tissue procedures include removing excess or diseased
gum tissue, contouring gums, performing biopsies, preparing gums for crown and
bridge impressions, trimming the gums to fit crowns and bridges, treating gum
disease and for hemostasis (control of bleeding). Hard tissue applications
include removing early decay from teeth, etching, increasing hardness of dentin,
and desensitizing and anesthetizing teeth. In May 1999, American Dental
Technologies received U.S. Food & Drug Administration ("FDA") clearance to
market the PulseMaster for the selective removal of enamel decay. American
Dental has not received clearance from the FDA to market dental lasers in the
United States for any other hard tissue application, but does market these
instruments in certain other countries for such purposes. See "Governmental
Regulation."

Intra Oral Camera Products

The Ultracam is a sophisticated camera system that allows the dentist to
take pictures of a patient's teeth during an examination. The pictures can be
projected on a video monitor in the examination room for immediate viewing by
the dentist and the patient and printed or stored on a computer disk. The
Ultracam systems offered vary in size from the basic cart system, which is a
portable camera and printer housed in a mobile cart, to a networked system that
can be utilized in several examination rooms. The networked systems combine the
cart system with central printing stations, digital docking stations and
examination room monitors.

The Ultracam is utilized in the dental practice for presentation, education
and as a means of communicating their services through multi-media. The recently
introduced Digital Docking Station greatly enhances the value of an intra oral
camera by allowing the storage of up to 40 images on a 3 1/2" computer floppy
disk.

Ultracam products are sold primarily in North America and Europe. Since its
acquisition in August 1998, the Ultracam products represented approximately 22%
and 11% of American Dental's total revenue in 1999 and 1998, respectively.

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Industrial Products

American Dental also develops, manufactures and markets precision air
abrasive jet machining ("AJM") systems for industrial applications. AJM has a
wide range of applications, including drilling, cutting, abrading, deburring,
dressing, beveling, etching, shaping and polishing. Its principal advantage over
conventional machining is that the AJM process, which accomplishes its work
through kinetic particle displacement (an erosion process), produces no heat,
shock or vibration. This enables precise work to be done on fragile materials
without deburring or further processing. Generally, the same is not true of
drills, saws, laser or other types of conventional machining equipment because
all of these systems rely on heat and/or friction to perform the work. These
machining techniques generally require further processing and in many instances
do not provide the precision available with AJM, particularly with fragile
materials. AJM systems are often used to remove the slag, burrs and flash
resulting from conventional machining processes. Some examples include deburring
needles, beveling silicon wafers and cutting fiber optics.

Industrial products accounted for less than 5% of American Dental's total
revenues in 1999, 1998, and 1997, respectively.

Probe and Chart-It

The Probe One is a computerized periodontal probe which works with practice
management software to automate and streamline perio-probing and charting.
Chart-It is an automated charting software program used to fully integrate a
dentist's operatory with most front office practice management systems. These
products represented less than 1% of the Company's total revenues in 1999, 1998
and 1997.

MARKETING, SALES AND TRAINING

General

Prior to February 14, 2000, American Dental marketed its dental products
through independent distributors, primarily Patterson Dental Company and
Sullivan Schein, Inc., to general dental practitioners and certain other dental
specialists in the United States. Sales to Patterson Dental Company, a major
domestic distributor of the Company's kinetic cavity preparation units, were
approximately 16%, 30%, and 34% of total revenues in 1999, 1998, and 1997,
respectively.

On February 14, 2000, American Dental commenced selling its dental products
in the United States to dentists 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. American Dental intends to become a distributor of
dental equipment by establishing the infrastructure to support direct selling.
American Dental will not only sell dental products it manufactures, but also
intends to actively pursue OEM or strategic relationships with other
manufacturers. Within five years, it hopes to be able to supply 80% to 90% of
the equipment used by dentists.

The new business model calls for the establishment of 20 dental sales and
service centers in the year 2000 and 20 more 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 the United States, including Canada, American Dental
will continue selling its dental products through its strong distributor
network.

American Dental's products are exclusively marketed in Japan by Denics Co.
Ltd. ("Denics") or its affiliates. As of March 2000, American Dental has
purchase commitments of approximately $4,560,675 through March 2001. Sales to
Denics for certain Asian and Pacific markets, primarily Japan, were
approximately 19%, 12%, and 10% of total revenues in 1999, 1998, and 1997,
respectively.

In most of Europe, American Dental's products are marketed through
exclusive dental distributors, such as DLMedica in Italy, Casa Schmidt in Spain
and Dentex in Russia. In Germany, the Company's primary European market,
American Dental is selling directly to the end user as well as selling through
distributors. An agreement was signed February 15, 2000 authorizing Plessing
Dental Handel GmbH and their affiliate, Sirona, to

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act as the exclusive laser distributor for Germany, provided these two firms
sell a minimum of 72 laser units during the balance of 2000. This agreement only
covers distributor sales in Germany and allows American Dental's German
subsidiary to continue to sell all of American Dental's products directly to the
end user.

The loss of American Dental's relationship with any of its international
dental product distributors or their failure to meet purchase commitments could
have a material adverse effect on American Dental's business.

Marketing activities, such as dental exhibitions and meetings, are
typically lower in the summer months, which results in decreased revenues during
the third quarter of the year.

American Dental presently has several industrial product distributors. Such
distributors have been and are anticipated to be the primary source of sales for
American Dental's industrial products in the future. Industrial product
distributors are supported by American Dental primarily through advertising in
the Thomas Register and trade journals, and by participation in trade shows.

American Dental also sells some industrial products directly to customers
through advertisements or customer referrals and through original equipment
manufacturers of grinding equipment who purchase AJM systems to incorporate into
their equipment.

INSTALLATION, TRAINING AND SERVICE

Because American Dental's dental products represent new approaches to
dentistry, installation and training are considered to be significant aspects of
its marketing efforts. Shortly after any purchase, American Dental or the
selling distributor install the product, verify that it is in proper working
order and provide training on its lasers and large air abrasion units. American
Dental also encourages each purchaser to participate in ongoing continuing
education regarding the use of American Dental's dental products and endeavors
to share new developments as soon as reliable scientific support has been
established.

American Dental or its distributors generally provide warranty service for
American Dental's products in the United States. To service its dental products,
American Dental has five full-time service employees in the United States and
has service arrangements with independent distributors for products in other
markets. Additionally, new service employees will be added as the sales and
service centers are opened. If such arrangements are unavailable, certain of
American Dental's sales personnel are trained to make minor service repairs. To
date, American Dental has not experienced significant service problems.
Previously, the warranty for a KCP, PAC, camera or laser was one year. The
general warranty was extended to two years in the United States for sales after
February 14, 2000. American Dental provides a limited five year warranty that a
PAC will deliver full curing energy in the calibrated time of ten seconds or
less.

The Company has a service center in Keltern, Germany which provides
installation, training, service and technical support for Europe, Russia and the
Mid-East. In other international markets, the distributors provide installation,
training and service with technical support from the United States office.

SUPPORT OF EDUCATIONAL ACTIVITIES

Because American Dental's dental products represent new approaches to
dentistry, American Dental believes a substantial effort is required to educate
dentists regarding the advantages of its technology. American Dental actively
supports educational activities relating to the use of its products.

Dr. Terry Myers, an American Dental consultant, is the executive director
of The Institute for Advanced Dental Technologies, formerly The Institute for
Laser Dentistry (the "Institute"). Under the auspices of the Institute, Dr.
Myers lectures at dental meetings and institutions throughout the world and
publishes professional papers and articles. The Institute also supervises the
training of clinical instructors, provides clinical instructors to lead
educational programs, evaluates developments in dental technology and organizes
clinical training programs. American Dental supports these programs by providing
financial support to the Institute, soliciting enrollments, providing loans of
equipment and assisting in the preparation of course materials. Following the
completion of a program, an American Dental sales representative is typically
available to answer questions concerning American Dental's products.

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COMPETITION

In general, American Dental's products are subject to intense competition,
both from other advanced dental technology companies and from makers of
conventional dental equipment. American Dental believes there are approximately
ten companies which presently sell competing dental air abrasive products and
approximately eleven companies which presently sell competing intra oral camera
systems. American Dental believes there are approximately eight competing
companies which presently offer Nd:YAG, diode, argon, erbium, holmium or CO2
lasers for use in dentistry. American Dental has patents in the basic
technologies, both in air abrasion and lasers, which the Company believes
provide a competitive advantage.

American Dental's KCP, PAC and Laser products must also compete with
conventional treatment methods using dental instruments or equipment which are
generally less expensive and with which dentists are more familiar.

Many of these competing companies, particularly those which manufacture
traditional dental equipment, may have been in business longer, have greater
resources and have a larger distribution network than American Dental. American
Dental's competitive position is dependent upon its pricing and marketing
practices, its ability to make ongoing improvements in its existing products, to
develop new products, and to successfully promote the capabilities and treatment
benefits of its products. While American Dental believes its products are
competitive in terms of capabilities, quality and price, competition has, and
may in the future, adversely affect American Dental's business.

PATENTS

American Dental believes its patents provide a competitive advantage in
those countries where they have been issued. American Dental believes its air
abrasive technology patents and other patent rights provide a proprietary means
to utilize that technology in dentistry. In the United States, American Dental
has patents related to dental air abrasive systems and methods for using an air
abrasive stream for dentistry that do not begin expiring until 2011, technology
patents for air abrasive cavity preparation systems that do not begin expiring
until 2004, dental laser method and technology patents that have expiration
dates ranging from 2002 to 2016, and industrial air abrasive patents that have
expiration dates ranging from 2004 to 2016. American Dental also holds several
industrial air abrasive patents in various other countries.

MANUFACTURING AND SUPPLIERS

American Dental manufactures, assembles and services its products at its
ISO 9001-certified facility in Corpus Christi, Texas. Certification under the
ISO 9001 standard represents the highest level of facility certification
attainable. Manufacturing certification became a requirement for all medical
products distributed or sold in Europe as of July 1, 1998.

American Dental's products are manufactured from parts, components and
subassemblies obtained from a number of unaffiliated suppliers and/or fabricated
internally at its manufacturing facility. American Dental has modern machining
capability allowing it to control the production of certain non-standard parts.
American Dental uses numerous suppliers for standard parts and for fabrication
of certain parts. Although most of the parts and components used in its products
are available from multiple sources, American Dental presently obtains several
parts and components from single sources. Lack of availability of certain parts
and components could result in production delays. Management has identified
alternate suppliers and believes any delays would be minimal. While the loss of
American Dental's relationship with a particular supplier might result in some
production delays, such a loss is not expected to materially affect American
Dental's business.

RESEARCH AND DEVELOPMENT

Most research and development, prototype production and testing activities
take place at the Texas facility, although some research and development work is
performed for American Dental by consultants. The Texas facility has an
engineering and CAD/CAM drafting staff which is capable of producing new product
prototypes. Although American Dental expects to continue to conduct most of its
own research and development activities, American Dental will continue to work
with various domestic and international dental schools, consultants and
researchers to analyze dental applications and to develop product enhancements
and complementary products.

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American Dental's research and development expenditures for 1999, 1998 and
1997 were $931,189, $947,202 and $641,984, respectively. American Dental's
current research and development efforts are focused on new complementary
products for the dental market.

GOVERNMENTAL REGULATION

American Dental's dental products are subject to significant governmental
regulation in the United States and certain other countries. In order to conduct
clinical tests and to market products for therapeutic use, American Dental must
comply with procedures and standards established by the United States Food and
Drug Administration ("FDA") and comparable foreign regulatory agencies. Changes
in existing regulations or adoption of additional regulations may adversely
affect American Dental's ability to market its existing products or to market
enhanced or new dental products.

United States Regulatory Requirements

The FDA granted clearance to market the KCP for hard-tissue applications
and the PulseMaster dental lasers for soft-tissue procedures in late 1992.
Clearance to market the PAC was granted by the FDA in mid-1995. The PulseMaster
received FDA clearance to market for laser curettage in March 1997 and a diode
laser was granted soft tissue clearance in September 1997. The Pulsemaster
received FDA clearance to market for selective removal of enamel dental caries
in May 1999. The receipt of FDA clearance requires proof of the product's safety
and efficacy or that the product is substantially equivalent to products which
have already received FDA clearance. Such clearances, if obtained, may take from
three months to several years to receive.

Foreign Regulatory Requirements

The KCP, PAC, Intraoral cameras and Lasers have been granted CE mark
approvals which are recognized by most European countries, and may be sold in
Germany and many other European markets. In the latter part of 1996, approval to
market the KCP in Japan was obtained. American Dental's dental lasers comply
with government regulations in most major countries in Europe, Asia, the Pacific
Rim, and North and South America and are marketed for both hard and soft tissue
applications, except in Japan, where (as in the United States) they have not
been cleared for certain hard-tissue procedures. Additional foreign
authorizations to market its dental products are being sought where needed.
Regulation of medical devices in other countries varies between countries such
as Japan, which has standards similar to the FDA, to countries which have no
regulations. Regulation of medical devices in other countries is also subject to
change and there can be no assurance American Dental will continue to be able to
comply with such requirements.

European regulations required ISO 9001 certification as of July 1998 for
all medical products distributed or sold in Europe. American Dental's
manufacturing facility received ISO 9001 certification in 1997.

PRODUCT LIABILITY EXPOSURE

American Dental's business involves the inherent risk of product liability
claims. If such claims arise, they could have an adverse effect on American
Dental. American Dental currently maintains product liability insurance on a
"claims made" basis with coverage per occurrence and in the aggregate annually
of $5,000,000. There is no assurance that such coverage will be sufficient to
protect American Dental from all risks to which it may be subject or that
product liability insurance will be available at a reasonable cost, if at all,
in the future.

FOREIGN OPERATIONS

See "American Dental Technologies, Inc. Notes to Financial Statements, Note
8."

EMPLOYEES

On March 1, 2000, American Dental had 95 full-time employees and 2
part-time employees. Of these employees, 24 were engaged in direct sales and
marketing activities and 55 in manufacturing activities. The remaining employees
are in finance, administration, customer service, and research and development.
American Dental has no collective bargaining agreements with any unions and
believes that its overall relations with its employees are good.

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EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth information concerning each of the current
executive officers of American Dental who are elected to serve at the discretion
of the Board of Directors.

Name Age Position
------------------------------------------------------------------------------------
<S> <C> <C>
Ben J. Gallant 66 President, Chief Executive Officer and Director
Barbara A. Danieli 37 Chief Financial Officer
John E. Vickers 53 Executive Vice President, Secretary and Director
William S. Parker 54 Senior Vice President - Dental
Hans Nahme 60 Senior Vice President - Sales
William E. Graham 41 Vice President - Eastern Sales
John A. Miller 40 Vice President - Western Sales
William D. Myers 58 Chairman of the Board of Directors
</TABLE>

Ben J. Gallant - Mr. Gallant was appointed President of American Dental in
September 1996 and Chief Executive Officer in November 1996. He became a
director in July 1996. Mr. Gallant was a founder of Texas Airsonics, Inc.
("Texas Air"), which was acquired by American Dental on July 31, 1996, served as
a director and chairman of the board since that company's inception in 1982, and
became its president and chief executive officer in 1991.

Barbara A. Danieli - Ms. Danieli was appointed Chief Financial Officer in April
1999. She had been the Controller of American Dental since 1998 and prior to
that, the Accounting Manager for American Dental since 1997. Prior to joining
American Dental, Ms. Danieli was a financial analyst for Kmart Corporation from
1995 to 1997, and an accountant for a local Michigan accounting firm from 1990
to 1995.

John E. Vickers III - Mr. Vickers was appointed Executive Vice President in
August 1998. He had been the Senior Vice President - Operations of American
Dental since November 1996 and became a director in July 1996. Mr. Vickers had
served as Texas Air's chief financial officer and legal counsel since June 1993
and had various operating responsibilities with Texas Air. From December 1991
until September 1994, Mr. Vickers was of counsel to the law firm of Novak,
Vickers and Burt. Mr. Vickers had been engaged in the practice of law for 25
years.

Hans Nahme - Mr. Hahme was appointed Senior Vice President - Sales in August
1999. He had been the Vice President - International Sales since May 1999. Prior
to joining American Dental, Mr. Nahme had been general manager with IDEA
Associates, Inc., a Portland, Oregon firm that had been responsible for export
sales of American Dental products in Latin America, Australia and New Zealand,
from 1997 to 1999. From 1994 to 1997, Mr. Nahme was Vice President -
International Sales of Dentech, Inc.

William S. Parker - Mr. Parker was appointed Senior Vice President - Dental in
August 1998. He had been a consultant, then an employee of the Company in charge
of product development since 1991. From 1976 to 1991, he was the president and
co-founder of the New Directions Group, Inc., a management consulting firm which
had clients such as Ford, Exxon Enterprises, AT&T and Ross Laboratories. He is
chiefly responsible for the Company's product development.

William E. Graham - Mr. Graham was appointed Vice President - Eastern Sales in
May 1999. Mr. Graham had been Vice President - Sales and prior to that National
Sales Manager - Ultracam from August 1998 to May 1999. Prior to joining American
Dental, Mr. Graham was a high tech product consultant for Meer Dental, a large
regional dental distributor, from November 1996 until August 1998. From August
1993 to November 1996 he was a sales representative for Insight Imaging, Inc.,
an intra oral camera manufacturer.

John A. Miller - Mr. Miller was appointed Vice President - Western Sales in May
1999. Prior to joining American Dental, Mr. Miller was President of Source One,
a marketing, consulting, planning and research firm he founded in 1996. Mr.
Miller has been in dental equipment related sales for over ten years.

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William D. Myers, M.D. - Dr. Myers is one of the founders of American Dental and
a co-inventor of the Company's first dental laser. He has been Chairman of the
Board of American Dental since January 1990. Dr. Myers has been a practicing
ophthalmologist for more than 20 years and is the founder and director of the
Michigan Eyecare Institute. Dr. William Myers and Dr. Terry Myers are brothers.

FORWARD LOOKING STATEMENTS

This report and other reports filed by the Company, as well as our press
releases and other investor communications, contain statements which are
"forward looking statements" within the meaning of the Securities Exchange Act
of 1934, as amended, and are subject to uncertainties which could cause our
results and performance to differ materially from the Company's expectations.
Such uncertainties include, without limitation, the possible failure to maintain
its lines of credit, ability to hire and retain qualified sales and service
personnel, the potential for an extended decline in sales, the inability of
revenues to offset additional costs associated with the new approach, the
negative effects of competition on prices and sales volumes and the other risks
and uncertainties set forth in this report.

ITEM 2. DESCRIPTION OF PROPERTIES

American Dental owns an approximately 52,000 square foot manufacturing
facility on 5.2 acres located at 5555 Bear Lane, Corpus Christi, Texas 78405
which houses its manufacturing and administration facilities.

The office building in Southfield, Michigan was sold in November, 1999 as
part of the move to consolidate administrative operations in Corpus Christi,
Texas. American Dental maintains a lease on a total of 1,800 square feet office
space in Southfield, Michigan and a total of 1,200 square feet in San Carlos,
California for its product development, clinical and service activities. As of
March 15, 2000, twelve locations were leased for sales and service centers. The
leases are generally for one to two year terms.

ITEM 3. LEGAL PROCEEDINGS

The Company is not a party to any material litigation at December 31, 1999.
All of the litigation involving Kreativ, Inc. was settled during 1999 as
previously disclosed. The Company received a $580,000 settlement from Kreativ
Inc. in the false advertising suit and received $300,000 in exchange for a
paid-up license in settlement of the two patent suits. The proceeds from the
false advertising suit are included in other income in the statement of
operations and the proceeds from the patent suit are included in the license
transfer fees in the statement of operations.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS

American Dental's common stock is traded on The Nasdaq National Market
(Symbol: ADLI). The following table sets forth certain information as to the
high and low sales prices per share of American Dental common stock as reported
by Nasdaq for each quarterly period during the last two fiscal years.

Closing Price
High Low
-------------------------

1998
<S> <C> <C>
First Quarter $ 5.375 $ 4.750
Second Quarter 5.563 4.438
Third Quarter 5.063 3.500
Fourth Quarter 4.375 3.438

1999
First Quarter $4.688 $3.688
Second Quarter 4.125 3.125
Third Quarter 3.750 2.250
Fourth Quarter 2.375 1.250
</TABLE>

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As of March 30, 2000, there were approximately 4,000 beneficial and record
holders of American Dental common stock based upon the records of the Company's
stock transfer agent and security position listings.

The Board of Directors presently intends to retain all earnings to finance
operations and does not expect to authorize cash dividends in the foreseeable
future. Any payment of cash dividends in the future will depend upon earnings,
capital requirements and other factors considered relevant by the Board of
Directors.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data, as of and for each of the five years
ended December 31, is derived from the audited financial statements of American
Dental. Operating results for prior years are not necessarily indicative of the
results that may be expected for any other periods. The data should be read in
conjunction with the financial statements and related notes included in this
report and with Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

(dollars in thousands, except per share amounts)

1999 1998 1997 1996 1995
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

Operating data:
Net revenues $ 24,370 $ 28,285 $ 21,652 $ 20,510 $ 13,617
Net income (loss) $ 392 $ 8,849(2) $ 3,622 $ 5,628(2) $ (1,274)

Net income (loss)
per common share
assuming dilution $ .05 $ 1.20 $ .47 $ .90 $ (.34)

Weighted average number
of common shares 7,446 7,375 7,640 6,284 3,836

Balance Sheet Data:
Total assets $ 40,348 $ 41,855(3) $ 22,530 $ 21,280(4) $ 12,984
Long-term obligations 5,373 6,271 135 577 3,664
Stockholders' equity(5) 32,018 31,809 20,257 16,809 1,832
Working capital (deficit) 17,144 17,504 8,290 5,153 (1,437)
</TABLE>

- -----------------
(dollars in thousands)

(1) Includes $5,072 income tax benefit related to reversal of a previously
recorded deferred tax asset valuation allowance

(2) Includes $2,700 related party royalty income and a $560 restructuring
expense.

(3) Includes goodwill of $4,230 and other assets of $3,948 recorded in
connection with the acquisitions of The Dental Probe and Dental Vision
Direct in February 1998 and August 1998, respectively.

(4) Includes goodwill of $6,125 and other assets of $2,447 recorded in
connection with the acquisition of Texas Airsonics, Inc. on July 31, 1996.

(5) No dividends were paid on the common stock during the periods presented.

10
<PAGE> 11

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Results of Operations

For the year ended December 31, 1999, income before taxes was $1,007,606
compared to $3,777,200 for 1998. The decline in income before taxes was
primarily attributable to a decline in revenues and gross margins, and an
increase in selling and marketing expenses for the first half of 1999 as a
percentage of revenues.

For the year ended December 31, 1998, income before taxes was $3,777,200
compared to $3,621,770 for 1997. The increase in income before taxes was
primarily due to increased revenues, which was partially offset by increased
legal fees incurred during 1998 for defending the Company's business reputation
and patents.

For the year ended December 31, 1999, the Company's revenues decreased 14%
compared to 1998. This decrease in revenues is primarily due to 27% decrease in
revenues in North America, partially offset by a 39% increase in revenues in
Japan and a 41% increase in Europe. The decrease in North American revenues is
primarily due to a decrease in KCP sales caused by the liquidation of dealer
inventories and a soft air abrasion market. The Company is attempting to reduce
fluctuations resulting from dealer inventory adjustments by implementing the new
business model described in Item I. Sales of lasers, PAC lights and intraoral
cameras increased in North America during 1999, partially off-setting the softer
KCP sales. The increase in revenues in Europe are mainly attributable to the
addition of new distributors in 1999.

For the year ended December 31, 1998, the Company's revenues increased 31%
compared to 1997. This increase in revenues is primarily due to a 32% increase
in revenues in North America, a 44% increase in revenues in Japan and a 2%
increase in Europe. The increase in North America is due to the addition of the
Ultracam intra oral product line as a result of the acquisition of Dental Vision
Direct in August 1998 and increased sales of the stand alone curing light. The
Japanese and European distributors had reduced purchasing in 1997 and 1996 to
lower their inventory levels.

Gross profit as a percentage of revenues was 48% for the year ended
December 31, 1999, compared to 54% in 1998 and 57% in 1997. The decrease in
gross profit as a percentage of revenues in 1999 compared to 1998 and 1997 is
due to price discounts extended to North American distributors and a change in
product mix with lower gross profit as a percentage of revenues on the Ultracam
product line acquired in August 1998.

Selling, general and administrative expenses were $10,772,746 in 1999,
$10,618,210 in 1998 and $8,418,271 in 1997. The increase in 1999 is primarily
attributable to sales and marketing expenses in the first half of the year which
were higher as a percentage of sales primarily due to increased selling,
marketing, and general and administrative expenses related to the camera
business acquired from Dental Vision Direct and amortization of goodwill also
related to the camera business. The increase in 1998 is attributable to
increased selling and marketing expenses in North America and legal expenses
in excess of $500,000 for the purpose of defending the Company's business
reputation and patents.

Research and development expenses were $931,189 in 1999, $947,202 in 1998,
and $641,984 in 1997. The expenditures related primarily to the development of a
new PAC light and two new products which have not been completed. The increase
in research and development expense during 1998 was due to expenses relating to
clinical reports for regulatory approvals and the completion of two new
products.

License transfer fees increased $665,000 for the year ended December 31,
1999 compared to 1998. This increase is primarily due to the licensing
agreement with ESC Medical Systems, Ltd. for $300,000, a licensing agreement
with Chart-It for $65,000 and settlement of $300,000 from Kreativ regarding
patent litigation.

Other income increased $715,050 for the year ended December 31, 1999
compared to 1998. This increase is primarily due to the Kreativ lawsuit
settlement of $580,000 and a gain on the sale of the Michigan building of
$180,000.

Interest expense was $401,438 in 1999, $206,856 in 1998, and $52,857 in
1997. The increase in interest expense in 1999 and 1998 is primarily due to the
debt incurred to fund the acquisition of DVD in August 1998.

In 1999, the Company recorded a $616,000 charge for income tax. The
Company's income taxes at U.S. statutory rates, differs from its recorded income
tax expense primarily due to nondeductible goodwill amortization. In 1998, the
Company reversed its previously recorded deferred tax asset valuation allowance
as the Company determined that it was more likely than not that it would realize
the related deferred tax asset. The effect of the reversal was to increase net
income by $5,072,117 for this income tax benefit. The Company's income taxes at
U. S.

11
<PAGE> 12

statutory rates differs from its recorded income tax benefit primarily due to
the reversal of a previously recorded deferred tax valuation allowance in 1998.
At December 31, 1999, the Company had net deferred tax assets totaling
$4,744,000, primarily consisting of a net operating loss carryforward of
$3,746,000. These net operating loss carryforwards expire in various amounts in
the years 2006 through 2011.

Liquidity and Capital Resources

The Company's operating activities provided $2,818,774 in cash resources in
1999. Cash provided by operating activities in 1999 was due to net income of
$391,606, a decrease in inventories of $1,401,007, a decrease in accounts
receivable of $211,110, $558,619 of non-cash change in deferred taxes and
$1,868,378 of non-cash depreciation and amortization expense. Cash provided by
operating activities was primarily offset by reductions in liabilities totaling
$1,833,462.

The Company's investing activities used $149,095 in cash resources in 1999.
The cash used in investing activities in 1999 related primarily to the expansion
of the Company's facility in Corpus Christi, Texas, partially offset by the sale
of its office in Southfield, Michigan.

On September 30, 1999, the Company renewed an agreement for a $7,500,000
revolving line of credit from a bank, with interest at prime or the LIBOR rate
(Eurodollar rates, which were approximately 6.0% at December 31, 1999) 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 December 31, 1999, the Company had
$5,150,000 outstanding and $2,350,000 available under this line of credit. The
borrowings were used to fund the Company's acquisition of DVD.

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.

Impact of Year 2000

In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. During 1999, the Company completed its remediation
and testing of systems. As a result of those planning and implementation
efforts, the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company
incurred costs of approximately $50,000 in connection with remediating its
systems and anticipates no further costs. The Company is not aware of any
material problems resulting from Year 2000 issues, either with its products, its
internal systems, or the products and services of third parties. The Company
will continue to monitor critical computer applications and those of its
suppliers and vendors throughout the year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, the Company is subject to market risk
from changes in foreign exchange rates, interest rates and raw material prices.

Foreign Currency

The Company sells its products in North America, Europe (primarily
Germany), Japan and other foreign countries. The Company is headquartered in the
United States and has a German subsidiary. Except for revenues generated by its
German subsidiary, the Company sells its products to its foreign customers in
United States dollars. As a result the Company's financial results could be
affected by factors such as changes in foreign currency exchange rates or weak
economic conditions in the foreign markets in which the Company distributes its
products. The Company's operating results are primarily exposed to changes in
exchange rates between the United States dollar and the German deutsche mark.

<PAGE> 13

As currency rates change, translation of the income statements of the
Company's German subsidiary into United States dollars affects year-to-year
comparability of operating results. The Company does not generally hedge
operating translation risks because cash flows from the German operations are
generally reinvested locally.

As of December 31, 1999 and 1998, the Company's net assets (defined as
current assets less current liabilities) subject to foreign currency translation
risk were $1,562,051 and $964,512 in 1998. The potential decrease in net assets
from a hypothetical 10% adverse change in quoted foreign currency exchange rates
would be approximately $156,205 and $96,541 for 1999 and 1998, respectively.

Interest Rate Risk

The Company's variable interest expense is sensitive to changes in the
general level of United States and European interest rates. The Company's long
term debt represents borrowings under a revolving line of credit at the bank's
prime rate and various notes at Eurodollar rates plus 1.5% and is sensitive to
changes in interest rates. The borrowings under the Eurodollar rates have
maturity dates varying between 30 to 120 days. At December 31, 1999, the
weighted average interest rate on the $5,150,000 debt was 7.22% and the fair
value of the debt approximates its carrying value.

The Company had interest expense of $401,438 in 1999 as compared to
$206,856 in 1998. The potential increase in interest expense from a hypothetical
2% adverse change, assuming the December 31, 1999 and 1998 debt was outstanding
for the entire year, would be approximately $103,000 and $118,000 for the year
ended December 31, 1999 and 1998, respectively.

13
<PAGE> 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial Statements

Report of Independent Auditors

Stockholders and Board of Directors
American Dental Technologies, Inc.

We have audited the accompanying consolidated balance sheets of American Dental
Technologies, Inc. as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1999. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
American Dental Technologies, Inc. at December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows for each of three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material respects
the information set forth therein.

/s/ Ernst & Young LLP

Detroit, Michigan
February 25, 2000

14
<PAGE> 15

American Dental Technologies, Inc.
Consolidated Statements of Operations

Year Ended December 31
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Equipment:
Trade $ 19,665,156 $ 24,545,421 $ 19,386,836
Related party (Note 3) 4,536,007 3,465,819 2,060,505
------------- ------------ -------------
24,201,163 28,011,240 21,447,341
Royalties 168,364 273,480 204,533
------------- ------------ -------------
24,369,527 28,284,720 21,651,874

Cost of sales 12,778,664 12,877,318 9,371,342
------------- ------------ ------------
Gross profit 11,590,863 15,407,402 12,280,532

Selling, general and administrative 10,772,746 10,618,210 8,418,271
Research and development 931,189 947,202 641,984
------------- ------------ ------------
Income (loss) from operations (113,072) 3,841,990 3,220,277
Other income (expense)
License transfer fee 665,000 --- 375,000
Other income 857,116 142,066 79,350
Interest expense (401,438) (206,856) (52,857)
------------- ------------ ------------
Income before income taxes 1,007,606 3,777,200 3,621,770
Income tax (benefit) expense 616,000 (5,072,117) ---
------------- ------------ ------------
Net income $ 391,606 $ 8,849,317 $ 3,621,770
============= =========== ============

Net income per share $ 0.05 $ 1.21 $ 0.52
====== ====== =======

Net income per share
assuming dilution $ 0.05 $ 1.20 $ 0.47
====== ====== =======
</TABLE>

See accompanying notes.

15
<PAGE> 16

American Dental Technologies, Inc.
Consolidated Balance Sheets

December 31
1999 1998
------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 3,230,647 $ 1,409,404
Accounts receivable:
Trade, less allowance of $188,000
in 1999 and $175,000 in 1998 3,584,559 4,423,633
Related party (Note 3) 1,131,693 1,143,475
----------- -----------
4,716,252 5,567,108

Inventories (Note 1) 9,938,205 11,225,208
Deferred taxes 870,000 1,857,143
Prepaid expenses and other current assets 569,903 919,633
Other receivable (Note 6) 100,000 --
Note receivable-related party (Note 3) 675,000 300,000
----------- -----------
Total current assets 20,100,007 21,278,496

Deferred taxes 3,874,000 3,445,476
Property and equipment, net (Note 1) 2,447,906 2,462,747
Intangible assets, net (Notes 1,2 and 3):
Goodwill 11,850,523 12,170,149
Air abrasive technology rights 551,838 730,878
Other 1,523,539 1,667,439
----------- -----------
13,925,900 14,568,466
Other receivable (Note 6) -- 100,000
----------- -----------
Total assets $40,347,813 $41,855,185
=========== ===========
</TABLE>

See accompanying notes.

16
<PAGE> 17

American Dental Technologies, Inc.
Consolidated Balance Sheets

December 31
1999 1998
-----------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,311,903 $ 2,877,517
Compensation and employee benefits 217,141 405,850
Accrued warranty 150,000 194,732
Other accrued liabilities 277,108 296,448
------------ ------------
Total current liabilities 2,956,152 3,774,547

Other non-current liabilities (Note 4) 223,278 321,336
Notes payable (Note 4) 5,150,000 5,950,000

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: 7,367,847
shares in 1999; and 7,419,259 shares in 1998 294,717 296,773
Additional paid-in capital 42,312,636 42,359,016
Warrants and options 801,000 772,500
Accumulated deficit (11,121,624) (11,513,230)
Foreign currency translation (268,346) (105,757)
------------ ------------
Total stockholders' equity 32,018,383 31,809,302
------------ ------------
Total liabilities and stockholders' equity $ 40,347,813 $ 41,855,185
============ ============
</TABLE>

See accompanying notes.

17
<PAGE> 18

American Dental Technologies, Inc.
Consolidated Statements of Cash Flows

Year ended December 31
1999 1998 1997
---------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 391,606 $ 8,849,317 $ 3,621,770
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 413,977 244,566 121,435
Amortization 1,454,401 1,225,344 990,742
Deferred taxes 558,619 (5,212,619) (45,000)
Net gain on disposal of property and equipment (179,368) -- --
Other non-cash gains -- -- (100,000)
Changes in operating assets and liabilities:
Accounts receivable 211,110 (2,221,040) 124,343
Inventories 1,401,007 (3,788,370) (905,068)
Prepaid expenses and other current assets 400,884 (300,218) (29,098)
Notes and other receivables -- 200,000 (600,000)
Accounts payable (556,620) 1,580,876 (754,470)
Compensation and employee benefits (187,112) 157,977 11,243
Other accrued liabilities (248,727) 99,240 (694,750)
Other non-current liabilities (841,003) 183,989 (41,780)
----------- ----------- -----------
Net cash provided by operating activities 2,818,774 1,019,062 1,699,367

INVESTING ACTIVITIES
Acquisition of businesses -- (3,315,000) --
Purchases of property, plant & equipment (986,982) (1,242,296) (126,718)
Proceeds from sales of property, plant & equipment 769,367 -- --
Collections on notes receivable 300,000 -- --
Increase in intangible assets (231,480) (307,787) (1,087,639)
----------- ----------- -----------
Net cash used in investing activities (149,095) (4,865,083) (1,214,357)

FINANCING ACTIVITIES
Payments on note payable to related party -- -- (500,000)
Payments on note payable (800,000) (5,800,000) (250,000)
Proceeds from note payable -- 7,600,000 --
Repurchase of common stock (91,339) -- --
Proceeds from exercise of warrants -- 1,564,000 --
Proceeds from exercise of stock options 42,903 59,742 264,481
----------- ----------- -----------
Net cash provided by (used in) by financing activities (848,436) 3,423,742 (485,519)
----------- ----------- -----------
Increase (decrease) in cash 1,821,243 (422,279) (509)

Cash at beginning of year 1,409,404 1,831,683 1,832,192
----------- ----------- -----------
Cash at end of year $ 3,230,647 $ 1,409,404 $ 1,831,683
=========== =========== ===========
</TABLE>

See accompanying notes.

18
<PAGE> 19

American Dental Technologies, Inc
Consolidated Statements of Stockholders' Equity

Additional Warrants
Common Stock Paid-In and
Shares Amount Capital Options
------------ ------------ ------------- --------------
<S> <C> <C> <C> <C>
Balance at January 1, 1997 6,936,353 $ 277,457 $ 40,515,943 $ --
Net income for 1997
Foreign currency translation
Comprehensive income
Exercise of stock options 65,205 2,608 261,872
Redemption of stock cancellation
of joint venture (Note 3) (53,547) (2,142) (331,191)
------------ ------------ ------------ ------------
Balance at December 31, 1997 6,948,011 277,923 40,446,624 --
Net income for 1998
Foreign currency translation
Comprehensive income
Issuance of common stock for
acquisition of business (Note 2) 61,500 2,460 305,040
Exercise of stock options 18,748 750 58,992
Issuance of options for intangible
assets 52,500
Exercise of warrants 391,000 15,640 1,548,360
Issuance of warrants for
acquisition of business (Note 2) 720,000
------------ ------------ ------------ ------------
Balance at December 31, 1998 7,419,259 296,773 42,359,016 772,500
Net income for 1999
Foreign currency translation
Comprehensive income
Exercise of stock options 12,788 512 42,391
Issuance of common stock for
intangible assets 28,500
Repurchase of common stock (64,200) (2,568) (88,771)
------------ ------------ ------------ ------------
Balance at December 31, 1999 7,367,847 $ 294,717 $ 42,312,636 $ 801,000
============ ============ ============ ============
</TABLE>

Foreign
Accumulated Currency
Deficit Translation Total
------------ ------------- ------------
<S> <C> <C> <C>
Balance at January 1, 1997 $(23,984,317) $ (43,588) $ 16,765,495
Net income for 1997 3,621,770 3,621,770
Foreign currency translation (60,976) (60,976)
-------------
Comprehensive income 3,560,794
-------------
Exercise of stock options 264,480
Redemption of stock cancellation
of joint venture (Note 3) (333,333)
------------ ------------- ------------
Balance at December 31, 1997 (20,362,547) (104,564) 20,257,436
Net income for 1998 8,849,317 8,849,317
Foreign currency translation (1,193) (1,193)
------------
Comprehensive income 8,848,124
------------
Issuance of common stock for
acquisition of business (Note 2) 307,500
Exercise of stock options 59,742
Issuance of options for intangible
assets 52,500
Exercise of warrants 1,564,000
Issuance of warrants for
acquisition of business (Note 2) 720,000
------------ ------------- ------------
Balance at December 31, 1998 (11,513,230) (105,757) 31,809,302
Net income for 1999 391,606 391,606
Foreign currency translation (162,589) (162,589)
------------
Comprehensive income 229,017
------------
Exercise of stock options 42,903
Issuance of common stock for
intangible assets 28,500
Repurchase of common stock (91,339)
------------ ------------- ------------
Balance at December 31, 1999 $(11,121,624) $ (268,346) $ 32,018,383
============ ============= ============
</TABLE>

See accompanying notes.

19
<PAGE> 20

Notes to Consolidated Financial Statements
December 31, 1999

1. Organization and Significant Accounting Policies

Principles of Consolidation

American Dental Technologies, Inc. (the "Company") develops, manufactures,
markets and sells high technology products for dentistry. The consolidated
financial statements include the accounts and operations of the Company and its
subsidiary. All intercompany transactions and balances have been eliminated.

Inventories

Inventories are stated at the lower of cost, determined by the first-in
first-out method, or market. At December 31, inventories consisted of the
following:

1999 1998
------------ -------------
<S> <C> <C>
Finished goods $ 1,310,448 $ 1,255,608
Raw materials, parts and supplies 8,627,757 9,969,600
------------ -------------
$ 9,938,205 $ 11,225,208
============ =============
</TABLE>

Inventories at December 31, 1999 and 1998 are net of valuation allowances of
$811,715 and $555,000, respectively.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed by the straight-line method over the estimated useful
lives of the related assets, which range from three to thirty-nine years. At
December 31, property and equipment consisted of the following:

1999 1998
------------ -----------
<S> <C> <C>
Building and improvements $ 1,546,745 $ 1,469,583
Office furniture and equipment 3,023,207 2,737,837
------------ -----------
4,569,952 4,207,420
Accumulated depreciation (2,122,046) (1,744,673)
------------ -----------
$ 2,447,906 $ 2,462,747
============ ===========
</TABLE>

Intangible Assets

Intangible assets consist of goodwill, air abrasive technology rights, patents,
distribution rights and organization costs and are stated at cost less
accumulated amortization. The Company is amortizing goodwill over periods
ranging from 15 to 25 years, air abrasive technology rights over 10 years and
other intangible assets over lives ranging from 5 to 17 years. Accumulated
amortization was $5,806,049 and $4,351,647 at December 31, 1999 and 1998,
respectively.

The Company periodically evaluates intangible assets for indicators of
impairment in value. When impairment is indicated, the Company revalues the
assets based on their estimated fair value.

Revenue Recognition

The Company recognizes revenues and related estimated warranty expense when
title is transferred to the customer, generally upon shipment. The Company
recognized revenue on certain sales to two of its largest distributors under
terms which require shipment to a local independent warehouse during 1997 and
1998.

<PAGE> 21

Notes to Consolidated Financial Statements
December 31, 1999

1. Organization and Significant Accounting Policies (continued)

Net Income Per Share

The following table sets forth the computation for basic and diluted earnings
per share:

1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Numerator:
Net income $ 391,606 $8,849,317 $3,621,770
---------- ---------- ----------

Numerator for basic and diluted earnings per
share - income available to common
stockholders after assumed conversions $ 391,606 $8,849,317 $3,621,770

Denominator:
Denominator for basic earnings per share -
weighted-average shares 7,424,433 7,310,510 6,933,740

Effect of dilutive securities:
Employee stock options 21,736 51,626 138,409
Warrants -- 12,858 568,231
---------- ---------- ----------

Dilutive potential common shares
Denominator for diluted earnings per
share - adjusted weighted-average
shares after assumed conversions 7,446,169 7,374,994 7,640,380
========== ========== ==========

Net income per share $ 0.05 $ 1.21 $ 0.52
========== ========== ==========
Net income per share assuming dilution $ 0.05 $ 1.20 $ 0.47
========== ========== ==========
</TABLE>

Translation of non-U.S. currency amounts

For non-U.S. subsidiaries which operate in a local currency environment, assets
and liabilities are translated to U.S. dollars at the current exchange rates at
the balance sheet date. Income and expense items are translated at average rates
of exchange prevailing during the year. Translation adjustments are accumulated
in a separate component of stockholders' equity.

Stock Based Compensation

The Company grants stock options for a fixed number of shares to employees with
an exercise price no less than the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly,
recognizes no compensation expense for the stock option grants.

Advertising

The Company expenses advertising costs as incurred. Advertising expense
approximated $603,400, $1,353,500 and $1,042,000 in 1999, 1998 and 1997,
respectively.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from these estimates.

21
<PAGE> 22

Notes to Consolidated Financial Statements
December 31, 1999

1. Organization and Significant Accounting Policies (continued)

Fair Value of Financial Instruments

The fair value of the Company's cash, accounts receivable, note receivable,
accounts payable and note payable to the bank approximates their carrying value
due to their short term nature.

Reclassifications

Certain amounts in prior year financial statements have been reclassified to
conform with the presentation used in 1999.

2. Business Acquisitions

Dental Vision Direct

On August 1, 1998, the Company acquired 100% of the outstanding stock of Dental
Vision Direct ("DVD"), which manufactures and markets intra oral cameras and
related equipment. The total consideration paid was $7,620,000, including
$3,000,000 in cash, a promissory note of $3,900,000 and warrants to purchase
600,000 shares of Company common stock at a price of $5.50 per share. The
$3,900,000 promissory note was repaid in October 1998 with proceeds from the
line of credit as described in Note 4. The acquisition was accounted for as a
purchase and, accordingly, the total consideration paid of $7,620,000 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
$4,367,000 has been allocated to goodwill to be amortized over a 25 year period.
The results of operations for DVD have been included in the consolidated
statements of operations for the Company from the acquisition date.

The following unaudited pro forma financial information for the twelve months
ended December 31, 1998 and 1997 assume the DVD acquisition occurred as of the
beginning of the respective periods, after giving effect to certain adjustments,
including the amortization of intangible assets, interest expense on acquisition
debt and income tax effects. The pro forma results have been prepared for
comparative purposes only and are not necessarily indicative of the results of
operations which may occur in the future or that would have occurred had the
acquisition of DVD been consummated on the dates indicated, nor are they
necessarily indicative of the company's future results of operations.

Year Ended December 31
1998 1997
----------- -----------
<S> <C> <C>
Revenues $32,313,902 $29,081,521
Net income 8,402,401 2,270,229
Net income per share $ 1.14 $ 0.30
</TABLE>

The Dental Probe

On February 15, 1998, the Company acquired 100% of the outstanding stock of the
Dental Probe, Inc. ("TDP") in exchange for $250,000 in cash and 61,500 shares of
common stock. The acquisition was accounted for as a purchase and accordingly,
the total consideration paid of $557,500, 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 $392,500 has been allocated to
goodwill to be amortized over a fifteen year period. The results of operations
for TDP have been included in the consolidated statements of operations for the
Company from the acquisition date.

22
<PAGE> 23

Notes to Consolidated Financial Statements
December 31, 1999

3. Agreements with Related Parties

Denics Co., Ltd.

In December 1999, the Company agreed to convert $675,000 of outstanding accounts
receivable from Denics to a note receivable, with interest payable at 8.5%, due
February, 2001.

In February 1998, the Company agreed to convert $500,000 of outstanding accounts
receivable from Denics to a note receivable, with interest payable at 10.5% due
in September 1998. In August 1998, the Company agreed to modify the repayment
terms of the note receivable to $200,000 due August 31, 1998 and five monthly
installments of $60,000 commencing in April 1999. The note was paid in full in
September, 1999.

Sales of lasers and KCPs to Denics were $4,536,007, $3,465,819 and $2,060,505 in
1999, 1998 and 1997, respectively. The Company had accounts receivable of
$1,131,693 and, $1,143,475 from Denics at December 31, 1999 and 1998,
respectively.

Denics owned 4.89% and had warrants to acquire an additional 1.43% of the
Company's common stock. These warrants expired in 1999 and Denics is no longer
considered a "related party". However, the Company has disclosed its trade sales
and accounts receivable balances with Denics as a "related party" on the face of
the financial statements for all periods presented to provide consistent
disclosure.

Other

The Company obtained consulting and research services from related parties and
paid approximately $159,200 in 1997 for such services. There was no such expense
in 1999 and 1998.

4. Line of Credit and Other Non-Current Liabilities

The Company leases certain equipment under capital leases. Equipment related to
these capital leases had a net book value of approximately $281,525 at December
31, 1999. Future minimum lease payments under capital and operating leases as of
December 31, 1999 are as follows:

Year Operating Capital
Leases Leases
--------- ----------
<S> <C> <C>
2000 $ 83,388 $ 124,195
2001 33,120 124,195
2002 24,840 79,066
2003 47,776
2004 and thereafter --
--------- ---------
$ 141,348 375,232

Less amount representing interest (53,897)
---------
$ 321,335
=========

</TABLE>
Capital lease obligations at December 31, 1999 consisted of the following:
<TABLE>

<S> <C>
Current portion $ 98,057
Non-current portion 223,278
--------
Total capital lease obligations $321,335
========
</TABLE>

Rental expense, primarily office facilities, for operating leases in 1999, 1998
and 1997 approximated $94,227, $144,000 and $154,000, respectively.

The Company paid interest of approximately $401,438, $207,000 and $63,000 in
1999, 1998 and 1997, respectively.

23
<PAGE> 24

Notes to Consolidated Financial Statements
December 31, 1999

5. Stockholders' Equity, Stock Options and Warrants

The Company has authorized three stock option plans for employees, officers,
directors, consultants and other key personnel. As of December 31, 1999, the
Nonqualified Stock Option Plan has 287,500 shares reserved, 72,804 shares
available for issuance and 172,409 shares outstanding; the Long-Term Incentive
Plan has 625,000 shares reserved, 108,802 shares available for issuance and
436,649 shares outstanding; and the Stock Option Plan for Employees has 17,405
shares reserved, 1,166 shares available and 13,536 shares outstanding

The Company also authorized and granted 81,392 stock options exclusive of the
above described plans, of which 48,721 options have been exercised or canceled
and 32,670 options were outstanding at December 31, 1999.

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.

Pro forma information regarding net income and earnings per share is required by
Statement 123 and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1997,
1998 and 1999, respectively: risk-free interest rate of 6.5%; dividend yield of
0%; volatility factors of the expected market price of the Company's common
stock of 1.1, .373 and 1.437 and a weighted-average expected life of the option
of five years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the option is
amortized to expense over the options' vesting period. The Company's pro forma
information follows:

1999 1998 1997
--------- ---------- ----------

<S> <C> <C> <C>
Proforma net income $ 366,875 $ 8,438,709 $ 3,213,783
Proforma net income per share $ 0.05 $ 1.15 $ 0.46
Proforma net income per share
assuming dilution $ 0.05 $ 1.14 $ 0.42
</TABLE>

24
<PAGE> 25

Notes to Consolidated Financial Statements
December 31, 1999

5. Stockholders' Equity, Stock Options and Warrants (continued)
<TABLE>
<CAPTION>

Stock option activity is summarized as follows:

Number Weighted-Average
of Shares Exercise Price
--------- ----------------

<S> <C> <C>
Outstanding at January 1, 1997 576,158 5.52
==========
Exercisable at January 1, 1997 576,158 5.52
==========

Options granted 251,872 5.44
Options exercised (65,205) 3.66
Options canceled (18,185) 9.29
----------

Outstanding at December 31, 1997 744,619 5.57
==========
Exercisable at December 31, 1997 541,811 5.64
==========

Options granted 51,560 4.72
Options exercised (18,748) 3.19
Options canceled (38,323) 5.55
----------

Outstanding at December 31, 1998 739,108 5.57
==========
Exercisable at December 31, 1998 535,598 5.63
==========

Options granted 111,872 3.47
Options exercised (12,788) 3.36
Options canceled (182,928) 6.29
----------

Outstanding at December 31, 1999 655,264 5.06
==========
Exercisable at December 31, 1999 535,598 6.19
==========
</TABLE>

The weighted-average fair value of options granted during the year was $3.46,
$1.07 and $4.51 in 1999, 1998 and 1997, respectively. Exercise prices for
options outstanding as of December 31, 1999 ranged from $2.00 to $50.00. The
weighted-average remaining contractual life of those options is 4.7 years.

Warrant activity is summarized as follows: Weighted-Average
Shares Exercise Price
---------- ----------------
<S> <C> <C>
Outstanding at January 1, 1997 2,846,868 5.04
==========
Exercisable at January 1, 1997 1,097,639 4.08
==========

Warrants issued -- --
Warrants canceled -- --
-----------
Outstanding at December 31, 1997 2,846,868 5.04
===========
Exercisable at December 31, 1997 2,846,868 5.04
===========

Warrants issued 600,000 5.50
Warrants exercised (391,000) 4.00
Warrants canceled (125,000) 4.00
-----------
Outstanding at December 31, 1998 2,930,868 5.46
===========
Exercisable at December 31, 1998 2,930,868 5.46
===========

Warrants issued 50,000 4.13
Warrants exercised -- --
Warrants canceled (2,232,618) 5.50
-----------
Outstanding at December 31, 1999 748,250 5.29
===========
Exercisable at December 31, 1999 748,250 5.29
===========
</TABLE>

25
<PAGE> 26

Notes to Consolidated Financial Statements
December 31, 1999

5. Stockholders' Equity, Stock Options and Warrants (continued)

The weighted-average fair value of warrants granted during 1999 was $4.13 and
$1.20 in 1998. Exercise prices for warrants outstanding as of December 31, 1999
ranged from $4.00 to $5.64. The weighted-average remaining contractual life of
those warrants is 4 years.

6. Transfer of License

In June 1997, the Company agreed to the transfer of the licenses for the sales
of dental lasers and air abrasive instruments from Sunrise Technologies, Inc.
("Sunrise") to Lares Co. ("Lares") in connection with the sale of Sunrise's
dental business to Lares. The Company received a payment of $275,000 and a note
receivable for $100,000, due in June 2000. The Company will also continue to
receive royalties on air abrasive and dental lasers from Lares.

In 1999, the Company sold a license to ESC Medical Systems, Ltd. for $300,000
for the use of certain patents. The Company delivered the license to ESC
Medical Systems, Ltd in 1999 and recorded the income in 1999 as a license
transfer fee since the Company has no additional requirements under this
license.

7. Income Taxes

At December 31, 1999, the Company had a $11,018,472 net operating loss
carryforward for federal income tax purposes, which expire in various amounts in
the years 2006 through 2011.

Deferred tax assets represent the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes. Significant components of the
Company's deferred tax assets are as follows:

December 31
1999 1998
----------- -----------
<S> <C> <C>
Allowance for doubtful accounts $ 77,000 $ 72,000
Inventory valuation reserves 402,000 189,000
Depreciation 261,000 287,000
Compensation and employee benefits 51,000 236,000
Alternative minimum tax credit carryforward 245,000 212,000
Other 206,000 328,000
Net operating loss carryforwards 3,746,000 4,047,000
----------- -----------
Deferred tax asset 4,988,000 5,371,000

Deferred tax liabilities (244,000) (68,000)
----------- -----------

Net deferred tax asset $ 4,744,000 $ 5,303,000
=========== ===========
</TABLE>

The Company's income tax provision included the following

1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Current expense $ 58,000 $ 140,000 $ 45,000
Deferred benefit 558,000 (5,212,000) (45,000)
----------- ----------- -----------
$ 616,000 $(5,072,000) $ --
=========== =========== ===========

Income taxes (benefit) at
US statutory rate $ 343,000 $ 1,284,000 $ 1,231,000
State taxes 58,000 65,000 --
Non-deductible amortization 251,000 367,000 247,000
Deferred tax asset valuation
allowance adjustment -- (6,738,000) (1,420,000)
Other (36,000) (50,000) (58,000)
----------- ----------- -----------
$ 616,000 $(5,072,000) $ --
=========== =========== ===========
</TABLE>

26
<PAGE> 27

Notes to Consolidated Financial Statements
December 31, 1999

7. Income Taxes (continued)

In 1998, the Company reversed its previously recorded deferred tax asset
valuation allowance as the Company determined that it was more likely than not
that they would realize the related deferred tax asset. The effect of the
reversal was to increase net income by $5,072,000 for this income tax benefit.
The Company paid no income tax during 1999. Income taxes paid were approximately
$134,400 and $94,100 in 1998 and 1997.

The Company's investment in its foreign subsidiary are considered to be
permanently invested and no provision for U.S. federal and state income taxes on
these translation adjustments have been provided.

8. Operations by Industry Segment, Geographic Area and Significant Customers

The Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information, for the year ended December 31, 1999. 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. Operating results for North America, substantially all of
which is attributable to the United States, include the effects of the business
acquisitions, as described in Note 2. The Company's Chief Operating Decision
Maker evaluates segmental performance and allocates resources based on
operational earnings (gross profit less selling and marketing expenses).

27
<PAGE> 28

Notes to Consolidated Financial Statements
December 31, 1999

8. Operations by Industry Segment, Geographic Area and Significant Customers
(continued)
<TABLE>
<CAPTION>

1999 1998 1997
------------ ------------ ------------
Revenues:
<S> <C> <C> <C>
North America $ 15,175,956 $ 20,874,298 $ 15,826,885
Europe 2,493,165 1,765,065 1,726,766
Japan 4,341,895 3,130,000 2,170,219
Other international 16,200 166,749 114,428
------------ ------------ ------------
$ 22,027,216 $ 25,936,112 $ 19,838,298
============ ============ ============
Reconciliation of revenues:
Total segment revenues $ 22,027,216 $ 25,936,112 $ 19,838,298
Other 2,342,311 2,348,608 1,813,576
------------ ------------ ------------
Total revenues $ 24,369,527 $ 28,284,720 $ 21,651,874
============ ============ ============

Operational earnings:
North America $ 1,636,667 $ 5,521,650 $ 5,167,694
Europe 165,565 139,284 (231,651)
Japan 2,127,529 1,491,754 1,073,979
Other international 8,360 65,071 (66,793)
------------ ------------ ------------
$ 3,938,121 $ 7,217,759 $ 5,943,229
============ ============ ============

Reconciliation of operational earnings
to income from operations:
Total segment operational earnings $ 3,938,121 $ 7,217,759 $ 5,943,229
Other operational earnings 782,868 1,356,004 889,476
Research & development expenses (931,189) (947,202) (641,984)
Administrative expenses (3,902,872) (3,784,571) (2,970,444)
----------- ----------- -----------
Income (loss) from operations $ (113,072) $ 3,841,990 $ 3,220,277
=========== =========== ===========

Long lived assets (excluding deferred taxes):
North America $ 2,436,122 $ 2,546,779 $ 2,693,441
Europe 11,784 15,968 5,794
Japan -- -- --
Other international -- -- --
----------- ----------- -----------
$ 2,447,906 $ 2,562,747 $ 2,699,235
=========== =========== ===========
</TABLE>

Sales to Patterson Dental Company, a major domestic distributor of the Company's
kinetic cavity preparation units, were approximately 16%, 30% and 34% of total
revenues in 1999, 1998 and 1997, respectively. Sales to Denics for certain Asian
and Pacific markets, primarily Japan, were approximately 19%, 12% and 10% of
total revenues in 1999, 1998 and 1997, respectively.

9. Litigation and Contingencies

The Company is not a party to any material litigation at December 31, 1999. All
of the litigation involving Kreativ, Inc. was settled during 1999 as previously
disclosed. The Company received a $580,000 settlement from Kreativ Inc in the
false advertising suit and received $300,000 in exchange for a paid-up license
in the settlement of the two patent suits. The proceeds from the false
advertising suit are included in other income in the statement of operations and
the proceeds from the patent suit are included in the license transfer fees in
the statement of operations. The Company also received $300,000 from Kreativ
during 1999 for a paid-up license for patents in suit.

28
<PAGE> 29

Notes to Consolidated Financial Statements
December 31, 1999

10. Selected Quarterly Financial Data (unaudited)
<TABLE>
<CAPTION>

Three Months Ended
March 31 June 30 September 30 December 31
1999 1999 1999 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 6,416,754 $ 6,568,805 $ 4,576,128 $ 6,807,840
Gross profit 3,440,391 3,032,188 2,210,448 2,907,836
Net income (loss) 128,676 36,870 (49,889) 275,949
Net income per share
assuming dilution $ 0.02 $ 0.01 $ (0.01) $ 0.04
</TABLE>

Three Months Ended
March 31 June 30 September 30 December 31
1998 1998 1998 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 5,707,667 $ 6,396,913 $ 6,571,648 $ 9,608,492
Gross profit 3,128,833 3,678,363 3,374,039 5,226,167
Net income 840,664 1,002,397 549,859 6,456,397(1)
Net income per share
assuming dilution $ 0.12 $ 0.13 $ 0.07 $ 0.87
</TABLE>

(1) Includes $5,072,117 income tax benefit related to reversal of a previously
recorded deferred tax asset valuation allowance.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

None.
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information included in the Company's definitive Proxy Statement to
be distributed in connection with its 2000 Annual Meeting of Stockholders (the
"2000 Proxy Statement"), under the headings "Election of Directors" and "Section
16(a) Beneficial Ownership Reporting Compliance" is incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION

The information included in the 2000 Proxy Statement under the heading
"Executive Compensation" (but excluding the information in the Compensation
Committee Report and under "Stock Performance Graph") is incorporated herein by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The information included in the 2000 Proxy Statement under the heading
"Principal Stockholders of the Company and Security Ownership of Management" is
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

29
<PAGE> 30

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) 1. Financial Statements: The following financial statements of American
Dental Technologies, Inc. are included in Item 8, "Financial Statements and
Supplementary Data":

Report of Independent Auditors

Consolidated Statements of Operations for the Years Ended December 31,
1999, 1998, and 1997

Consolidated Balance Sheets as of December 31, 1999 and 1998

Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1999, 1998, and 1997

Consolidated Statements of Cash Flows for the Years Ended December 31,
1999, 1998, and 1997 Notes to

Consolidated Financial Statements

2. Financial Statement Schedules: The following financial statement
schedule is attached to this report.

Schedule II - Valuation and Qualifying Accounts

All other schedules are omitted because they are not applicable, not required,
or the information is included in the financial statements or the notes thereto.

3. Exhibits: The exhibits included as part of this report are listed in
the attached Exhibit Index, which is incorporated herein by reference.

(b) Reports on Form 8-K: No reports on Form 8-K were filed during
the quarter ended December 31, 1999.

30
<PAGE> 31

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
American Dental Technologies, Inc.

Column A Column B Column C Column D Column E
- -------------------------------------------- -------- --------- --------- ---------

Additions
Balance at Charged to Balance
Beginning Costs and Deductions at End
Description of Period Expenses Describe of Period
- -------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>

Year Ended December 31, 1997

Valuation allowance for accounts receivable 280,000 -- 30,000(3) 250,000
Valuation allowance for inventories 395,000 320,000 -- 715,000
Valuation allowance for deferred taxes 8,185,000 -- 1,420,000(4) 6,738,000

Year Ended December 31, 1998

Valuation allowance for accounts receivable 250,000 -- 75,000(1) 175,000
Valuation allowance for inventories 715,000 -- 160,000(2) 555,000
Valuation allowance for deferred taxes 6,738,000 -- 6,738,000(5) --

Year Ended December 31, 1999

Valuation allowance for accounts receivable 175,000 13,000(5) -- 188,000
Valuation allowance for inventories 555,000 257,000(7) -- 812,000
Valuation allowance for deferred taxes -- -- -- --
</TABLE>

(1) Uncollectible accounts charged off net of recoveries.

(2) Inventory valuation write-offs.

(3) Reduction in valuation allowance.

(4) Utilization of NOL on current year income.

(5) Reversal of valuation allowance.

(6) Increase in accounts receivable valuation allowance.

(7) Increase in inventory valuation allowance.

<PAGE> 32

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Corpus Christi, State of Texas, on the 19th day of March, 2000.

AMERICAN DENTAL TECHNOLOGIES, INC.

/s/ BEN J. GALLANT
-----------------------------------
Ben J. Gallant, President and CEO

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 30, 2000.

<S> <C>
/s/ BEN J. GALLANT
- ------------------------- President, CEO and Director
Ben J. Gallant (Principal Executive Officer)

/s/ BARBARA A. DANIELI
- ------------------------- Chief Financial Officer (Principal Financial
Barbara A. Danieli Officer and Principal Accounting Officer)

/s/ WILLIAM D. MYERS
- ------------------------- Chairman of the Board
William D. Myers and Director

/s/ GARY A. CHATHAM Director
- -------------------------
Gary A. Chatham

/s/ WAYNE A. JOHNSON II
- ------------------------- Director
Wayne A. Johnson II

/s/ WILLIAM D. MARONEY
- ------------------------- Director
William D. Maroney

/s/ CHARLES A. NICHOLS
- ------------------------- Director
Charles A. Nichols

/s/ WILLIAM A. PARKER
- ------------------------- Director
William A. Parker

/s/ JOHN E. VICKERS III
- ------------------------- Director
John E. Vickers III

/s/ BERTRAND R. WILLIAMS, SR
- ------------------------- Director
Bertrand R. Williams, Sr.
</TABLE>

<PAGE> 33
EXHIBIT INDEX

Certain of the following Exhibits have been previously filed with the
Securities and Exchange Commission pursuant to the requirements of the
Securities Act of 1933 and the Securities Exchange Act of 1934. Such exhibits
are identified by the parenthetical references following the listing of each
such exhibit and are incorporated herein by reference. The Company's Commission
File No. is 0-19195.

Exhibit
Number Description of Document
- ------- ------------------------
3.1 Amended and Restated Certificate of Incorporation of American Dental
Technologies, Inc. filed on August 7, 1997 with the Delaware Secretary
of State (Form 10-Q for the quarter ended June 30, 1997, Exhibit 3.5)

3.4 Amended & Restated By-Laws of the Company, dated December 15, 1993 (Form
10-K for the year ended December 31, 1998, Exhibit 3.4)

4.1 Nontransferable Common Stock Purchase Warrant, dated August 5, 1998,
540,000 shares (Form 10-Q for the quarter ended September 30, 1998)

4.2 Nontransferable Common Stock Purchase Warrant, dated August 5, 1998,
60,000 shares (Form 10-Q for the quarter ended September 30, 1998)

4.3 Promissory Note to Ultrak, Inc.(Form 8-K filed August 5, 1998)

4.4 Line of Credit of Agreement between Bank One and American Dental
Technologies, Inc. dated September 28, 1999

4.5 Revolving Business Credit Note (LIBOR - Based Interest Rate) between
Bank One and American Dental Technologies, Inc. dated September 28, 1999

4.8 Non-transferable Common Stock Purchase Warrant dated March 24, 1999
(Form 10-Q for the quarter ended March 31, 1999, Exhibit 4.20).

4.9 Non-transferable Common Stock Purchase Warrant dated March 24, 1999
(Form 10-Q for the quarter ended March 31, 1999, Exhibit 4.21).

10.1* American Dental Laser, Inc. Amended and Restated Nonqualified Stock
Option Plan. (Registration No. 33-40140, Exhibit No. 10.16)

10.2* American Dental Laser, Inc. Stock Option Plan for Employees.
(Registration No. 33-40140, Exhibit No. 10.18)

10.3* Amended and Restated Long-Term Incentive Plan (Form 10-Q for the quarter
ended September 30, 1996, Exhibit 4.1)

10.4 Voting Agreement between William D. Myers and Ben J. Gallant
(Registration No. 333-6663, Exhibit 9.1)

10.5* Ben J. Gallant Employment Agreement (Form 10-K for the year ended
December 31, 1996, Exhibit 10.44)

10.6 License Agreement between Texas Airsonics, Inc., a wholly owned
subsidiary of American Dental Technologies, Inc. and Texas Airsonics,
L.P. (Form 10-K for the year ended December 31, 1996, Exhibit 10.45)

10.7** Patent License Agreement dated October 18, 1997 between Danville
Engineering, Inc. and the Company (Form 10-Q for the quarter ended
September 30, 1997, Exhibit 10.53)

<PAGE> 34

10.8 Assignment from Sunrise Technologies International, Inc. to Lares
Research dated June 24, 1997 (Form 10-K for the year ended December
31,1997)

10.9 Patent License Agreement dated June 29, 1998 Prep-Technology Corp. and
American Dental Technologies, Inc. (Form 10-Q for the quarter ended June
30, 1998)

10.10** Patent License Agreement dated as of January 21, 1999 between ESC
Medical Systems, Ltd. and American Dental Technologies, Inc. (Form 10-Q
for quarter ended March 31, 1999)

10.11 Patent licensing agreement dated June 10, 1999 between American Dental
Technologies, Inc. and Kreativ, Inc. (Form 10-Q for quarter ended June
30, 1999)

10.12 Employment agreement dated September 7, 1999 between American Dental
Technologies, Inc. and Barbara A. Danieli (Form 10-Q for quarter ended
September 30, 1999, Exhibit 10.59)

10.13 Promissory Note between the Company and Denics Co Ltd. dated December
15, 1999.

10.14 Amended employment agreement dated August 1, 1999 between American
Dental Technologies, Inc. and Ben J. Gallant (Form 10-Q for quarter
ended September 30, 1999, Exhibit 10.61)

10.15 Change in Control Agreement dated October 16, 1999 between American
Dental Technologies, Inc. and Ben J. Gallant, John E. Vickers, III,
William A. Parker and William E. Graham

21.1 Subsidiaries of the Registrant

23.1 Consent of Independent Auditors

27.1 Financial Data Schedule

---------------

*Identifies current management contracts or compensatory plans or arrangements.

**Portions of this agreement were filed separately with the Commission pursuant
to Rule 24b-2 of the Securities Act of 1934 governing requests for
confidential treatment of information.

<PAGE> 1
EXHIBIT 4.4

LINE OF CREDIT AGREEMENT
- --------------------------------------------------------------------------------

Bank One, Michigan (the "Bank"), whose address is 611 Woodward Avenue, Detroit,
Michigan 48226-3947, has approved the credit facilities listed below
(collectively, the "Credit Facilities," and, individually, as designated below)
to American Dental Technologies, Inc. (the "Borrower"), whose address is 5555
Bear Lane, Corpus Christi, TX 78405 subject to the terms and conditions set
forth in this agreement.

1.0 CREDIT FACILITIES.

1.1 FACILITY A. The Bank has approved a credit facility to the Borrower
in the principal sum not to exceed $7,500,000.00 in the aggregate at
any one time outstanding ("Facility A"). Credit under Facility A shall
be in the form of disbursements evidenced by credits to the Borrower's
account and shall be repayable as set forth in a Master Business
Credit Note executed concurrently (referred to in this agreement both
singularly and together with any other promissory notes referenced in
this Section 1 as the "Notes"). The proceeds of Facility A shall be
used for the following purpose: working capital. Facility A shall
expire September 30, 2001 unless earlier withdrawn.

The Bank agrees to review Facility A on or before September 30 of each
year to determine whether it desires to extend Facility A for an
additional year. The performance of the review will not obligate the
Bank to grant any extension. Such an extension will take place at the
Bank's sole discretion and may be conditioned upon any changes in the
terms of Facility A which the Bank may require in its sole discretion.

1.2 FACILITY B (PURCHASE MONEY TERM LOANS AND/OR LEASES). The Bank has
approved a credit facility to the Borrower in the principal sum not to
exceed $250,000.00 in the aggregate at any one time outstanding
("Facility B"). Facility B shall be in the form of loans evidenced by
the Borrower's notes on the Bank's form (referred to in this agreement
both singularly and together with any other promissory notes
referenced in this Section 1 as the "Notes") or lease agreements on
the Bank's standard lease form (referred to in this agreement as the
"Leases"), the proceeds of which shall be used to purchase equipment.
Interest on each loan shall accrue at a rate to be agreed upon by the
Bank and the Borrower at the time the loan is made. Rent under any
Lease shall be in an amount to be negotiated by the Borrower and the
Bank prior to finding of the Lease. The maturity of each note or the
term of any Lease shall not exceed 60 months from the note date or
lease commencement date. Notwithstanding the aggregate amount of
Facility B stated above, the original principal amount of each loan
shall not exceed the lesser of 80% of the cost of the equipment
purchased with loan proceeds or $250,000.00, and the amount funded
under each Lease shall not exceed the cost of the equipment. Facility
B shall expire on September 30, 2000 unless earlier withdrawn.

2.0 CONDITIONS PRECEDENT.

2.1 CONDITIONS PRECEDENT TO INITIAL EXTENSION OF CREDIT. Before the first
extension of credit under this agreement, whether by disbursement of a
loan, issuance of a letter of credit, the funding of a Lease or
otherwise, the Borrower shall deliver to the Bank, in form and
substance to the Bank:

A. LOAN DOCUMENTS. The Notes, and if applicable, the Leases, the
letter of credit applications, the security agreement, financing
statements, mortgage, guaranties, subordination agreements and
any other loan documents which the Bank may reasonably require to
give effect to the transactions described by this agreement;

B. EVIDENCE OF DUE ORGANIZATION AND GOOD STANDING. Evidence
satisfactory to the Bank of the due organization and good
standing of the Borrower and every other business entity that is
a party to this agreement or any other loan document required by
this agreement;

C. EVIDENCE OF AUTHORITY TO ENTER INTO LOAN DOCUMENTS. Evidence
satisfactory to the bank that (i) each party to this agreement
and any other loan document required by this agreement is
authorized to enter into the transaction described by this
agreement and the other loan documents, and (ii) the person
signing on behalf of each party is authorized to do so; and

D. YEAR 2000 ASSESSMENT. If requested by the Bank, information
satisfactory to the Bank regarding the Borrower's plan for
addressing Year 2000 issues. "Year 2000 Issues" means anticipated
costs, problems and uncertainties associated with the inability
of certain computer applications to effectively handle data
including dates on and after January 1, 2000, as such inability
affects the business, operations, and financial condition of the
Borrower and of the Borrower's material customers, suppliers and
vendors.

<PAGE> 2
2.2 CONDITIONS PRECEDENT TO EACH EXTENSION OF CREDIT. Before any
extension of credit under this agreement, whether by disbursement of a
loan, issuance of a letter of credit, the funding of a Lease or
otherwise, the following conditions shall have been satisfied:

A. REPRESENTATIONS. The Representations contained in this agreement
shall be true on and as of the date of the extension of credit;

B. NO EVENT OF DEFAULT. No event of default shall have occurred and
be continuing or would result from the extension of credit;

C. ADDITIONAL APPROVALS, OPINIONS, AND DOCUMENTS. The Bank shall
have received such other approvals, opinions and documents as it
may reasonably request.

3.0 FEES AND EXPENSES.

3.1 NONUSAGE FEE. The Borrower shall pay the Bank a nonusage fee on the
average daily unused portion of Facility A at a rate of 1/8% per
annum, payable quarterly in arrears within 30 days of the end of the
quarter for which the fee is owing.

3.2 OUT-OF-POCKET EXPENSES. The Borrower shall reimburse the Bank for its
out-of-pocket expenses, and reasonable attorney's fees (including the
fees of in-house counsel) allocated to the Credit Facilities.

4.0 SECURITY.

4.1 Payment of the borrowings and all other obligations under the Credit
Facilities shall be accrued by a first security interest and/or real
estate mortgage, as the case may be, covering the following property
and all its additions, substitutions, increments, proceeds and
products, whether now owned or later acquired ("Collateral"):

A. ACCOUNTS RECEIVABLE. All of the Borrower's accounts, chatal
paper, general intangibles, instruments and documents (as those
terms are defined in the Michigan Uniform Commercial Code),
rights to refunds of taxes paid at any time to any governmental
entity, and any letters of credit and drafts under them given in
support of the foregoing, wherever located. The Borrower shall
deliver to the Bank executed security agreements and financing
statements in form and substance satisfactory to the Bank.

B. INVENTORY. All of the Borrower's inventory, wherever located.
The Borrower shall deliver to the Bank executed security
agreements and financing statements in form and substance
satisfactory to the Bank.

C. EQUIPMENT. All of the Borrower's equipment, wherever located.
The Borrower shall deliver to the Bank executed security
agreements and financing statements in form and substance
satisfactory to the Bank.

D. PATENTS, COPYRIGHTS, TRADEMARKS. All of the Borrower's present
and future patents, copyrights and trademarks. The Borrow shall
deliver to the Bank executed assignments, pledges and financing
statements satisfactory to the Bank.

4.2 No forbearance or extension of time granted any subsequent owner of
the Collateral shall release the Borrower from liability.

4.3 ADDITIONAL COLLATERAL/SETOFF. To further secure payment of the
borrowings and all other obligations under the Credit Facilities and
all of the Borrower's other liabilities to the Bank, the Borrower
grants to the Bank a continuing security interest in: (i) all
securities and other property of the Borrower in the custody,
possession or control of the Bank (other than property held by the
Bank solely in a fiduciary capacity) and (ii) all balances of deposit
accounts of the Borrower with the Bank. The Bank shall have the right
at any time to apply its own debt or liability to the Borrower, or to
any other party liable for payment of the obligations under the Credit
Facilities, in whole or partial payment of such obligations or other
present or future liabilities, without any requirement of mutual
maturity.

2
<PAGE> 3
4.4 CROSS LIEN. Any of the Borrower's other property in which the Bank has
a security interest to secure payment of any other debt, whether
absolute, contingent, direct or indirect, including the Borrower's
guaranties of the debts of others, shall also secure payment of and be
part of the Collateral for the Credit Facilities.

5.0 AFFIRMATIVE COVENANTS. So long as any debt or obligation remains
outstanding under the Credit Facilities, the Borrower, and each of its
subsidiaries, if any, shall:

5.1 INSURANCE. Maintain insurance with financially sound and reputable
insurers covering its properties and business against those casualties
and contingencies and in the types and amounts as shall be in
accordance with sound business and industry practices.

5.2 EXISTENCE. Maintain its existence and business operations as presently
in effect in accordance with all applicable laws and regulations, pay
its debts and obligations when due under normal terms, and pay on or
before their due date, all taxes, assessments, fees and other
governmental monetary obligations, except as they may be contested in
good faith if they have been properly reflected on its books and, at
the Bank's request, adequate funds or security has been pledged to
insure payment.

5.3 FINANCIAL RECORDS. Maintain proper books and records of account, in
accordance with generally accepted accounting principles where
applicable, and consistent with financial statements previously
submitted to the Bank. The Bank retains the right to inspect the
Collateral and business records related to it at such times and at
such intervals as the Bank may reasonably require.

5.4 NOTICE. Give prompt notice to the Bank of the occurrence of (i) any
Event of Default, and (ii) any other development, financial or
otherwise, which would affect the Borrower's business, properties or
affairs in a materially adverse manner.

5.5 COLLATERAL AUDITS. Permit the Bank or its agents to perform periodic
audits of the Collateral. The Borrower shall compensate the Bank for
such audits in accordance with the Bank's schedule of fees as amended
from time to time.

5.6 MANAGEMENT. Maintain current management.

5.7 FINANCIAL REPORTS. Furnish to the Bank whatever information, books,
and records the Bank may reasonably request, including at a minimum:
(If the Borrower has subsidiaries, all financial statements required
will be provided on a consolidated and on a separate basis.)

A. Promptly upon (i) furnishing to the shareholders of the Borrower,
copies of all financial statements, reports and proxy statements
and (ii) filing with the Securities and Exchange Commission, copies
of all registration statements and annual, quarterly, monthly or
other regular reports, including but not limited to, the Borrower's
and any subsidiary's 10Qs and 10Ks.

B. Within five (5) days after filing, a signed copy of the annual tax
return, with exhibits, of the Borrower.

5.8 YEAR 2000 ISSUES. The Borrower will take all actions reasonably
necessary to assure that Year 2000 Issues will not have a material
adverse effect on the business operations or financial condition of
the Borrower. Upon the Bank's request, the Borrower will provide the
Bank with a description of its plan to address Year 2000 Issues,
including updates and progress reports. Borrower will advise the Bank
of any reasonably anticipated material adverse effect on the business
operations or financial condition of the Borrower as a result of Year
2000 Issues.

6.0 NEGATIVE COVENANTS.

6.1 DEFINITIONS. As used in this agreement, the following terms shall have
the following respective meanings:

A. "Debt Service" means for any period, principal and interest
payments either paid or due during that period on all debt of the
Borrower.

B. "EBITDA" means for any period, net income plus to the extent
deducted in determining net income, interest expense (including but
not limited to imputed interest on capital leases), tax expense,
depreciation, and amortization.

3
<PAGE> 4
C. "Subordinated Debt" means debt subordinated to the Bank in manner
and agreement satisfactory to the Bank.

D. "Tangible Net Worth" means total assets less intangible assets,
total liabilities, and all sums owing from stockholders, members,
or partners, as the case may be, and from officers, managers, and
directors. Intangible assets include goodwill, patents, copyrights,
mailing lists, catalogs, trademarks, bond discount and underwriter
expenses, organization expenses, and all other intangibles.

6.2 Unless otherwise noted, the financial requirements set forth in this
section shall be computed in accordance with generally accepted
accounting principles applied on a basis consistent with financial
statements previously submitted by the Borrower to the Bank.

6.3 Without the written consent of the Bank, so long as any debt or
obligation remains outstanding under the Credit Facilities, the
Borrower shall not: (where appropriate, covenants apply on a
consolidated basis).

A. DEBT. Incur, or permit to remain outstanding, debt for borrowed
money or installment obligations, except (i) debt reflected in the
latest financial statement of the Borrower furnished to the Bank
prior to execution of this agreement and not to be paid with
proceeds of borrowings or leases under the Credit Facilities and
(ii) purchase money term loans and/or leases to acquire equipment
in an aggregate, annual amount not to exceed $300,000.00. For
purposes of this covenant, the sale of any accounts receivable
shall be deemed the incurring of debt for borrowed money.

B. GUARANTIES. Guaranties or otherwise become or remain secondarily
liable on the undertaking of another, except for endorsement of
drafts for deposit an collection in the ordinary course of
business.

C. LIENS. Create or permit to exist any lien on any of its property,
real or personal, including but not limited to copyrights, patents
and trademarks, except: existing liens known to the Bank; liens to
the Bank; liens incurred in the ordinary course of business
securing current nondelinquent liabilities for taxes, worker's
compensation, unemployment insurance, social security and pension
liabilities; and liens for taxes being contested in good faith.

D. TANGIBLE NET WORTH PLUS SUBORDINATED DEBT. Permit its Tangible Net
Worth plus Subordinated Debt to be less than $7,500,000.00.

E. LEVERAGE RATIO. Permit the ratio of its total liabilities to its
Tangible Net Worth plus Subordinated Debt to exceed 1.50 to 1.00.

F. CASH FLOW COVERAGE RATIO. For each fiscal quarter, permit the ratio
of the Borrower's EBITA to its Debt Service, determined as of the
end of that quarter, to be less than 2.00 to 1.00.

7.0 REPRESENTATIONS BY BORROWER. Each Borrower represents that: (a) the
execution and delivery of this agreement, the Notes, and the Leases and
the performance of the obligations they impose do not violate any law,
conflict with any agreement by which the Borrower is bound, or require
the consent or approval of any governmental authority or other third
party; (b) this agreement, the Notes, and the Leases are valid and
binding agreements, enforceable in accordance with their terms; and (c)
all balance sheets, profit and loss statements, and other financial
statements furnished to the Bank are accurate and fairly reflect the
financial condition of the organizations and persons to which they apply
on their effective dates, including contingent liabilities of every type,
which financial condition has not changed materially and adversely since
those dates. Each Borrower, if other than a natural person, further
represents that: (a) it is duly organized, existing and in good standing
under the laws of the jurisdiction under which it was organized; and (b)
the execution and delivery of this agreement, the Notes, and the Leases
and the performance of the obligations they impose (i) are within its
powers; (ii) have been duly authorized by all necessary action of its
governing body; and (iii) do not contravene the terms of its articles of
incorporation or organization, its bylaws, or any partnership, operating
or other agreement governing its affairs.

8.0 DEFAULT/ACCELERATION.

8.1 EVENTS OF DEFAULT/ACCELERATION. If any of the following events occurs,
the Credit Facilities shall terminate and all borrowings and other
obligations under them shall be due immediately, without notice, at
the Bank's option whether or not the Bank has made demand.

A. The Borrower or any guarantor of any of the Credit Facilities, the
Notes or the Leases ("Guarantor") fails to pay when due any amount
payable under the Credit Facilities or under any agreement or
instrument evidencing debt to any creditor.

4
<PAGE> 5
B. The Borrower or any Guarantor (a) fails to observe or perform any
other term of this agreement, the Notes, or the Leases; (b) makes
any materially incorrect or misleading representation, warranty,
or certificate to the Bank; (c) makes any materially incorrect or
misleading representation in any financial statement or other
information delivered to the Bank; or (d) defaults under terms of
any agreement or instrument relating to any debt for borrowed
money (other than borrowings under the Credit Facilities) such
that the creditor declares the debt due before its maturity;

C. There is a default under the terms of any loan agreement,
mortgage, security agreement or any other document executed as
part of the Credit Facilities, or any guaranty of the obligations
under the Credit Facilities becomes unenforceable in whole or in
part, or any Guarantor fails to promptly perform under its
guaranty;

D. A "reportable event" (as defined in the Employee Retirement
Income Security Act of 1974 as amended) occurs that would permit
the Pension Benefit Guaranty Corporation to terminate any
employee benefit plan of the Borrower or any affiliate of the
Borrower;

E. The Borrower or any Guarantor becomes insolvent or unable to pay
its debts as they become due;

F. The Borrower or any Guarantor (a) makes an assignment for the
benefit of creditors; (b) consents to the appointment of a
custodian, receiver or trustee for it or for a substantial part
of its assets; or (c) commences any proceeding under any
bankruptcy, reorganization, liquidation or similar laws of any
jurisdiction;

G. A custodian, receiver or trustee is appointed for the Borrower
or any Guarantor or for a substantial part of its assets without
its consent and is not removed within 60 days after such
appointment;

H. Proceedings are commenced against the Borrower or any Guarantor
under any bankruptcy, reorganization, liquidation, or similar
laws of any jurisdiction, and such proceedings remain undismissed
for 60 days after commencement; or the Borrower or Guarantor
consents to the commencement of such proceedings;

I. Any judgment is entered against the Borrower or any Guarantor, or
any attachment, levy or garnishment is issued against any property
of the Borrower or any Guarantor;

J. The Borrower or any Guarantor dies;

K. The Borrower or any Guarantor, without the Bank's written
consent, (a) is dissolved, (b) merges or consolidates with any
third party, (c) leases, sells or otherwise conveys a material
part of its assets or business outside the ordinary course of
business, (d) leases, purchases, or otherwise acquires a material
part of the assets of any other corporation or business entity,
except in the ordinary course of business, or (e) agrees to do any
of the foregoing, (notwithstanding the foregoing, any subsidiary
may merge or consolidate with any other subsidiary, or with the
Borrower, so long as the Borrower is the survivor);

L. The loan-to-value ratio of any pledged securities at any time
exceeds N/A%, and such excess continues for five (5) days after
notice from the Bank to the Borrower;

M. There is a substantial change in the existing or prospective
financial condition of the Borrower or any Guarantor which the
Bank in good faith determines to be materially adverse; or

N. The Bank in good faith shall deem itself insecure;

O. The acquisition by any Person (as defined below), or two or more
Persons acting in concert, of beneficial ownership (within the
meaning of Rule 13d.3 of the Securities and Exchange Commission
under the Securities Exchange Act of 1934) of 20% or more of the
outstanding shares of voting stock of the Borrower. For purposes
of this covenant, "Person" means any natural person, corporation,
firm, joint venture, partnership, association, limited liability
company, enterprise, trust or other entity or organization, or any
government or political subdivision or any agency, department of
instrumentality thereof.

8.2 REMEDIES. If the borrowings and all other obligations under the
Credit Facilities are not paid at maturity, whether by demand, acceleration or
otherwise, the Bank shall have all of the rights and remedies provided by any
law or agreement. Any requirement of reasonable notice shall be met if the Bank
sends the notice to the Borrower at least seven (7) days prior to the date of
sale, disposition or other event giving rise to the required notice. The Bank
is authorized to cause all or any part of the Collateral to be transferred to
or registered in its name or in the name of any other person, firm or
corporation, with or without designation of the capacity of such nominee. The
Borrower shall be liable for any deficiency remaining after disposition of any
Collateral. The Borrower is liable to the Bank for all reasonable costs and
expenses of every kind incurred in the making or collection of the Credit
Facilities, including, without limitation, reasonable attorney's fees and court
costs (whether attributable to the Bank's in-house or outside counsel). These
costs and expenses shall include, without limitation, any costs or expenses
incurred by the Bank in any bankruptcy, reorganization, insolvency or other
similar proceeding.

9.0 MISCELLANEOUS.

9.1 Notice from one party to another relating to this agreement shall be
deemed effective if made in writing (including telecommunications) and
delivered to the recipient's address, telex number or fax number set forth
under its name below by any of the following means: (a) hand delivery, (b)
registered or certified mail, postage prepaid, with return receipt requested,
(c) first class or express mail, postage prepaid, (d) Federal Express or like
overnight courier service

5
<PAGE> 6
or (e) fax, telex, or other wire transmission with request for
assurance of receipts in a manner typical with respect to
communication of that type. Notices made in accordance with this
section shall be deemed delivered upon receipt, if delivered by hand
or wire transmission, 3 business days after mailing if mailed by first
class, registered of certified mail, or one business day after mailing
or deposit with an overnight courier service if delivered by express
mail or overnight courier.

9.2 No delay on the part of the Bank in the exercise of any right or
remedy shall operate as a waiver. No singer or partial exercise by the
Bank of any right or remedy shall preclude any other future exercise
of it or the exercise of any other right or remedy. No waiver or
indulgence by the Bank of any default shall be effective unless in
writing and signed by the Bank, nor shall a waiver on one occasion be
construed as a bar to or waiver of that right on any future occasion.

9.3 This agreement, the Notes, the Leases and any related loan documents
embody the entire agreement and understanding between the Borrower and
the Bank and supersede all prior agreements and understandings
relating to their subject matter. If any one or more of the
obligations of the Borrower under this agreement, the Notes or the
Leases shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining obligations
of the Borrower shall not in any way be affected or impaired, and such
invalidity, illegality or unenforceability in one jurisdiction shall
not affect the validity, legality or enforceability of the obligations
of the Borrower under this agreement, the Notes or the Leases in any
other jurisdiction.

9.4 The Borrower, if more than one, shall be jointly and severally liable.

9.5 This agreement is delivered in the State of Michigan and governed by
Michigan law. This agreement is binding on the Borrower and its
successors, and shall inure to the benefit of the Bank, its successors
and assigns.

9.6 Section headings are for convenience of reference only and shall not
affect the interpretation of this agreement.

10.0 Waiver of Jury Trial. The Bank and the Borrower knowingly and voluntarily
waive any right either of them have to a trial by jury in any proceeding
(whether sounding in contract or tort) which is in any way connected with
this or any related agreement, or the relationship established under them.
This provision may only be modified in a written instrument executed by the
Bank and the Borrower.

Executed by the parties on: September 30, 1999.

Bank One, Michigan Borrower: American Dental Technologies,
Inc.

By: /s/ JAMES E. WOLFINGTON By: /s/ BEN J. GALLENT
------------------------------- -----------------------------------
James E. Wolfington, Ben J. Gallent, President
Vice President

Address for Notices Address for Notices

28660 Northwestern Highway 5555 Bear Lane
Southfield, Michigan 48034 Corpus Christi, Texas 78405

Fax/Telex No. (248) 799-5826 Fax/Telex No.

<PAGE> 1
EXHIBIT 4.5

REVOLVING BUSINESS CREDIT NOTE (LIBOR - BASED INTEREST RATE)
- --------------------------------------------------------------------------------

Due September 30, 2001 $7,500,000.00

No.__________________ Date: September 30, 1999

PROMISE TO PAY. On or before September 30, 2001, for value received, American
Dental Technologies, Inc. (the "Borrower") promises to pay to Bank One,
Michigan (the "Bank"), or order, at any office of the Bank in the State of
Michigan, the sum of Seven Million Five Hundred Thousand and 00/100 DOLLARS
($7,500,000.00), or such lesser sum as is indicated on Bank records, plus
interest as provided below.

DEFINITIONS.

As used in this note, the following terms have the following respective
meanings.

"APPLICABLE MARGIN" means with respect to any Floating Rate Loan 0% per
annum and with respect to any Eurodollar Loan 1.5% per annum.

"BUSINESS DAY" means a day other than a Saturday or Sunday, or other day
that commercial banks in Detroit, Michigan are authorized or required to
close under the laws of the State of Michigan and, with respect to any
Eurodollar Loan, on which dealings in United States dollar deposits are
carried out in the London interbank market.

"CREDIT AGREEMENT" is defined in the paragraph entitled "Credit Agreement"
below.

"CREDIT FACILITY" is defined in the paragraph entitled "Credit Facility"
below.

"EURODOLLAR LOANS" means any Loan under the Credit Facility when and to the
extent that its interest rate is determined by reference to the Eurodollar
Rate.

"EURODOLLAR RATE" means, with respect to any Eurodollar Loan and the
related Interest Period, the per annum rate that is equal to the sum of:

(A) the Applicable margin, plus

(B) the rate obtained by dividing (i) the per annum rate of interest at
which deposits in United States dollars for the Interest Period and in an
aggregate amount comparable to the amount of the Loan are offered to Bank
One, NA by other prime banks in the London interbank market, at
approximately 11:00 a.m. London time on the second Business Day prior to
the first day of the Interest Period by (ii) an amount equal to one minus
the stated maximum rate (expressed as a decimal) of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) specified on the first day of such
Interest Period by the Board of Governors of the Federal Reserve System (or
any successor agency) for determining the maximum reserve requirement with
respect to eurocurrency funding required to be maintained by a Federal
Reserve System member bank;

all as conclusively determined by the Bank, such sum to be rounded up, if
necessary, to the nearest one-hundredth of one percent (1/100 of 1%).

"FLOATING RATE" means the per annum rate of interest equal to the sum of
the rate announced by the Bank as its "prime rate" in effect from time to
time, which is not necessarily the lowest rate charged by the Bank to any
of its customers, plus the Applicable Margin. Any change in the Bank's
"prime rate" shall immediately change the Floating Rate.

"FLOATING RATE LOAN" means any Loan under the Credit Facility when and to
the extent that its interest rate is determined by reference to the
Floating Rate.

"INTEREST PERIOD" means, with respect to any Eurodollar Loan, a period of
one, two, three or six months agreed upon by the Borrower and the Bank,
commencing on the Business Day the Loan is made. If the Interest Period
would end on a day which is not a Business Day, the Interest Period shall
end on the next succeeding Business Day unless that

<PAGE> 2
Business Day would fall in the next calendar month, in which case the
Interest Period shall end on the immediately preceding Business Day.

"Loan" and "Loans" are defined in the paragraph entitled "Credit Facility"
below.

"Loan Documents" means this note, the Credit Agreement, and any other
documents executed in connection with this Credit Facility.

CREDIT FACILITY. The Bank has authorized a credit facility to the Borrower in a
principal amount not to exceed the face amount of this note. The credit
facility is in the form of loans (each, a "Loan", and, together, the "Loans")
made from time to time by the Bank to the Borrower. This note evidences the
Borrower's obligation to repay those Loans. The Bank shall, in the ordinary
course of business, make notations in its records of the date, amount, interest
rate and Interest Period of each Loan, the amount of each payment on the Loans,
and other information. Such records shall, in the absence of manifest error, be
conclusive as to the outstanding principal balance of and interest rate or
rates applicable to the Loans. The aggregate principal amount of debt evidenced
by this note shall be the amount reflected from time to time in the records of
the Bank but shall not exceed the face amount of this note. Until maturity, the
Borrower may borrow, pay down, and reborrow under this note so long as the
aggregate principal amount outstanding at any one time does not exceed the face
amount of this note.

CREDIT AGREEMENT. This note evidences a debt under the terms of a Line of
Credit Agreement (the "Credit Agreement") between the Bank and the Borrower
dated concurrently, and any amendments.

INTEREST RATES. Each Loan under the Credit Facility may be outstanding as
either a Floating Rate Loan or a Eurodollar Loan. The Borrower shall pay
interest to the Bank on the outstanding and unpaid principal amount of each
Floating Rate Loan at the Floating Rate and each Eurodollar Loan at the
Eurodollar Rate. Interest shall be calculated on the basis of the actual number
of days elapsed in a year of 360 days. In no event shall the interest rate
applicable to any Loan exceed the maximum rate allowed by law. Any interest
payment which would for any reason be deemed unlawful under applicable law
shall be applied to principal.

NOTICE AND MANNER OF BORROWING. The Borrower shall give the Bank written notice
(effective upon receipt) of any Loan under the Credit Facility no later than
11:00 A.M. Detroit time, one (1) Business Day before each Floating Rate Loan
and three (3) Business Days before each Eurodollar Loan specifying: (A) the
date of the Loan, (B) the amount of the Loan, (C) the type of the Loan
(Floating Rate Loan or Eurodollar Loan), and (D) in the case of a Eurodollar
Loan, the duration of the applicable Interest Period. Each Eurodollar Loan
shall be in a minimum amount of $500,000.00. All notices under this paragraph
are irrevocable. By the Bank's close of business on the date of the Loan and
upon fulfillment of the conditions set forth in the Credit Agreement, the Bank
shall make the Loan available to the Borrower in immediately available funds by
crediting the amount of the Loan to the Borrower's account with the Bank.

CONVERSION AND RENEWALS. The Borrower may elect from time to time to convert
one type of Loan into another or to renew any Loan by giving the Bank written
notice no later than 11:00 A.M. Detroit time one (1) Business Day before
conversion into a Floating Rate Loan and three (3) Business Days before
conversion into or removal of a Eurodollar Loan, specifying: (A) the renewal or
conversion date, (B) the amount of the Loan to be converted or renewed, (C) in
the case of conversion, the type of Loan to be converted into (Floating Rate
Loan or Eurodollar Loan), and (D) in the case of renewals of or conversion into
a Eurodollar Loan, the applicable Interest Period, provided that (i) the
minimum principal amount of each Eurodollar Loan outstanding after a renewal or
conversion shall be $500,000.00 and (ii) a Eurodollar Loan can only be
converted on the last day of the Interest Period for the Loan. All notices
given under this paragraph are irrevocable. If the Borrower fails to give the
Bank the notice specified above for the renewal or conversion of a Eurodollar
Loan by 11:00 a.m. Detroit time three (3) Business Days before the end of the
Interest Period for that Loan, the Loan shall automatically be converted to a
Floating Rate Loan on the last day of the Interest Period for the Loan.

INTEREST PAYMENTS. Interest on the Loans shall be paid as follows:

(A) For each Floating Rate Loan, on the 30th day of each month beginning
with the first full month following disbursement of the Loan and at the
maturity of the Loan;

(B) For each Eurodollar Loan, on the last day of the Interest Period for
the Loan and, if the Interest Period is longer than three months, at
three-month intervals beginning with the day three months from the date
the Loan is disbursed.

OVERDUE AMOUNTS. Any principal amount not paid when due (at maturity, by
acceleration, or otherwise) shall bear interest thereafter until paid in full,
payable on demand, at a per annum rate equal to:

(A) For each Floating Rate Loan a rate equal to the Floating Rate plus
three percent (3%).

(B) For each Eurodollar Loan, a rate equal to the Eurodollar Rate plus
three percent (3%) from the time of default in payment of principal
until the end of the then current Interest Period for the Loan and
after that at a rate equal to the Floating Rate plus three percent
(3%).

<PAGE> 3
PREPAYMENT. The Borrower may prepay all or any part of any Floating Rate Loan
at any time without premium or penalty. The Borrower may prepay any Eurodollar
Loan only at the end of an Interest Period.

FUNDING LOSS INDEMNIFICATION. Upon the Bank's request, the Borrower shall pay
the Bank amounts sufficient (in the Bank's reasonable opinion) to compensate it
for any loss, cost, or expense incurred as a result of:

(A) Any payment of a Eurodollar Loan on a date other than the last day of
the Interest Period for the Loan, including, without limitation,
acceleration of the Loans by the Bank pursuant to this note or the
Loan Documents; or

(B) Any failure by the Borrower to borrow or renew a Eurodollar Loan on
the date specified in the relevant notice from the Borrower to the
Bank.

ADDITIONAL COSTS. If any applicable domestic or foreign law, treaty, government
rule or regulation now or later in effect (whether or not it now applies to the
Bank) or the interpretation or administration thereof by a governmental
authority charged with such interpretation or administration, or compliance by
the Bank with any guideline, request or directive of such an authority (whether
or not having the force of law), shall (A) affect the basis of taxation of
payments to the Bank of any amounts payable by the Borrower under this note or
the Loan Documents (other than taxes imposed on the overall net income of the
Bank by the jurisdiction or by any political subdivision or taxing authority
of the jurisdiction in which the Bank has its principal office), or (B) impose,
modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by
the Bank, or (C) impose any other condition with respect to this note or the
Loan Documents and the result of any of the foregoing is to increase the cost
to the Bank of maintaining any Eurodollar Loan or to reduce the amount of any
sum receivable by the Bank on such a Loan, or (D) affect the amount of capital
required or expected to be maintained by the Bank (or any corporation
controlling the Bank) and the Bank determines that the amount of such capital
is increased by or based upon the existence of the Bank's obligations under
this note or the Loan Documents and the increase has the effect of reducing the
rate of return on the Bank's (or its controlling corporation's) capital as a
consequence of the obligations under this note or the Loan Documents to a level
below that which the Bank (or its controlling corporation) could have achieved
but for such circumstances (taking into consideration its policies with respect
to capital adequacy) by an amount deemed by the Bank to be material, then the
Borrower shall pay to the Bank, from time to time, upon request by the Bank,
additional amounts sufficient to compensate the Bank for the increased cost or
reduced sum receivable. Whenever the Bank shall learn of circumstances
described in this section which are likely to result in additional costs to the
Borrower, the Bank shall give prompt written notice to Borrower of the basis
for and the estimated amount of any such anticipated additional costs. A
statement as to the amount of the increased cost or reduced sum receivable,
prepared in good faith and in reasonable detail by the Bank and submitted by
the Bank to the Borrower, shall be conclusive and binding for all purposes
absent manifest error in computation.

ILLEGALITY. If any applicable domestic or foreign law, treaty, rule or
regulation now or later in effect (whether or not it now applies to the Bank)
or the interpretation of administration thereof by a governmental authority
charged with such interpretation or administration, or compliance by the Bank
with any guideline, request or directive of such an authority (whether or not
having the force of law), shall make it unlawful or impossible for the Bank to
maintain or find the Eurodollar Loans, then, upon notice to the Borrower by the
Bank, the outstanding principal amount of the Eurodollar Loans, together with
accrued interest and any other amounts payable to the Bank under this note or
the Loan Documents on account of the Eurodollar Loans shall be repaid (A)
immediately upon the Bank's demand if such change or compliance with such
requests, in the Bank's judgment, requires immediate repayment, or (B) at the
expiration of the last Interest Period to expire before the effective date of
any such change or request provided, however, that subject to the terms and
conditions of this note and the Loan Documents the Borrower shall be entitled
to simultaneously replace the entire outstanding balance of any Eurodollar Loan
repaid in accordance with this section with a Floating Rate Loan in the same
amount.

INABILITY TO DETERMINE INTEREST RATE. If the Bank determines that (A)
quotations of interest rates for the relevant deposits referred to in the
definition of Eurodollar Rate are not being provided in the relevant amounts or
for the relevant maturities for purposes of determining the interest rate on a
Eurodollar Loan as provided in this note, or (B) the relevant interest rates
referred to in the definition of Eurodollar Rate do not accurately cover the
cost to the Bank of making or maintaining Eurodollar Loans, then the Bank shall
forthwith give notice of such circumstances to the Borrower, whereupon (1) the
obligation of the Bank to make Eurodollar Loans shall be suspended until the
Bank notifies the Borrower that the circumstances giving rise to the suspension
no longer exists, and (2) the Borrower shall repay in full the then
outstanding principal amount of each Eurodollar Loan, together with accrued
interest, on the last day of the then current Interest Period applicable to the
Loan, provided, however, that, subject to the terms and conditions of this note
and the Loan Documents, the Borrower shall be entitled to simultaneously
replace the entire outstanding balance of any Eurodollar Loan repaid in
accordance with this section with a Floating Rate Loan in the same amount.

OBLIGATIONS DUE ON NON-BUSINESS DAY. Whenever any payment under this note
becomes due and payable on a day that is not a Business Day, if no event of
acceleration has occurred and is continuing, the maturity of the payment
shall be extended to the next succeeding Business Day, except, in the case of a
Eurodollar Loan, if the result of the extension would be to extend the payment
into another calendar month, the payment must be made on the immediately
preceding Business Day.

SECURITY. To secure the payment of this note and all other present or future
liabilities of the Borrower to the Bank, whether several, joint, or joint and
several, the Borrower pledges and grants to the Bank a continuing security
interest in the following described property and all of its additions,
substitutions, increments, proceeds and products, whether now owned or later
acquired ("Collateral"):

3
<PAGE> 4
1. All securities and other property of the Borrower in the custody,
possession or control of the Bank (other than property held by the Bank
solely in a fiduciary capacity);

2. All property or securities declared or acknowledged to constitute security
for any past, present or future liability of the Borrower to the Bank;

3. All balances of deposit accounts of the Borrower with the Bank;

4. The following additional property: all of the Borrower's present and future
accounts, chattel paper and general intangibles; all of the Borrower's
present and future inventory and equipment, wherever located; all of the
Borrowers, patent's copyrights and trademarks.

BANK'S RIGHT TO SETOFF. The Bank shall have the right at any time to apply its
own debt or liability to the Borrower or to any other party liable on this note
in whole or partial payment of this note or other present or future
liabilities, without any requirement of mutual maturity.

REPRESENTATIONS BY BORROWER. Each Borrower represents: (a) that the execution
and delivery of this note and the performance of the obligations it imposes do
not violate any law, conflict with any agreement by which it is bound, or
require the consent or approval of any governmental authority or any third
party; (b) that this note is a valid and binding agreement, enforceable
according to its terms; and (c) that all balance sheets, profit and loss
statements, and other financial statements furnished to the Bank are accurate
and fairly reflect the financial condition of the organizations and persons to
which they apply on their effective dates, including contingent liabilities of
every type, which financial condition has not changed materially and adversely
since those dates. Each Borrower, other than a natural person, further
represents: (a) that it is duly organized, existing and in good standing
pursuant to the laws under which it is organized; and (b) that the execution
and delivery of this note and the performance of the obligations it imposes (i)
are within its powers and have been duly authorized by all necessary action of
its governing body; and (ii) do not contravene the terms of its articles of
incorporation or organization, its by laws, or any partnership, operating or
other agreement governing its affairs.

EVENTS OF DEFAULT/ACCELERATION. If any of the following events occurs, this
note shall be due immediately, without notice, at the Bank's option.

1. The Borrower or any guarantor of this note ("Guarantor") fails to pay when
due any amount payable under this note or under any agreement or instrument
evidencing debt to any creditor;

2. The Borrower or any Guarantor (a) fails to observe or perform any other
term of this note; (b) makes any materially incorrect or misleading
representation, warranty, or certificate to the Bank; (c) makes any
materially incorrect or misleading representation in any financial
statement or other information delivered to the Bank; or (d) defaults under
the terms of any agreement or instrument relating to any debt for borrowed
money (other than the debt evidenced by this note) such that the creditor
declares the debt due before its maturity;

3. There is a default under the terms of any loan agreement, mortgage,
security agreement, or any other document executed as part of the loan
evidenced by this note, or any guaranty of the loan evidenced by this note
becomes unenforceable in whole or in part, or any Guarantor fails to
promptly perform under its guaranty;

4. A "reportable event" (as defined in the Employee Retirement Income Security
Act of 1974 as amended) occurs that would permit the Pension Benefit
Guaranty Corporation to terminate any employee benefit plan of the Borrower
or any affiliate of the Borrower;

5. The Borrower or any Guarantor becomes insolvent or unable to pay its debts
as they become due;

6. The Borrower or any Guarantor (a) makes an assignment for the benefit of
creditors; (b) consents to the appointment of a custodian, receiver, or
trustee for itself or for a substantial part of its assets; or (c)
commences any proceeding under any bankruptcy, reorganization, liquidation,
insolvency or similar laws of any jurisdiction;

7. A custodian, receiver, or trustee is appointed for the Borrower or any
Guarantor or for a substantial part of its assets without the consent of
the party against which the appointment is made and is not removed within
60 days after such appointment;

8. Proceedings are commenced against the Borrower or any Guarantor under any
bankruptcy, reorganization, liquidation, or similar laws of any
jurisdiction, and such proceedings remain undismissed for 60 days after
commencement; or the Borrower or Guarantor consents to the commencement of
such proceedings;

9. Any judgment is entered against the Borrower or any Guarantor, or any
attachment, levy, or garnishment is issued against any property of the
Borrower or any Guarantor;

10. The Borrower or any Guarantor dies;

11. The Borrower or any Guarantor, without the Bank's written consent, (a) is
dissolved, (b) merges or consolidates with any third party, (c) leases,
sells or otherwise conveys a material part of its assets or business
outside the ordinary course of business, (d) leases, purchases or otherwise
acquires a material part of the assets of any other corporation or business
entity except in the ordinary course of business, or (e) agrees to do any
of the foregoing (notwithstanding the foregoing, any subsidiary may merge
or consolidate with any other subsidiary, or with the Borrower so long as
the Borrower is the survivor);

12. The loan-to-value ratio of any pledged securities at any time exceeds N/A%,
and such excess continues for five (5) days after notice from the Bank to
the Borrower;

13. There is a substantial change in the existing or prospective financial
condition of the Borrower or any Guarantor which the Bank in good faith
determines to be materially adverse;

14. The Bank in good faith deems itself insecure;

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<PAGE> 5
15. The acquisition by any Person (as defined below), or two or more Persons
acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 20% or more of the outstanding shares of voting
stock of the Borrower. For purposes of this covenant, "Person" means any
natural person, corporation, firm, joint venture, partnership, association,
limited liability company, enterprise, trust or other entity or
organization, or any government or political subdivision or any agency,
department of instrumentality thereof.

REMEDIES. If this note is not paid at maturity, whether by acceleration or
otherwise, the Bank shall have all of the rights and remedies provided by any
law or agreement. Any requirement of reasonable notice shall be met if the Bank
sends the notice to the Borrower at least seven (7) days prior to the date of
sale, disposition or other event giving rise to the required notice. The Bank
is authorized to close all or any part of the Collateral to be transferred to
or registered in its name or in the name of any other person, firm or
corporation, with or without designation of the capacity of such nominee. The
Borrower shall be liable for any deficiency remaining after disposition of any
Collateral. The Borrower is liable to the Bank for all reasonable costs and
expenses of every kind incurred in the making or collection of this note,
including, without limitation, reasonable attorneys' fees and court costs.
These costs and expenses shall include, without limitation, any costs or
expenses incurred by the Bank in any bankruptcy, reorganization, insolvency or
other similar proceeding.

WAIVER. Each endorser and any other party liable on this note severally waives
demand, presentment, notice of dishonor and protest, and consents to any
extension or postponement of time of its payment without limit as to the number
or period, to any substitution, exchange or release of all or part of the
Collateral, to the addition of any party, and to the release or discharge of,
or suspension of any rights and remedies against, any person who may be liable
for the payment of this note. No delay on the part of the Bank in the exercise
of any right or remedy shall operate as a waiver. No single or partial exercise
by the Bank of any right or remedy shall preclude any other future exercise of
it or the exercise of any other right or remedy. No waiver or indulgence by the
Bank of any default shall be effective unless in writing and signed by the
Bank, nor shall a waiver on one occasion be construed as a bar to or waiver of
that right on any future occasion.

MISCELLANEOUS. The Borrower, if more than one, shall be jointly and severally
liable, and the term "Borrower" shall mean any one or more of them. This note
shall be binding on the Borrower and its successors, and shall inure to the
benefit of the Bank, its successors and assigns. Any reference to the Bank
shall include any holder of this note. This note is delivered in the State of
Michigan and governed by Michigan law. Section headings are for convenience of
reference only and shall not affect the interpretation of this note.

WAIVER OF JURY TRIAL. The Bank and the Borrower knowingly and voluntarily waive
any right either of them have to a trial by jury in any proceeding (whether
sounding in contract or tort) which is in any way connected with this or any
related agreement, or the relationship established under them. This provision
may only be modified in a written instrument executed by the Bank and the
Borrower.

ADDRESS: BORROWER: AMERICAN DENTAL TECHNOLOGIES,INC.

5555 Bear Lane By: /s/ BEN J. GALLANT
Corpus Christi, TX 78405 ---------------------------------------
Ben J. Gallant, President

<PAGE> 1
EXHIBIT 10.13

PROMISSORY NOTE

1. PRINCIPAL AMOUNT: $675,000, U.S.D.

2. INTEREST RATE: 8.5% ANNUM

3. DATE OF LOAN: DECEMBER 15, 1999

4. MATURITY DATE: FEBRUARY 15, 2001

5. LENDER: American Dental Technologies, Inc.
5555 Bear Lane
Corpus Christi, Texas 78405

6. BORROWER: Denics, Co. Ltd.
Yotsuya Y's Bldg
7-6 Honshio-CHO
Shinjuku-ku
Tokyo 160, Japan

7. IN PAYMENT OF INVOICES #47073 AND #48232, BORROWER AGREES TO PAY LENDER THE
PRINCIPAL AMOUNT OF $675,000 U.S.D. PLUS INTEREST AT THE RATE OF 8.5% PER
ANNUM IN THE MANNER DESCRIBED BELOW.

PAYMENT SCHEDULE: TWELVE EQUAL MONTHLY PAYMENTS OF $58,881.77 U.S.D.
BEGINNING ON MARCH 15, 2000 AND CONTINUING ON THE 15TH OF EACH
SUCCEEDING MONTH WITH THE LAST PAYMENT ON FEBRUARY 15, 2001.
<PAGE> 2
All payments will be made to Lender at its address set forth above and
in lawful currency of the United State of America.

PREPAYMENT: This note may be prepaid in full or in part on or before
its Maturity Date,

8. Compliance with applicable law: It is Lender's Intention to comply fully
with Texas law and federal law as applicable, regulating credit terms,
interest, fees, charges, expenses and other amounts. For purposes of
determining Lender's compliance with such laws, the following shall apply
to the extent permitted by law: (a) any contract, charge or receipt by
Lender, whether occurring now or in the future, shall be strictly limited
by this provision; (b) the "Maximum Lawful Rate" shall be the maximum
lawful ceiling, rate or amount that Lender could have contracted to change
or ceiling, rate or amount that Lender could have contracted to charge or
receive under Texas law or applicable federal law, whether permits the
highest maximum ceiling, rate or amount; (c) to the extent Texas Article
5069 1.04, as amended, provides the Maximum Lawful rated, the "Indicated
rate ceiling" shall apply unless changed by the Lender or in accordance
with Texas law; (d) Lender may calculate rates or mounts by aggregating,
amortizing, prorating, allocating and spreading contracted for charge or
receipt shall obligate Borrower or any obligor to pay any amount in excess
of Maximum Lawful Rate or waive any right under Texas 5069; and (f) any
contract, charge or receipt that in the event of acceleration or under any
other contingency purports to require the payment or collection of any
amount in excess of the Maximum Lawful Rate shall automatically be

2
<PAGE> 3
reformed to not obligate Borrower or any Obligor to pay any amount in
excess of the Maximum Lawful Rate. If Lender ever contracts for charges or
receives rate or amount in excess of the Maximum Lawful Rate, the excess
(whether denominated principal, interest, or other wise) shall be
automatically subject to reallocation, cancellation, credit, applications
or refund to eliminate any amount in excess of the Maximum Lawful Rates.

9. Financial information: Borrower will provide Lender with current financial
statements including, but not limited to, balance sheets and profit and
loss statements and other information upon request.

10. Modification and Waiver: The modification or waiver of any Borrower's
obligations or Lender's rights under this Note must be contained in a
writing signed by Lender. Lender may perform any of Borrower's obligations
or delay or fail to exercise any of its rights without causing a waiver of
those obligations or rights. A waiver on one occasion will not constitute a
waiver other occasion. Borrower's obligations under this Note shall not be
affected if Lender amends compromises, exchanges, fails to exercise,
impairs or releases any of the obligations belonging to any co-borrower or
guarantor of any of its rights against any co-borrower, guarantor or
collateral.

11. Severability: If any provision of this Note violates the law or is
unenforceable, the rest of the Note of the will remain valid.

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<PAGE> 4

12. Notice: Any notice or other communications to be provided to Borrower or
Lender under this Note shall be in writing and sent to the parties at the
addresses described in this Note or such other addresses and the parties
may designate in writing from time to time.

13. Applicable law: This note shall be governed by the laws of the state of
Texas and applicable federal laws. Borrower consents to the jurisdiction
and venue of any court located in Nueces County, Texas in the event of any
legal proceeding under this Note.

14. Collection expenses: If Lender hires an attorney (who is not a salaried
employee of Lender) to assist in collecting any amount due or enforcing any
right or remedy under this Note, Borrower agrees to pay Lender's reasonable
attorney's fees and collection costs subject to court award.

15. Miscellaneous: This Note is being executed for commercial purposes.
Borrower and Lender agree that time is of the essence. Borrower waives
presentment, demand for payment, notice of intent to accelerate, notice of
acceleration, notice of dishonor and protest. All references to Borrower in
this Note shall include all of the parties signing this Note. If there is
more than one Borrower, their obligation will be joined and several. This
Note and any related documents represent the complete and integrated
understanding between Borrower and Lender pertaining to the terms and
conditions of those documents.

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<PAGE> 5

16. ADDITIONAL TERMS: THIS NOTE CONSTITUTES PAYMENT OF INVOICES #47073 AND
#48232 OWED BY BORROWER TO LENDER.

DENICS CO. LTD

BY: /s/ KENGO IWAI
---------------------
Kengo Iwai, President

UNCONDITIONAL GUARANTEE

I, SHOHEI OGURI OF TOKYO, JAPAN HEREBY IRREVOCABLY AND UNCONDITIONALLY
GUARANTEE PAYMENT OF ALL AMOUNTS OWED BY BORROWER TO LENDER AS SET FORTH IN
THE FORGOING NOTE FROM DENICS CO., LTD. TO AMERICAN DENTAL TECHNOLOGIES, INC.
AS IF I WAS THE BORROWER. THIS GUARANTEE IS PERFORMABLE IN CORPUS CHRISTI,
TEXAS.

/s/ SHOHEI OGURI
--------------------------------
SHOHEI OGURI, INDIVIDUALLY

--------------------------------

ADDRESS:

<PAGE> 1

EXHIBIT 10.14

1ST AMENDMENT TO EMPLOYMENT AGREEMENT

The 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

<PAGE> 1

EXHIBIT 10.15

AMERICAN DENTAL TECHNOLOGIES, INC.

EXECUTIVE CHANGE IN CONTROL BONUS AND SEVERANCE AGREEMENT

THIS AGREEMENT, dated as of October 16, 1999, is between American Dental
Technologies, Inc. (the "Company") and Barbara Danieli, who is currently
employed by the Company in the position of Chief Financial Officer (the
"Executive").

WITNESSETH:

WHEREAS, the Company believes that it is in the best interests of the
Company and its stockholders if the Executive is assured of appropriate
financial protection in the event of a Change in Control (as defined in Section
4 below), thus ensuring that the Executive shall have an incentive to perform
valuable services for the Company and shall not be distracted in the
anticipation, or in the event of, a Change in Control; and

WHEREAS, the Company believes that the assurance of appropriate financial
protection to the Executive in the event of a Change in Control shall encourage
the Executive to remain in the employ of the Company through the transition
period following a Change in Control, which is in the best interests of the
Company and its stockholders; and

WHEREAS, the Executive is willing to continue to provide dedicated
services to the Company with the appropriate financial protection provided for
herein;

NOW THEREFORE, in consideration of the premises and mutual covenants, the
parties hereto agree as follows:

AGREEMENT

1. OPERATION OF AGREEMENT. This Agreement sets forth the severance
compensation that the Company shall pay the Executive if the Executive's
employment with the Company terminates under one of the applicable provisions
set forth herein following a Change in Control that occurs on or prior to June
22, 2000.

2. TERM OF THE AGREEMENT. This Agreement shall be effective upon its
execution by both parties and shall terminate upon the first of the following
events to occur: (a) June 22, 2000, if a Change in Control has not occurred on
or before such date; (b) the termination of the Executive's employment with the
Company prior to a Change in Control; (c) the expiration of one year following
a Change in Control; (d) the termination of the Executive's employment with the
Survivor following a Change in Control due to the Executive's death, Disability
(as a defined in Section 3(a) below) or Retirement (as defined in Section 3(b)
below); (e) the termination of the Executive's employment by the Survivor for
Cause (as defined in Section 3(c) below) following a Change in Control; or (f)
<PAGE> 2

termination of employment by the Executive for other than Good Reason (as
defined in Section 6) following the date of a Change in Control.

3. DEFINED TERMS. For purposes of this Agreement, the following terms
shall have the meanings set forth below:

(a) "Disability" shall mean disability as defined in the Company's
Long-Term Disability Plan.

(b) "Retirement" shall mean retirement on or after age 65.

(c) "Cause" shall mean the Executive's termination of employment by
the Company, or, if the Executive is employed by the Survivor following a Change
in Control, termination of employment by the Survivor, due to misconduct,
personal dishonesty, conviction for violation of any law, rule or regulation
(other than traffic violations or minor misdemeanors), breach of fiduciary duty
to the Survivor, engaging in any conduct which adversely affects or conflicts
with the interest of the Survivor, including any breach of employment
agreement between the Executive and the Survivor. The President of the Survivor
shall make any determination under this Agreement regarding acts that constitute
grounds for the Executive to be terminated for Cause.

(d) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.

(e) "Survivor" shall mean the person or persons surviving any merger
or statutory share exchange involving the Company, the person or persons
purchasing all or substantially all of the assets of the Company and, in the
case of a Stock Sale, the Company.

4. CHANGE IN CONTROL. A Change in Control shall be deemed to have
occurred upon the occurrence of the conditions set forth in either of the
following paragraphs.

(a) 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 the Company's authorized Common Stock ("Common Stock")
(other than a person who on March 23, 1993 owned 10 percent or more of the
outstanding shares of the Common Stock, or other than trustee or other
fiduciary holding shares of Common Stock under an employee benefit plan of the
Company, or a corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportions as their ownership of shares
of the Company) 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 Company's voting securities, or

(b) The stockholders of the Company approve a dissolution of the
Company or a definitive agreement (i) to merge or consolidate the Company with
or into another entity in which the Company 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

2
<PAGE> 3
than a merger of the Company 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 (ii) to sell or otherwise dispose of substantially
all the assets of the Company.

5. CHANGE IN CONTROL OPTION GRANT AND CASH BONUS PAYMENT. As of the date
of this Agreement ("Grant Date"), the Executive shall receive a nonqualified
stock option under the Company's Amended and Restated Nonqualified Stock Option
Plan, as amended, to purchase up to 3,750 shares of Common Stock, and a
nonqualified stock option under the Company's Amended and Restated Long-Term
Incentive Plan, as amended, to purchase up to 3,750 shares of Common Stock.
Both stock options shall become exercisable on the date of a Change in Control
that occurs during the term of this Agreement, if the Executive is still
employed by the Company on such date. The per share purchase price under the
stock options shall be $3.50. Within ten (10) days following a Change in
Control, the Executive, if still employed by the Company on the date of the
Change in Control, shall receive a cash lump sum payment, equal to $30,000.00,
reduced by any applicable income and employment withholding taxes.

6. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL. Except as
set forth in Section 10(a) hereunder, the Executive shall be entitled to
severance payments under Section 7 of this Agreement only if there has been a
Change in Control, the Executive has incurred a Termination of Employment, and
the Executive has properly executed the General Release attached hereto as
Appendix A, which must be returned to the President of the Survivor prior to
commencement of the severance benefit provided hereunder.

(a) For purposes of this Agreement, during the one-year period
following any Change in Control that occurs during the term of this Agreement,
"Termination of Employment" shall be defined as:

(i) The Executive's involuntary termination by the Survivor for
any reason other than death, Disability, Retirement or Cause; or

(ii) The Executive's termination of his employment with the
Survivor for "Good Reason," defined as the occurrence of any of the following
events without the Executive's written consent:

(A) Any material dimunition of the Executive's position,
duties and responsibilities from his position, duties and responsibilities with
the Company immediately prior to the Change in Control;

(B) Any reduction in the Executive's base salary in effect
immediately prior to the Change in Control;

3
<PAGE> 4

(C) Required relocation of the Executive's principal place of
employment more than 50 miles from his or her place of employment immediately
prior to the Change in Control without the Executive's written consent; and

(D) The Company's breach of any provision in this Agreement.

(b) An Executive who believes that he or she is entitled to a
Termination of Employment for Good Reason as defined in subparagraph (a)(ii)
above, may apply in writing to the Survivor for confirmation of such
entitlement prior to the Executive's actual separation from employment, by
following the claims procedure set forth in Section 14 hereof. The submission
of such a request by an Executive shall not constitute "Cause" for termination
of the Executive as defined under Section 3(c) hereof. If the Executive's
request for a Good Reason Termination of Employment is denied under both the
request and appeal procedures set forth in paragraphs (b) and (c) of Section 14
hereof, then the parties shall use their best efforts to resolve the claim
within 90 days after the claim is submitted to arbitration pursuant to Section
14(d).

7. SEVERANCE BENEFIT.

(a) Upon satisfaction of the requirements set forth in Sections 6 and
10(a) hereof, the Executive shall receive base salary continuation payments,
distributed on normal payroll dates, for 6 months following the Executive's
Termination of Employment, at the Executive's base salary in effect at the time
of Termination of Employment, less any other severance payments provided by the
Survivor through an employment agreement or other company-sponsored program.

(b) The value of the base salary continuation payments provided in
paragraph (a) above, when aggregated with the cash bonus and any applicable
portion of the stock option income in Section 5 and any other severance
payments constituting "golden parachute" amounts (defined under Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code"), as compensation
that becomes payable or accelerated due to a Change in Control) pursuant to all
plans, agreements or policies of the Company and its subsidiaries, shall be
reduced to the highest amount permissible under Sections 280G and 4999 of the
Code before the Executive becomes subject to the excess parachute payment
excise tax under Section 4999 of the Code and the Company loses all or part of
its compensation deduction for such payments.

8. NO MITIGATION OR DUTY TO SEEK REEMPLOYMENT. The Executive shall be
under no duty or obligation to seek or accept other employment after Termination
of Employment and shall not be required to mitigate the amount of the cash
bonus or any salary continuation payments provided by this Agreement by seeking
employment or otherwise.

9. TAX WITHHOLDING. The Company may withhold from any cash amounts
payable to the Executive under this Agreement to satisfy all applicable
Federal, State, local or other income and employment withholding taxes. In the
event the Company fails to withhold such sums for any

4
<PAGE> 5
reason, the Company may require the Executive to promptly remit to the Company
sufficient cash to satisfy all applicable income and employment withholding
taxes.

10. BINDING EFFECT.

(a) This Agreement shall be binding upon the successors and assigns
of the Company. The Company shall cause any successor to all or substantially
all of its operations (whether by purchase, merger, consolidation, sale of
substantially all assets or otherwise to) evidence the assumption of such
obligations in a written agreement. Notwithstanding any other provisions in
this Agreement, if the Company fails to obtain an agreement evidencing the
assumption of the Company's obligations by any such successor, the Executive
shall be entitled to immediate payment of the severance compensation provided
under Section 7, irrespective of whether the Executive's employment has then
terminated. For purposes of implementing the foregoing, the date on which any
succession becomes effective shall be deemed to constitute the date of the
Executive's Termination of Employment.

(b) This Agreement shall be binding upon the Executive and shall
inure to the benefit of and be enforceable by the Executive's legal
representatives and heirs. However, the rights of the Executive under this
Agreement shall not be assigned, transferred, pledged, hypothecated or
otherwise encumbered, except by operation of law.

11. AMENDMENT OF AGREEMENT. This Agreement may not be modified or
amended except by instrument in writing signed by the parties hereto.

12. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall continue in full force and effect.

13. LIMITATION ON RIGHTS.

(a) This Agreement shall not be deemed to create a contract of
employment between the Company and the Executive and shall create no right in
the Executive to continue in the Company's employment for any specific period
of time, or to create any other rights in the Executive or obligations on the
part of the Company, except as set forth herein. This Agreement shall not
restrict the right of the Company to terminate the Executive, or restrict the
right of the Executive to terminate employment.

(b) This Agreement shall not be construed to exclude the Executive
from participation in any other compensation or benefit programs in which the
Executive is specifically eligible to participate either prior to or following
the execution of this Agreement, or any such programs that generally are
available to other executive personnel of the Company, nor shall it affect the
kind and amount of other compensation to which the Executive is entitled.

5
<PAGE> 6

(c) The rights of the Executive under this Agreement shall be solely
those of an unsecured general creditor of the Company. Payments under this
Agreement shall be made from the Company's general assets.

14. CLAIMS PROCEDURE.

(a) The administrator for purposes of this Agreement shall be the
Company or, following a Change in Control, the Survivor ("Administrator"), whose
current address is 5555 Bear Lane, Corpus Christi, Texas 78405, and whose
telephone number is (512) 289-1145. The "Named Fiduciary" as defined in Section
402(a)(2) of ERISA, also shall be the Company. The Company shall have the right
to designate one or more Company employees as the Administrator and the Named
Fiduciary at any time, and to change the address and telephone number of the
same. The Company shall give the Executive written notice of any change in the
Administrator and Named Fiduciary, or in the address or telephone number of the
same.

(b) The Administrator shall make all determinations as to the right
of any person to receive benefits under the Agreement. Any denial by the
Administrator of a claim for benefits by the Executive ("the claimant") shall be
stated in writing by the Administrator and delivered or mailed to the claimant
within ten (10) days after receipt of the claim, unless special circumstances
require an extension of time for processing the claim. If such an extension is
required, written notice of the extension shall be furnished to the claimant
prior to the termination of the initial 10-day period. In no event shall such
extension exceed a period of ten (10) days from the end of the initial period.
Any notice of denial shall set forth the specific reasons for the denial,
specific reference to pertinent provisions of this Agreement upon which the
denial is based, a description of any additional material or information
necessary for the claimant to perfect the claim, with an explanation of why such
material or information is necessary, and any explanation of claim review
procedures, written to the best of the Administrator's ability in a manner that
is intended to be understood without legal or actuarial counsel.

(c) A claimant whose claim for benefits has been wholly or partially
denied by the Administrator may request, within ten (10) days following the date
of such denial, in a writing addressed to the Administrator, a review of such
denial. The claimant shall be entitled to submit such issues or comments in
writing or otherwise, as the claimant shall consider relevant to a determination
of the claim, and the claimant may include a request for a hearing in person
before the Administrator. Prior to submitting the request, the claimant shall be
entitled to review such documents as the Administrator shall agree are pertinent
to the claim. The claimant may, at all stages of review, be represented by
counsel, legal or otherwise, of the claimant's choice. All requests for review
shall be promptly resolved. The Administrator's decision with respect to any
such review shall be set forth in writing and shall be mailed to the claimant
not later than ten (10) days following receipt by the Administrator of the
claimant's request unless special circumstances, such as the need to hold a
hearing, require an extension of time for processing, in which case the
Administrator's decision shall be so mailed not later than twenty (20) days
after receipt of such request.

6
<PAGE> 7
(d) A claimant who has followed the procedures in paragraphs (b) and
(c) of this Section, but who has not obtained full relief on the claim for
benefits, may, within sixty (60) days following the claimant's receipt of the
Administrator's written decision on review, apply in writing to the
Administrator for binding arbitration of the claim before an arbitrator
mutually acceptable to both parties, the arbitration to be held in Corpus
Christi, Texas, in accordance with the arbitration rules of the American
Arbitration Association, as then in effect. If the parties are unable to
mutually agree upon an arbitrator, then the arbitration proceedings shall be
held before three arbitrators, one of which shall be designated by the Company,
one of which shall be designated by the claimant and the third of which shall
be designated mutually by the first two arbitrators in accordance with the
arbitration rules referenced above. The arbitrator(s) sole authority shall be
to interpret and apply the provisions of this Agreement; the arbitrator(s)
shall not change, add to, or subtract from, any of the Agreement's provisions.
The arbitrator(s) shall have the power to compel attendance of witnesses at the
hearing. Any court having jurisdiction may enter a judgment based upon such
arbitration. All decisions of the arbitrator(s) shall be final and binding on
the claimant and the Company without appeal to any court. Upon execution of
this Agreement, the Executive shall be deemed to have waived any right to
commence litigation proceedings regarding this Agreement outside of
arbitration without the express written consent of the Company.

15. LEGAL FEES AND EXPENSES. In the event any arbitration or litigation
is brought to enforce any provision of this Agreement and the Executive
prevails, then the Executive shall be entitled to recover from the Company the
Executive's reasonable costs and reasonable expenses of such arbitration or
litigation, including reasonable fees and disbursements of counsel (both at
trial and in appellate proceedings). If the Company prevails, then each party
shall be responsible for its/his respective costs, expenses and attorneys fees,
and the costs of arbitration shall be equally divided.

16. NONALIENATION OF BENEFITS. Except in so far as this provision may be
contrary to applicable law, no sale, transfer, alienation, assignment, pledge,
collateralization or attachment of any benefits under this Agreement shall be
valid or recognized by the Company.

17. ERISA. This Agreement is an unfunded compensation arrangement for a
member of a select group of the Company's management and any exemptions under
ERISA, as applicable to such an arrangement, shall be applicable to this
Agreement. Provided, however, the cash bonus and stock option under Section 5
are strictly incentive payments that are not subject to ERISA.

18. REPORTING AND DISCLOSURE. The Company, from time to time, shall
provide government agencies with such reports concerning this Agreement as may
be required by law, and the Company shall provide the Executive with such
disclosure concerning this Agreement as may be required by law or as the
Company may deem appropriate.

19. NOTICES. Any notice required or permitted by this Agreement shall be
in writing, sent by registered or certified mail, return receipt requested,
addressed to the Company at the Company's then principal office, or to the
Executive at the Executive's last address on file with the Company,

7
<PAGE> 8
as the case may be, or to such other address or addresses as any party hereto
may from time to time specify in writing for the purpose of this Agreement in a
notice given to the other parties in compliance with this Section 19. Notices
shall be deemed given when received.

20. MISCELLANEOUS/SEVERABILITY. A waiver of the breach of any term or
condition of this Agreement shall not be deemed to constitute a waiver of any
subsequent breach of the same or any other term or condition. This Agreement is
intended to be performed in accordance with, and only to the extend permitted
by, all applicable laws, ordinances, rules and regulations. To the extent that
any provision or benefit under this Agreement is not deemed to be in accordance
with any applicable law, ordinance, rule or regulation, the noncomplying
provision shall be construed, or benefit limited, to the extent necessary to
comply with all applicable laws, ordinances and regulations and any such
provision or benefit shall not affect the validity of any other provision or
benefit provided by this Agreement. The headings in this Agreement are inserted
for convenience of reference only and shall not be a part of or control or
affect the meaning of any provision hereof.

21. GOVERNING LAW. To the extent not preempted by Federal law, this
Agreement shall be governed and construed in accordance with the laws of the
State of Texas. Payment and performance hereunder shall be considered to be
made in Corpus Christi, Texas.

22. ENTIRE AGREEMENT. This document represents the entire agreement and
understanding of the parties with respect to the subject matter of the
Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.

AMERICAN DENTAL TECHNOLOGIES, INC.

By: Ben Gallant
------------------------------
Its: CEO
--------------------------

By: [ILLEGIBLE] CFO
------------------------------

, Executive
-------------------

8
<PAGE> 9

APPENDIX A
RELEASE

THIS AGREEMENT ("Agreement") is made by and between Barbara Danieli
("Executive") and American Dental Technologies, Inc. ("Company").

RECITALS

A. Executive has terminated employment with the Company, effective
__________, _______________.

B. Executive has been given the opportunity to review this Agreement, to
consult with legal counsel, and to ascertain his rights and remedies.

C. Executive and Company, without any admission of liability, desire to
settle with finality, compromise, dispose of, and release any and all claims
and demands asserted or which could be asserted arising out of Executive's
employment at and separation from Company.

In consideration of the foregoing and of the promises and mutual covenants
contained herein, it is hereby agreed between Executive and Company as follows:

AGREEMENT

1. In exchange for the good and valuable consideration set forth in this
Agreement, Executive hereby releases, waives and discharges any and all manner
of action, causes of action, claims, rights, charges, suits, damages, debts,
demands, obligations, attorneys fees, and any and all other liabilities or
claims of whatsoever nature, whether in law or in equity, known or unknown,
including, but not limited to, any claim and/or claim of damages or other
relief for tort, breach of contract, personal injury, negligence, age
discrimination under The Age Discrimination In Employment Act of 1967 (as
amended), employment discrimination prohibited by other federal, state or
local laws including sex, race, national origin, marital status, age, handicap,
height, weight, or religious discrimination, and any other claims, which
Executive has claimed or may claim or could claim in any local, state or
federal or other forum, against Company, its directors, officers, employees,
agents, attorneys, successors and assigns as a result of or relating to
Executive's employment at and separation from Company and as an officer of
Company, or any claim and/or claim of damages or other relief, in any other
capacity, as a result of any acts or omissions by Company or any of its
directors, officers, employees, agents, attorneys, successors or assigns
("Covered Acts or Omissions") which occurred prior to the date of this
Agreement; excluding only (i) the Executive Change in Control Bonus and
Severance Agreement dated October 16, 1999 (the "CIC Agreement"), or (ii) those
for indemnification under the Company's articles of incorporation, bylaws or
applicable law by reason of his service as an officer of the Company.

A-1
<PAGE> 10

2. Executive agrees to immediately return to Company all property,
assets, manuals, materials, information, notes, reports, agreements, memoranda,
customer lists, formulae, data, know-how, inventions, trade secrets, processes,
techniques, and all other assets, materials and information of any kind or
nature, belonging or pertaining to Company ("Company Information and
Property"), including, but not limited to, computer programs and diskettes or
other media for electronic storage of information containing Company
Information and Property, in Executive's possession, and Executive shall not
retain copies of any such Company Information and Property. Executive further
agrees that from and after the date hereof he will not remove from Company's
offices any Company Information and Property, nor retain possession or copies
of any Company Information and Property.

3. Executive agrees that he shall never make negative, disparaging,
defamatory or other unfavorable comments regarding Company, or any officer or
director of Company, to any person, except as required by law.

4. Executive covenants and agrees that he shall never commence or
prosecute, or knowingly encourage, promote, assist or participate in any way,
except as required by law, in the commencement or prosecution, of any claim,
demand, action, cause of action or suit of any nature whatsoever against
Company or any officer, director, employee or agent of Company ("Covered
Litigation") that is based upon any claim, demand, action, cause of action or
suit released pursuant to this Agreement or involving or based upon the Covered
Acts and Omissions.

5. Executive further agrees that he has read this Agreement carefully
and understands all of its terms.

6. Executive understands and agrees that he was advised to consult with
an attorney and did so prior to executing this Agreement.

7. Executive understands and agrees that he has been given twenty-one
(21) days within which to consider this Agreement.

8. Executive understands and agrees that he may revoke this Agreement
for a period of seven (7) calendar days following the execution of this
Agreement (the "Revocation Period"). This Agreement is not effective until this
revocation period has expired. Executive understands that any revocation, to be
effective, must be in writing and either (a) postmarked within seven (7) days of
execution of this Agreement and addressed to President, American Dental
Technologies, Inc., 5555 Bear Lane, Corpus Christi, TX 78405 or (b) hand
delivered within seven (7) days of execution of this Agreement to President,
American Dental Technologies, Inc., 5555 Bear Lane, Corpus Christi, TX 78405.
Executive understands that if revocation is made by mail, mailing by certified
mail, return receipt requested, is recommended to show proof of mailing.

9. In agreeing to sign this Agreement, Executive is doing so completely
voluntarily and of his or her own free-will and without any encouragement or
pressure from Company and agrees

A-2
<PAGE> 11
that in doing so he or she has not relied on any oral statements or
explanations made by Company or its representatives.

10. Both parties agree not to disclose the terms of this Agreement to any
third party, except as is required by law, or as is necessary for purposes of
securing counsel from either parties' attorneys or accountants.

11. This Agreement shall not be construed as an admission of wrongdoing
by Company.

12. This Agreement contains the entire agreement between Executive and
Company. Any modification of this Agreement must be made in writing and signed
by Executive and each of the entities constituting the Company.

13. This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of Texas, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Texas or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Texas.

14. In the event any provision of this Agreement or portion thereof is
found to be wholly or partially invalid, illegal or unenforceable in any
judicial proceeding, then such provision shall be deemed to be modified or
restricted to the extent and in the manner necessary to render the same valid
and enforceable, or shall be deemed excised from this Agreement, as the case
may require, and this Agreement shall be construed and enforced to the maximum
extent permitted by law, as if such provision had been originally incorporated
herein as so modified or restricted, or as if such provision had not been
originally incorporated herein, as the case may be.

15. If there is a breach or threatened breach of the provisions of this
Agreement, Company may, in addition to other available rights and remedies,
apply to any court of competent jurisdiction for specific performance and/or
injunctive relief in order to enforce, or prevent any violation of, any of the
provisions of this Agreement.

16. In the event that Executive violates the terms of this Agreement, in
addition to other available rights and remedies, the Company shall be released
of all of its remaining obligations under the CIC Agreement.

A-3
<PAGE> 12
The parties hereto have entered into this Agreement as of this ___ day of
_______________, _____.

AMERICAN DENTAL TECHNOLOGIES, INC.

By:
-----------------------------------

Its:
-----------------------------

By:
-----------------------------------

____________________________, Executive

Schedule of Operations and Cash for Named Officers under the Executive change
of Control Agreements.

<TABLE>
<CAPTION>
Name New Options Cash
- ---- ----------- ----
<S> <C> <C>
Ben Gallant 37,000 @ $3.50 $150,000
John Vickers 25,000 @ $3.50 $100,000
William Parker 25,000 @ $3.50 $100,000
Bill Graham 5,000 @ $3.50 $ 20,000
</TABLE>

A-4
<PAGE> 13

STOCK OPTION GRANT
UNDER LONG-TERM INCENTIVE PLAN
OF
AMERICAN DENTAL TECHNOLOGIES, INC.

A Nonqualified Stock Option is hereby granted as of the 15th day of
December, 1999, (the "Date of Grant"), by American Dental Technologies, Inc., a
Delaware corporation (the "Company"), to BERTRAND R. WILLIAMS, SR. (the
"Optionee"), for and with respect to Common Stock of the Company, $.04 par
value per share (the "Common Stock"), pursuant to the Amended and Restated
Long-Term Incentive Plan of American Dental Technologies, Inc. (the "Plan"), in
consideration of services rendered and to be rendered by the Optionee to the
Company, subject to the terms and conditions in the Plan and as hereinafter
provided. Capitalized terms not defined herein shall have the meanings
respectively assigned to them in the Plan.

1. GRANT OF OPTION. The Company hereby grants to Optionee the right,
privilege, and option to purchase 312 shares of Common Stock at $1.381 per
share (the "Exercise Price"), in the manner and subject to the conditions
hereinafter provided (the "Option"). The Option is intended to be an option
which does not meet the requirements of Section 422 of the Code.

2. TIME OF EXERCISE OF OPTION. The Option with respect to the 312
shares of Common Stock may be exercised by the Optionee at any time and
from time to time within the time period beginning one year after grant of
the Option and ending ten years after grant of the Option, according to the
following schedule: One-fourth (78 shares) of the Options shall become
exercisable on the first anniversary of the date of grant of the Options,
and one-fourth of the Options shall become exercisable on each of the
second, third and fourth anniversaries of the date of grant of the Option.

To the extent not exercised, installments shall accumulate and Optionee may
exercise them thereafter in whole or in part until 5:00 p.m., Detroit,
Michigan time, on the Expiration Date, subject to Section 6. The Expiration
Date of the Option is December 15, 2009.

3. METHOD OF EXERCISE. The Option shall be exercisable only by written
notice directed to the Secretary of the Company at its principal place of
business, which notice (i) shall state the number of shares with respect to
which the Option is being exercised, the person in whose name the stock
certificate representing such shares is to be registered, and the address
and social security number of such person; (ii) shall be signed by the
person entitled to exercise the Option (and if such person is not the
Optionee, shall be accompanied by proof satisfactory to the Company of such
person's right to exercise the Option); and (iii) shall be accompanied by
payment in full of the Exercise Price for the number of shares specified.
Payment of the Option price shall be in cash, personal check or money
order. Optionee shall also furnish to the Company such assurances as the
Company may request pursuant to Section 8.5 of the Plan.
<PAGE> 14

4. WITHHOLDING TAXES. The Company shall have the right to withhold from
Optionee's compensation or require Optionee to remit sufficient funds to
satisfy applicable withholding for income and employment taxes upon exercise of
the Option. At the discretion of the Committee and only if the applicable
requirements of Rule 16b-3 have been satisfied, (i) an Optionee 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, provided that the shares have an aggregate Fair Market
Value sufficient to satisfy in whole or in part the applicable withholding
taxes; or (ii) the cashless exercise procedure described in Section 2.4 of the
Plan may be utilized to satisfy the withholding requirements. The Company shall
not withhold from the exercise of the Option more shares than are necessary to
meet the established minimum tax withholding requirements of federal, state and
local obligations.

5. TRANSFERABILITY. The Option may be exercised only by Optionee during
the Optionee's lifetime and may not be transferred other than by will, the laws
of descent or distribution or a qualified domestic relations order as defined
by the Code. Any attempted assignment, transfer, pledge or hypothecation or
other disposition of the Option, other than in accordance with the terms set
forth herein and in the Plan, shall be void and of no effect.

6. TERMINATION OF EXERCISE RIGHTS. In the event the Optionee ceases to
be a director of the Company, the Option shall be exercisable only as permitted
by paragraphs (a), (c) and (d) of Section 6.1 of the Plan.

7. RIGHTS AS STOCKHOLDER. Neither Optionee nor any other person
entitled to exercise the Option under the terms hereof shall be, or have any of
the rights or privileges of, a stockholder of the Company in respect of any of
the shares of Common Stock issuable on exercise of the Option, unless and until
a stock certificate has been issued upon exercise of the Option and the
purchase price for such shares shall have been paid in full. 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. EFFECT ON EMPLOYMENT OR SERVICES. The Option shall not confer upon
the Optionee any right to continue as a director of the Company.

9. ADJUSTMENT PROVISIONS. The aggregate number of shares of Common
Stock with respect to which this Option is granted may be adjusted by the
Committee pursuant to Section 7.1 of the Plan to prevent dilution or
enlargement of the benefits intended to be granted hereby.

10. APPLICABLE LAW. This Agreement shall be construed, administered and
governed in all respects under and by the laws of the State of Michigan.

11. APPLICATION OF PLAN. This Option shall be interpreted, administered
and subject to all terms and conditions of the Plan. The Optionee agrees to all
of the terms and conditions stated in this Agreement, as well as to all of the
terms

<PAGE> 15
3

and conditions of the Plan, a copy of which may be obtained from the Company
upon request. In case of conflict, the terms of the Plan shall control.

AMERICAN DENTAL TECHNOLOGIES, INC.
(A Delaware Corporation)

By: /s/ BEN J. GALLANT
------------------------------------
Ben J. Gallant

/s/ BERTRAND R. WILLIAMS, SR.
------------------------------------
Bertrand R. Williams, Sr.
Optionee

<PAGE> 1
EXHIBIT 21.1

Subsidiaries of the Registrant

Jurisdiction of Names Under Which
Name of Subsidiary Incorporation Subsidiary Does Business
------------------- ---------------- ------------------------

<S> <C> <C>
1. American Dental Laser GmbH Germany American Dental Laser GmbH
</TABLE>

<PAGE> 1
EXHIBIT 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statements
pertaining to the Amended and Restated Long-Term Incentive Plan (Form S-8 Nos.
33-66552, 33-86062 and 333-13061) and the Non-Qualified Stock Option Plan and
the Stock Option Plan for Employees (Form S-8 No. 33-52664) of American Dental
Technologies, Inc. of our report dated February 25, 2000 with respect to the
consolidated financial statements and schedule of American Dental Technologies,
Inc. included in the Annual Report (Form 10-K) for the year ended December 31,
1999.

Ernst & Young LLP
Detroit, Michigan

March 30, 1999

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,230,647
<SECURITIES> 0
<RECEIVABLES> 4,904,560
<ALLOWANCES> 188,308
<INVENTORY> 9,938,205
<CURRENT-ASSETS> 20,100,007
<PP&E> 4,569,952
<DEPRECIATION> 2,122,046
<TOTAL-ASSETS> 40,347,813
<CURRENT-LIABILITIES> 2,956,152
<BONDS> 0
0
0
<COMMON> 294,717
<OTHER-SE> 31,723,666
<TOTAL-LIABILITY-AND-EQUITY> 40,347,813
<SALES> 24,201,163
<TOTAL-REVENUES> 24,369,527
<CGS> 12,778,664
<TOTAL-COSTS> 12,778,664
<OTHER-EXPENSES> 11,703,935
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 401,438
<INCOME-PRETAX> 1,007,606
<INCOME-TAX> 616,000
<INCOME-CONTINUING> 391,606
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 391,606
<EPS-BASIC> 0.05
<EPS-DILUTED> 0.05

</TABLE>