November ___, 2007
----------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No.3)
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
[ ] Definitive Information Statement
DENTALSERV.COM
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Eugene M. Kennedy, Esq. (954) 524-4155
----------------------------------------------------
(Name of Person(s) Filing the Information Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14c-5(g)
and Rule 0-11(a)(4).
1) Title of each class of securities to which transaction applies:
Common Stock, par value $0.001 per share.
_________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
11,878,628 shares of Common Stock.
_________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
Average of the closing bid and asked prices of Common Stock reported on the
Over the Counter Bulletin Board as of 11/22/2007: $0.50
Total value of shares to be issued: $5,939,314.00
Fee per Rule 0-11(a)(4): $182.34
__________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
Total value of the merger transaction; $5,939,314.00
_________________________________________________________________________
5) Total fee paid:
$ 182.34
_________________________________________________________________________
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $182.34
__________________________________________________________________________
2) Form, Schedule or Registration Statement No.: Preliminary Schedule 14C
(Amendment No.2)
__________________________________________________________________________
3) Filing Party: Dentalserv.com; Filed by Eugene M. Kennedy,Esq., its
counsel.
__________________________________________________________________________
4) Date Filed: November 14, 2007
_________________________________________________________________________
DENTALSERV.COM
20 West 55th Street, Fifth Floor
New York, New York 10019
(212) 849-8248
NOTICE OF ACTION TAKEN WITHOUT A STOCKHOLDER MEETING
Approximate Date of Mailing: [November__, 2007]
To the Stockholders of Dentalserv.com:
The attached Information Statement is furnished by the Board of Directors
(the "Board") of Dentalserv.com (hereinafter, the "Company" or "DSRV"). DSRV
is a public company registered with the U.S. Securities and Exchange
Commission with no active business operations, whose Common Stock is
currently listed for quotation on the Over The Counter Bulletin Board
(OTCBB.com). The Information Statement describes several restructuring
transactions that were recently approved by the Board and by the written
consent of our controlling shareholder, Vision Opportunity Master Fund, LLC
("Vision"), a New York based private equity firm. The restructuring
involves:
* A 1-for-4 reverse stock split in which the 5,605,750 DSRV common shares
currently outstanding will be combined into 1,401,438 DSRV common shares.
* A proposed $13 million investment in DSRV by Vision and other accredited
investors, who would purchase newly issued shares of a new class of
convertible preferred stock and warrants to purchase common stock.
* A reverse merger in which MedPro Safety Products, Inc. ("MedPro") would
merge into DSRV. MedPro holds and is implementing a strategy for
commercializing a portfolio of patented medical device safety products
incorporating proprietary needlestick prevention functionalities. DSRV will
be the surviving corporation in the merger, but will be renamed "MedPro
Safety Products, Inc."
We believe that these restructuring transactions, when implemented, carry out
our business strategy to seek to combine with businesses that provide an
opportunity for growth, as described in our 2006 Annual Report on Form 10-
KSB.
This Information Statement relates specifically to the following corporate
actions that DSRV must take to accomplish the restructuring transactions:
1. Approval of an amendment to the Company's Articles of Incorporation
to make the following changes effective immediately before the reverse merger
takes effect:
(a) a 1-for-4 reverse split in which the 5,612,750 DSRV common shares
currently outstanding will be combined into 1,403,188 DSRV common shares when
the amendment takes effect.
(b) a change in the Company's capital stock from the 100,000,000
shares of Common Stock currently authorized to 90,000,000 shares of Common
Stock and 10,000,000 shares of preferred stock. The preferred stock can be
issued in series with such powers, designations, preferences and relative,
participating, optional or other special rights, and qualifications,
1
limitations or restrictions thereon, as the Company's Board may fix from time
to time by resolution or resolutions. The Board would designate 6,668,230 of
the newly authorized preferred shares as Series A Convertible Preferred
Stock, which the Company will issue to Vision and the other investors.
2. Approval of an Agreement and Plan of Merger dated September 5, 2007
(the "Merger Agreement") between DSRV and MedPro, which provides that MedPro
will merge into DSRV (the "Reverse Merger"). The Merger Agreement provides
that the 24,874,363 shares of MedPro common stock currently outstanding will
be converted into 11,284,696 shares of DSRV Common Stock. DSRV, a Nevada
corporation, will survive the Reverse Merger and be renamed "MedPro Safety
Products, Inc." ("New MedPro") and will continue to operate MedPro's current
medical device safety products business. The management of MedPro will
become the management of New MedPro, and persons designated by MedPro will
replace the current board of directors of DSRV.
On August 14, 2007, Vision, which holds 5,016,150 shares or
approximately 89.4% of our issued and outstanding Common Stock, consented in
writing to the two corporate actions listed above.
This Information Statement is being mailed to holders of record of
Common Stock as of the close of business on or about November __, 2007 (the
"Record Date"). As of that date, DSRV had 5,612,750 shares of Common Stock
outstanding, which was its only authorized class of capital stock.
NO VOTE OR OTHER ACTION OF THE COMPANY'S SHAREHOLDERS
IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
As provided by Article XIII of the Company's Articles of Incorporation,
the control share acquisition and dissenter's rights provisions of Chapter 78
of the Nevada Revised Statues do not apply to the Company or to the matters
disclosed in this Information Statement. Accordingly, shareholders have no
dissenter's or appraisal rights in connection with any of the corporate
actions discussed in this Information Statement.
INFORMATION STATEMENT
Please read this Notice and Information Statement carefully and in its
entirety. It describes the terms of the actions taken by the shareholders and
contains certain biographical and other information concerning the new
proposed directors of the Company. In addition, information about the
Company included in certain reports we have filed with the Securities and
Exchange Commission has been incorporated by reference into this Information
Statement. Copies of those reports accompany this Information Statement. See
"Incorporation By Reference."
The reports we file with the SEC and the accompanying exhibits may be
inspected without charge at the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549. Copies of such
materials may also be obtained from the SEC at prescribed rates. The SEC also
2
maintains a Web site that contains reports, proxy and information statements
and other information regarding public companies that file reports with the
SEC. Copies of the Reports may be obtained from the SEC's EDGAR archives at
http://www.sec.gov/cgobin/srch-edgar.
- ------------------------------------
Although you will not have an opportunity to vote on the approval of
the amendments to our articles of incorporation and the Merger Agreement,
this Information Statement contains important information about the Reverse
Merger, the sale of newly authorized securities to accredited investors,
MedPro, the business of the combined company after the Reverse Merger, and
its new executive officer management and directors.
By Order of the Board of Directors
Dr. Lawrence Chimerine,
President and CEO
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DENTALSERV.COM
20 WEST 55TH STREET
NEW YORK, NEW YORK 10019
(212) 849-8248
INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A
PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY
This Information Statement is being furnished to the stockholders of
Dentalserv.com, a Nevada corporation ("DSRV", "Company," "we" or "us"), to
advise them of the corporate actions that have been authorized by the written
consent of the Company's controlling shareholder, who owns 89.4% of the
Company's sole class of capital stock. These actions are being taken without
notice, meetings or votes in accordance with the Private Corporations law of
the Nevada Revised Statutes ("NRS"), Sections 78.315 and 78.320 and Articles
XI and XIII of the Company's Articles of Incorporation.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Information Statement, and the documents which we incorporate by
reference in this Information Statement, may contain "forward-looking
statements." All statements other than statements of historical fact are
"forward-looking statements" for purposes of these provisions, including any
projections of earnings, revenues or other financial items, any statement of
the plans and objectives of management for future operations, and any
statement of assumptions underlying any of the foregoing. These statements
may contain words such as "expects," "anticipates," "plans," "believes,"
"projects," and words of similar meaning. These statements relate to our
future business and financial performance.
Actual outcomes may differ materially from these statements. Our actual
results may also differ materially from any expectations we describe in our
forward-looking statements. We disclaim any obligation to update or revise
any of the forward-looking statements contained in this Information
Statement. We caution you not to rely upon any forward-looking statement as
representing our views as of any date after the date of this Information
Statement. You should carefully review the information and risk factors set
forth in other reports and documents that we file from time to time with the
SEC.
4
SUMMARY
Overview of Transactions
Dentalserv.com (also referred to as "DSRV" or our "Company")is a
registered public company with no active business operations. Our common
stock is currently listed for quotation on the Over The Counter Bulletin
Board (OTCBB.com). In December 2006, Vision Opportunity Master Fund, LLC
("Vision"), a New York based private equity firm, acquired a controlling
interest in our company, and our board of directors adopted a business
strategy to seek to combine with businesses that provide an opportunity for
growth, as described in our 2006 Annual Report on Form 10-KSB.
Our board of directors recently approved actions for the purpose of
completing a business combination with MedPro Safety Products, Inc. MedPro
holds and is implementing a strategy for commercializing a portfolio of
patented medical device safety products incorporating proprietary needlestick
prevention functionalities. Our plan for completing the business combination
with MedPro calls for the following transactions to occur concurrently:
* The 5,612,750 DSRV common shares currently outstanding will be combined
into 1,403,188 DSRV common shares in a 1-for-4 reverse stock split.
* Vision and other institutional investors (the "Vision Investor Group")
would invest $13 million in cash in DSRV by purchasing newly issued
shares of a new series of convertible preferred stock and warrants to
purchase Common Stock.
* MedPro would merge into DSRV. DSRV will be the surviving corporation
in the merger, but will be renamed "MedPro Safety Products, Inc."
After the merger, the combined corporation (which we refer to as "New
MedPro") will continue MedPro's medical device safety products
business. The management of MedPro will become the management of New
MedPro, and persons designated by MedPro will replace the current board
of directors of DSRV.
Upon completion of the merger, the former shareholders of MedPro will
own approximately 85.5% of the outstanding Common Stock of the combined
company. Vision will own approximately 9.0% of the outstanding Common Stock
of the combined company. The Dentalserv.com shareholders other than Vision
would own approximately 1% of the outstanding Common Stock of the combined
company.
In addition, the group of investors in the private placement(including
Vision) will own convertible preferred stock and warrants to purchase Common
Stock which, if issued, converted and exercised in full, could decrease the
ownership of the former MedPro shareholders to approximately 25.6% of the New
MedPro Common Stock and that of the Dentalserv.com shareholders to less than
1% of the outstanding Common Stock of the combined company.
Corporate Actions to be Taken
On August 14, 2007, our board of directors approved the following
corporate actions to carry out the business combination with MedPro:
* An amendment to our Company's Articles of Incorporation to make the
following changes effective immediately before the merger takes effect:
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(a) The 5,612,750 DSRV common shares currently outstanding will be
combined into 1,403,188 DSRV common shares in a 1-for-4 reverse split.
(b) The Company's authorized capital stock would change from the
100,000,000 shares of common stock currently authorized to 90,000,000
shares of Common Stock and 10,000,000 shares of preferred stock. The
preferred stock could be issued in series with such powers,
designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions
thereon, as the board of directors may fix from time to time by
resolution or resolutions. Our board would designate a series of the
newly authorized preferred stock for sale to the Vision Investor Group.
* Approval of an Agreement and Plan of Merger dated September 5, 2007
between DSRV and MedPro, which provides that MedPro will merge into
DSRV. The merger agreement provides that MedPro shareholders will be
entitled to receive 11,284,696 shares of DSRV Common Stock (on a post-
reverse split basis) for the 24,879,363 shares of MedPro common stock
to be outstanding immediately before the merger takes effect.
On August 14, 2007, Vision, which holds 5,016,150 shares, or
approximately 89.4% of our 5,612,750 outstanding shares, consented in
writing to the proposed amendment to our Company's articles of
incorporation and the proposed merger agreement, which was more than the
majority of the outstanding shares required to approve the proposals.
No Vote Required
We are not soliciting consents to approve the amendment to our
articles of incorporation or the merger agreement. Nevada law permits DSRV
to take any action which may be taken at annual or special meetings of its
stockholders by written consent, if the holders of a majority of the shares
of its Common Stock sign and deliver to the Company a written consent to the
action.
The terms of the amendment to the articles of incorporation and the
merger agreement, as well as the terms of the preferred stock and stock
purchase warrants to be issued to new investors, and other transactions
related to business combination with MedPro, are described in greater detail
in subsequent sections of this Summary.
No Appraisal Rights
Under Nevada law, shareholders have no dissenter's rights or
appraisal rights in connection with either the amendments to our articles of
incorporation or the merger.
MedPro Safety Products, Inc.
Founded in 1995, MedPro has developed and acquired a portfolio of
patented medical device safety products incorporating proprietary needlestick
prevention functionalities. Located in Lexington, Kentucky, MedPro has 96
shareholders and five employees.
MedPro has invested approximately $12 million in its technology to
date, including patent, regulatory, compliance, acquisition, and marketing
efforts. MedPro has generated revenues from the sale of its products since
2005. MedPro's present strategy is to enter into strategic partnership
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agreements with major medical products distribution partners providing for
distribution of four of its products, under fixed "take-or-pay" contracts
whenever possible. MedPro has entered into one such agreement for one of its
products, with plans to begin distribution in 2008, subject to obtaining
regulatory approval from the FDA and completing production arrangements.
Interests of Certain Parties in the Matters to be Acted Upon
As a purchaser of Units of preferred shares and Common Stock purchase
warrants to be offered by DSRV in its private placement, Vision has a direct
interest in the approval of the amendment to authorize DSRV to issue
preferred stock.
None of the directors or executive officers of DSRV has any substantial
interest resulting from the reverse split, the private placement or the merger
that is not shared by all other shareholders pro-rata, and in accordance with
their respective interests. Our current directors or executive officers will
be replaced in those capacities by persons designated by MedPro when the
merger takes effect.
In anticipation of the closing of the merger and the private placement,
MedPro has borrowed $1,000,000 from Vision, to be paid back in full upon the
closing of the merger or upon the termination of the merger agreement. The
loan bears interest at the rate of 8% per year and requires that MedPro pay
an origination fee of $50,000. The loan is secured by certain personal
property, intangibles and receivables of MedPro.
Financial Advisory Fees
SC Capital LLC has served as a financial advisor to MedPro in
connection with the private placement to the Vison Investment Group and the
merger. For those services, MedPro has agreed, upon completion of the
merger, to pay SC Capital $1,040,000 in cash, 593,931 newly issued shares of
New MedPro Common Stock, and warrants to purchase 533,458 shares of New
MedPro Common Stock at an exercise price of $1.81 and otherwise on the same
terms as the Series A Warrants to be issued to the Vision Investor Group in
the private placement. MedPro has designated Warren Rustand, a managing
director of SC Capital, to serve as a director of New MedPro upon completion
of the merger.
Other fees
MedPro has agreed, upon completion of the merger, to issue to Chrystal
Research warrants to purchase 68,036 shares of New MedPro Common Stock at an
exercise price of $1.99 and otherwise on the same terms as the Series B
Warrants to be issued to the Vision Investor Group in the Private Placement.
The warrants are being issued as consideration for the preparation and
publication by Chrystal Research. of a research report on MedPro and its
medical technology and products.
Federal Tax Considerations in Connection with Reverse Stock Split
In our view, a shareholder should recognize no gain or loss as a result
of the Reverse Split. The aggregate tax basis of the shares received in the
Reverse Split (including any fraction of a share deemed to have been
received) will be the same as the shareholder's aggregate tax basis in the
pre-split shares. The shareholder's holding period for the new shares will
include the period during which the shareholder held pre-split shares. Our
7
view however regarding the tax consequence of the Reverse Split is not
binding on the Internal Revenue Service or the courts. Accordingly, each
shareholder should consult with his or her own tax advisor with respect to
all of the potential tax consequences of the Reverse Split to the
shareholder.
The foregoing summary of certain material federal income tax
consequences of the Reverse Split does not purport to be a complete
discussion of all of the possible tax consequences. It is included for
general information only. Further, it does not address any state, local or
foreign income or other tax consequences. For example, the state and local
tax consequences of the Reverse Split may vary significantly as to each
shareholder, depending upon the state in which such shareholder resides.
Also, it does not address the tax consequences to holders subject to special
tax rules, such as banks, insurance companies, regulated investment
companies, personal holding companies, foreign entities, nonresident alien
individuals, broker-dealers and tax-exempt entities. This summary also
assumes that both before and after the reverse stock split, the shareholder
held the shares as a "capital asset," as defined in the Internal Revenue Code
of 1986, as amended (the "Code") (generally, property held for investment).
The tax treatment of a shareholder may vary depending upon the
shareholder's particular facts and circumstances. Each shareholder is urged
to consult with such shareholder's own tax advisor with respect to the tax
consequences of the Reverse Split.
Exchange of Stock Certificates
As soon as practicable after the effective date of the amendment and
the Reverse Merger, the Company will furnish a transmittal form and
instructions to DSRV shareholders for use to surrender and exchange their
current stock certificates for new certificates representing the shares of
Common Stock owned after the reverse stock split. Shareholders may, but need
not, surrender and exchange their certificates representing shares of
existing Common Stock.
SHAREHOLDERS SHOULD NOT SUBMIT ANY STOCK CERTIFICATES
TO THE COMPANY OR THE COMPANY'S TRANSFER AGENT UNTIL
YOU RECEIVE INSTRUCTIONS HOW TO DO SO.
8
THE MERGER AGREEMENT
Purpose The purpose of the merger is to combine the Company
with a business with an opportunity for growth.
Parties to the
Merger In the merger, MedPro (a Delaware corporation) will
merge with DSRV (a Nevada corporation). DSRV will be
the surviving corporation, but will be renamed
"MedPro Safety Products, Inc." We refer to the
merged company as "New MedPro" throughout this
Information Statement.
Merger
Consideration MedPro stockholders will be entitled to receive
11,284,696 shares of New MedPro Common Stock for the
24,879,363 shares of MedPro Common Stock outstanding
immediately before the effective time of the merger.
Effective Date
and Time
of Merger The Merger will be completed as soon as practicable
in accordance with the merger agreement and a minimum
of 20 days after the date this Information Statement
is first sent to shareholders. The merger will become
effective at the time and date specified in the
certificate of merger to be filed with the Nevada
Secretary of State.
Conditions to the
Merger The merger is subject to satisfaction (or, if
permissible, waiver) of the following conditions:
* Approval by the stockholders of MedPro and
DSRV;
* No temporary restraining order, preliminary or
permanent injunction or other order preventing
the consummation of the merger in effect or
pending, and no action must have been taken
that makes the consummation of the merger
illegal; and
* Receipt of all required regulatory approvals,
waivers, and consents.
The obligation of DSRV to complete the merger is
subject to satisfaction (or, if permissible, waiver)
of the following additional conditions:
* The truth of MedPro's representations and
warranties in the merger agreement in all
material respects;
* MedPro must have performed and complied in all
material respects with all of its covenants,
obligations and conditions in the Merger
Agreement;
* Dentalserv.com must have received any required
consents of third parties;
No temporary restraining order, preliminary or
permanent injunction or other order limiting or
restricting MedPro's conduct or operation of
business in effect or pending; and
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* No material adverse effect must have occurred
to MedPro.
The obligation of MedPro to complete the merger is
subject to satisfaction (or, if permissible, waiver)
of the following additional conditions:
* The truth of DSRV's representations and
warranties in the Merger Agreement in all
material respects;
* DSRV must have performed and complied in all
material respects with all covenants,
obligations and conditions of the Merger
Agreement;
* No temporary restraining order, preliminary or
permanent injunction or other order limiting or
restricting DSRV's conduct or operation of
business in effect or pending;
* No material adverse effect must have occurred
to DSRV;
* DSRV's current directors and officers must have
resigned, and DSRV must have appointed MedPro's
designees to those positions, effective as of
closing;
* DSRV Common Stock must continue to be quoted on
the OTCBB;
* DSRV must be in compliance with its reporting
requirements and must have timely filed all
Exchange Act reports for the 12 months
preceding the closing.
Representations
And Warranties The Merger Agreement contains representations and
warranties by DSRV and MedPro regarding various
legal, financial, business and regulatory matters.
The representations and warranties will not survive
after the merger.
Covenants Each of DSRV and MedPro has agreed to:
* Use its best efforts to fulfill all conditions
to the closing;
* Carry on its business in the ordinary course;
* Pay debts and taxes or other obligation when
due;
* Use all reasonable efforts consistent with past
practice and policies to preserve intact its
present business organizations;
* Use reasonable best efforts to keep available
the services of its present officers and key
employees; and
* Use reasonable best efforts to preserve its
relationships with customers, suppliers,
distributors, licensors, licensees, and others
having business dealings with it.
Each of Dentalserv.com and MedPro has agreed not to
do any of following without the prior written consent
of the other:
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* Amend its articles or certificate of
incorporation or bylaws;
* Declare any dividends, stock splits or
reclassify any of its capital stock, authorize
the issuance of any other securities, or
repurchase shares of its capital stock except
in accordance with prior agreements;
* Enter into any material contract, or violate,
amend or otherwise modify or waive any of the
terms of any of its contracts, except in the
ordinary course of business;
* Issue any shares of capital stock, other than
to convert preferred stock or exercise options,
warrants or other rights already outstanding;
* Sell, lease, license or otherwise dispose of or
encumber any of its material properties or
assets except in the ordinary course of
business consistent with past practice;
* Incur indebtedness totaling $500,000, except in
the ordinary course of business;
* Pay, discharge or satisfy any obligation in
excess of $50,000 unless reflected or reserved
against in its financial statements;
* Make any capital expenditures, capital
additions, or capital improvements except in
the ordinary course of business and consistent
with past practice not exceeding $100,000;
* Acquire the equity or assets of another
business organization;
* Make any material election in respect of taxes,
change any accounting method, or file any
material tax return or settle any tax related
claim or assessment;
* Revalue any of its assets other than in the
ordinary course of business;
* Make any change to its accounting methods
except as required by generally accepted
accounting principles.
Waiver, Amendment
Termination,
Expenses At any time before the effectiveness of the merger
either party may, to the extent legally allowed:
* Extend the time for the performance of any of
the obligations or other acts of the other
party;
* Waive any inaccuracies in the representations
and warranties; and
* Waive compliance with any of the agreements or
conditions for the benefit of such party
contained herein.
The boards of directors of the parties may also
mutually amend the merger agreement in writing at any
time provided that the amendment must not:
11
* Alter or change the amount or kind of
consideration to be received on conversion of
MedPro common stock;
* Alter or change any term of the articles of
incorporation of DSRV to take effect upon
completion of the merger; or
* Alter or change any of the terms and conditions
of the merger agreement if the change would
have a materially adverse affect on the holders
of MedPro common stock.
The Merger Agreement may be terminated, and the
merger may be abandoned:
* By the mutual consent of MedPro and DSRV;
* By either party, if, without fault of the
terminating party the closing has not occurred
by December 31, 2007;
* By MedPro, if DSRV breaches any of its
representations, warranties, or obligations;
* By DSRV, if MedPro breaches any of its
representations, warranties, or obligations; or
* By either party if (i) any permanent injunction
or other final order of a court preventing the
consummation of the merger or (ii) the
stockholders of MedPro or DSRV do not approve
the merger.
If the merger agreement terminates for any of the
above reasons, it will become void and there will be
no liability or obligation on the part of MedPro or
DSRV, except to the extent that the termination
results from the breach by a party of any of its
representations, warranties or covenants.
Each party will pay the expenses it incurs in
connection with the merger, except that if any party
terminates the merger agreement as a result of the
breach of any representation, warranty or covenant by
the other party, the terminating party is entitled to
reimbursement for all of the out-of-pocket costs and
expenses incurred in connection with the merger.
Accounting
Treatment For accounting purposes, MedPro will be treated as
the entity that acquired DSRV. New MedPro will
account for the merger using the purchase method of
accounting. Under this accounting method, New MedPro
would record the acquired identifiable assets and
liabilities assumed at their fair market value at the
time the merger is completed. Any excess of the cost
of DSRV over the sum of the fair values of tangible
and identifiable intangible assets less liabilities
assumed would be recorded as goodwill. New MedPro's
reported income would include the operations of DSRV
12
after the merger. Financial statements of New MedPro
issued after completion of the merger would reflect
the impact of the merger.
THE VISION CAPITAL INVESTMENT
DSRV has entered into a preferred stock purchase agreement with Vision,
pursuant to which Vision and other accredited investors (to whom we refer as
the "Vision Investor Group") will make a $13 million cash investment in New
MedPro. This transaction will close at the effective time of the merger, at
which time New MedPro will issue 6,668,230 units comprised of one share of a
new series of convertible preferred stock and a variable series of Common
Stock purchase warrants. The purchase price will be $1.9495 per Unit.
If each series of the warrants were to be issued and exercised in full
for cash consideration, New MedPro would issue up to an additional 25,286,692
shares of its Common Stock, subject to adjustment if standard anti-dilutive
provisions were triggered, for an additional cash investment totaling
approximately $51.4 million.
To the extent one or more warrant holders utilize the cashless exercise
option on the Series A, B and C warrants, and receive upon exercise only the
number of shares having a market value equal to the difference between the
then-current trading price of the New MedPro common stock and the warrant
exercise price, New MedPro will issue fewer shares to, and receive less cash
consideration from exercising warrant holders, and New MedPro stockholders
will realize a smaller reduction in their beneficial ownership of New MedPro
common stock.
Description of the Series A Convertible Preferred Stock
Under the terms of the preferred stock purchase agreement with Vision,
the DSRV board of directors will adopt a certificate of designation,
authorizing a new series of preferred stock (the "Series A Stock") that will
be issued to the Vision Investor Group. The following is a summary of the
powers, designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions of the
Series A Stock:
Amount to be
Issued A maximum of 6,668,230 shares of Series A Stock.
Ranking The Series A Stock will rank senior to New MedPro's
Common Stock and other classes of junior stock, but
rank junior to New MedPro's indebtedness.
Dividends The holders of Series A Stock are entitled to receive
cash dividends at the rate of 5% of the stated
liquidation preference amount ($1.95 per share).
Dividends will be prorated for shares not outstanding
for a full year.
Dividends are cumulative, and will accrue and be
payable upon any liquidation of the Company, as
described below. Dividends on Series A Stock will be
paid prior to dividends on any junior stock.
13
Liquidation
Rights Upon liquidation, dissolution or winding up of the
Company, the holder of Series A Stock is entitled to
a liquidation preference of $1.95 per share plus any
accrued and unpaid dividends, prior to any amounts
being paid on New MedPro Common Stock or any junior
stock. If New MedPro's assets are not sufficient to
pay in full the liquidation preference, then all of
the assets will be distributed pro rata among the
holders of the Series A Stock.
Voting Rights The Series A Stock holders have no voting rights
except in the following limited circumstances:
So long as there are 200,000 shares of Series A Stock
outstanding, the affirmative vote of 75% of the
Series A Stock is required for New MedPro to take the
following actions:
* To authorize the issuance of a series of stock
ranking equal or senior to the Series A Stock
with respect to the distribution of assets on
liquidation, dissolution, and winding up.
* To amend provisions of the Series A Stock that
will adversely affect any rights of the stock.
* To repurchase, redeem, or pay dividends on
shares of common stock other than de minimus
repurchases or contractual redemption
obligations.
* To amend the articles of incorporation or
bylaws to materially and adversely affect the
rights of Series A Stock.
* To make any unauthorized distribution to the
holders of stock junior to the Series A Stock.
* To reclassify our outstanding securities in a
way that adversely affects Series A Stock
rights.
* To voluntarily file for bankruptcy, liquidate
assets or make an assignment for the benefit of
New MedPro's creditors.
* To discontinue involvement in the business of
commercializing medical devices.
Conversion
Rights The Series A Stock shares are convertible into shares
of Common Stock at any time, in whole or in part, at
the option of the holder thereof; provided that no
fewer than 200,000 shares may be converted at any one
conversion.
For each share of Series A Stock converted, the
holder will be entitled to receive a number of shares
of common stock equal to the quotient of, (1) $1.95
(the liquidation preference amount), divided by(2)the
conversion price in effect as of the date of the
delivery of the holder's notice of election to
convert.
The conversion price is initially $1.95 per share,
but is subject to adjustment for certain events,
14
including stock splits, stock dividends,
distributions, reclassifications or reorganizations.
In addition, the conversion price is subject to
adjustment if the Company issues additional shares of
Common Stock or securities convertible into, or
exchangeable for, Common Stock, in either case at a
price per common share less than the conversion price
then in effect. The conversion price adjustment does
not apply to the issuance of shares in certain
transactions identified in the certificate of
designations unless the holder of the Series A Stock
waives the restriction.
The Series A Stock cannot be converted into Common
Stock if the conversion will result in the holder
beneficially owning in the aggregate more than 9.9%
of the New MedPro Common Stock outstanding.
Buy-In Rights If, upon receipt of a notice of conversion, New
MedPro fails to transmit to the holder of Series A
Stock, certificates representing the shares of Common
Stock issuable upon conversion, and the holder is
required to purchase shares of Common Stock to
deliver in satisfaction of a sale of the shares to
have been issued upon the conversion, then New MedPro
must pay the holder in cash the amount by which the
holder's total purchase price for the Common Stock
exceeds the amount obtained by multiplying, (1) the
number of shares of Common Stock issuable upon
conversion of the Series A Stock that New MedPro was
required to deliver times, (2) the price at which the
sell order giving rise to such purchase obligation
was executed. In addition, at the option of the
holder, New MedPro must either reinstate the shares
of Series A Stock and the equivalent number of shares
of Common Stock or deliver to the holder the number
of shares of Common Stock that would have been issued
if New MedPro has timely complied with its
conversion and delivery obligations.
Redemption
Rights Upon the occurrence of a "major transaction," each
holder of Series A Stock shall have the option to
require New MedPro to redeem all or a portion of the
holder's Series A Stock equal to 100% of the
liquidation preference amount plus any accrued but
unpaid dividends. New MedPro may elect to pay in
shares of Common Stock, in which case the price per
share will be based on the conversion price then in
effect.
A "major transaction" includes certain consolidation
or merger transactions, the sale of more than 50% of
New MedPro's assets, or the purchase of more than 50%
of the outstanding shares of Common Stock,
Upon the occurrence of one of the triggering events
listed below, each holder of Series A Stock can
require New MedPro to redeem all or a portion of the
holder's shares of Series A Stock at a price per
15
share equal to 120% of the liquidation preference
amount plus any accrued but unpaid dividends and
liquidated damages.
Triggering events include:
(1) Lapse of the effectiveness of the registration
statement for 20 consecutive trading days, or
unavailability of the registration statement for
sale of New MedPro Common Stock for 20 consecutive
trading days and New MedPro Common Stock cannot be
sold in the public securities market, provided that
the unavailability is not due to factors solely
within the control of the holder of the Series A
Stock.
(2) Suspension from listing or trading on any one of,
or the failure of New MedPro's Common Stock to be
listed or traded on at least one of, the OTC
Bulletin Board, the Nasdaq Capital Market, the
Nasdaq Global Market, the New York Stock Exchange,
Inc., or American Stock Exchange, Inc. for 5
consecutive trading days.
(3) Notice of New MedPro's inability to convert
Series A Stock into shares of Common Stock.
(4) Failure to comply with a conversion notice for 15
days.
(5) Deregistration of common stock so it is no longer
publicly traded.
(6) Consummation of a "going private" transaction so
that the Common Stock is no longer registered
under the Securities Exchange Act of 1934.
(7) Breach of a term of the purchase agreement or the
certificate of designation or any other agreement
delivered in connection with contemplated
transactions that has a materially adverse effect
and is not a curable breach of a covenant that
continues for more than 10 business days.
For triggering events (1), (2), (3), and (7), New
MedPro has the option to pay in cash or shares of
Common Stock (in which case, the price per share
shall be based on the conversion price then in
effect). For (4), (5), and (6), New MedPro will
redeem the applicable Series A Stock for cash.
Rights if Unable
to Fully Convert If DSRV cannot issue shares of Common Stock
for any reason, it will issue as many shares of
Common Stocks it can. With respect to the
unconverted Series A Stock, the holder can elect
within 5 business days of New MedPro's receipt of
notice:
* To redeem the unconverted stock at a price equal
to the major transaction redemption price,
provided that New MedPro has the option to pay
in cash or shares of Common Stock.
* If New MedPro cannot fully convert because it
failed to have a sufficient number of shares of
16
common stock registered for resale under the
registration, to require it to issue restricted
shares of Common Stock.
* To void its conversion notice and retain the
shares of Series A Stock.
* To exercise its buy-in rights.
No Preemptive
Rights Except as noted in the following paragraph,
a holder of Series A Stock will not have the right to
subscribe for, purchase or receive any part of any
new or additional shares of any class of the
company's shares, or any of the company's debt
securities convertible into its shares, except for
the holder's conversion rights. New MedPro's board
of directors will have the power to authorize the
company to issue shares (other than Series A Stock)
or debt securities on such terms and for such
consideration as they deem advisable.
For one year following the effective date of the
registration Statement covering the resale of shares
of New MedPro common stock issuable upon the
conversion of Series A Stock or the exercise of
the related warrants, each holder of Units will
have the option to purchase up to its pro rata
portion of all or a portion of the securities
being offered in any subsequent financing on the
same, absolute terms and conditions as contemplated
by such subsequent financing. A subsequent financing
means any proposed offer or sale of New MedPro's
common stock, or any debt or equity securities
convertible, exercisable or exchangeable into its
common stock, to any third party. The right would
not apply to shares issued to acquire patents for
technology, under employee benefit plans and certain
other corporate transactions. A Unit holder electing
to participate in a subsequent financing would have
the right to acquire a percentage of the offered
shares in the subsequent financing obtained by
dividing (x) the number of shares of Series A Stock
purchased by such Unit holder by (y) the total
number of shares of Series A Stock purchased by all
of the Unit holders who elect to participate in the
subsequent financing.
Restriction
on Issuance
of Stock The affirmative vote of 75% of the outstanding shares
of Series A Stock is required to issue shares of the
Series A Stock other than in the Private Placement.
Vote to Change
Terms The affirmative vote of 75% of the outstanding shares
of Series A Stock is required to change the
certificate of designation or the articles of
incorporation in a manner that alters the rights of
the Series A Stock.
Description of Common Stock Purchase Warrants
Each unit to be sold to the Vision Investor Group is comprised of one
share of Series A Stock, one Series A Warrant and one Series B Warrant. If
an investor purchases units for an aggregate purchase price of $5,000,000 or
more, one Series J Warrant and one Series C Warrant will also be included in
each Unit purchased. Each Series J Warrant and each series C Warrant may be
exercised to purchase one share of New MedPro Common Stock. The Series C
Warrant may only be exercised following exercise of the corresponding Series
J Warrant. Each series of warrant may be exercised on the following terms:
Series A Warrant Entitles holder to purchase one (1) share of Common
Stock at a purchase price of $1.81 per share, 93% of
the purchase price per share of Series A Stock.
Series B Warrant Entitles holder to purchase one additional share of
Common Stock at a purchase price of $1.99 per share,
102% of the purchase price per share of Series A
Stock.
Series J Warrant For investors purchasing an aggregate of at least
2,762,431 Units in the offering, each purchased Unit
also includes a Series J Warrant and a Series C
Warrant each to purchase one further additional share
of Common Stock at a purchase price of $2.18 per
17
share, 112% of the purchase price per share of Series
A Stock.
Series C Warrant For investors receiving Series J and Series C
Warrants, the Series C Warrants only become
exercisable following exercise of the corresponding
Series J Warrant.
Adjustments to
the Exercise
Price and
Number of Shares
Available The price per share and number of shares available
under each series of Warrant is subject to adjustment
in the following circumstances:
* the recapitalization, reorganization or
reclassification of New MedPro;
* the consolidation, merger or sale of New
MedPro;
* stock dividends, stock splits or reverse stock
splits made by New MedPro;
* or the issuance of additional shares of common
stock or Common Stock equivalents, or other
distributions made to the holders of Common
Stock other than permitted issuances.
Cashless
Exercise In lieu of exercising their warrants for cash, the
holders of Series A, Series B, and Series C Warrants
may make a cashless exercise of their warrants, and
will receive a number of shares of Common Stock based
on the appreciation of the market value of MedPro's
Common Stock.
Buy-In Rights If MedPro fails to transmit to the holder of a
warrant, certificates representing the shares of
Common Stock issuable upon exercise of the warrant,
and the holder is required to purchase shares of
Common Stock to deliver in satisfaction of a sale of
the shares to have been issued upon the exercise of
the warrant, then MedPro must pay the holder in cash
the amount by which the holder's total purchase price
for the Common Stock exceeds the amount obtained by
multiplying (1) the number of shares of Common Stock
issuable upon exercise of the warrant that MedPro was
required to deliver times (2) the price at which the
sell order giving rise to such purchase obligation
was executed.
Registration Rights
DSRV entered into a registration rights agreement with the Vision
Investor Group that will require New MedPro, after the merger, to register
their "registrable securities" with the SEC so those securities can be
publicly sold.
"Registrable securities" are (a) the shares of New MedPro Common Stock
issuable upon the conversion of the Series A Stock and (b) the shares of New
MedPro Common Stock issuable upon exercise of the Warrants. In addition, the
MedPro shareholders who do not sign lock-up agreements with the Vision
18
Investor Group may have their New MedPro shares included in the registration
statement, which would enable them to sell their shares without compliance
with a one year holding period or other conditions of Rule 144.
Resale
Registration New MedPro must file a registration statement within
60 days after closing, subject to certain exceptions,
to register all registrable securities. The
registration statement will cover additional shares
of Common Stock resulting from stock splits,
dividends or other similar transactions with respect
to the registrable securities.
New MedPro must use commercially reasonable efforts
to promptly cause the registration statement to
become effective and stay continuously effective,
including post-effective amendments and additional
registration statements, until the earlier of (i) the
date when all registrable securities covered under
the registration statement have been sold or (ii) the
date when the registrable securities can be sold
without any restriction pursuant to Rule 144 of the
Securities Act.
Liquidated
Damages If New MedPro fails to file:
* The registration statement prior to 60 days
after closing (other than as a result of the
Commission being unable to accept the filing or
circumstances beyond its control);
* A request for acceleration of effectiveness of
the registration statement within 3 business
days after the SEC notifies New MedPro that a
registration statement will not be reviewed; or
* A subsequent registration statement if the
original registration statement ceases to be
effective before expiration of the effectiveness
period, or
If New MedPro breaches the disclosure provision
discussed above, it will pay liquidated damages to
each holder equal to 1.5% of the holder's initial
investment in the Series A Stock then held by the
holder for each calendar month, or portion thereof,
until the failure or breach is cured. Liquidated
damages will not exceed an aggregate of 20% of the
amount of the holder's initial investment in the
Series A Stock.
Piggy-Back
Registrations New MedPro will register the shares of its Common
Stock issuable upon the conversion of Series A Stock
or the exercise of warrants, upon the request of a
Series A Stockholder, if New MedPro registers
securities for an offering for sale (other than
registrations in connection with the acquisition of a
business or in connection with employee benefit
plans).
19
Demand
Registration
Rights Series A Stock holders may make a written request for
registration of shares of Common Stock not previously
registered that are issued upon the occurrence of a
"major transaction" or "triggering event." New
MedPro will use its reasonable best efforts to
register the shares no later than 120 days after the
holder's request and keep the registration statement
continuously effective for as long as the holder
shall request, but no later than the date that the
shares of Common Stock may be offered for resale to
the public without restriction pursuant to Rule 144.
A "major transaction" includes certain consolidation
or merger transactions, the sale of more than 50% of
New MedPro's assets, or the purchase of more than 50%
of the outstanding shares of its Common Stock.
"Triggering events" include:
(1) Lapse of the effectiveness of the registration
statement for 20 consecutive trading days, or
unavailability of the registration statement for
sale of New MedPro's Common Stock for 20
consecutive trading days and New MedPro's Common
Stock cannot be sold in the public securities
market, provided that the unavailability is not due
to factors solely within the control of the holder
of the Series A Stock.
(2) Suspension from listing or trading on any one
of, or the failure of New MedPro's common stock to be
listed or traded on at least one of, the OTC
Bulletin Board, the Nasdaq National Market, the Nasdaq
Capital Market, the New York Stock Exchange, Inc., or
the American Stock Exchange, Inc. for 5 consecutive
trading days.
(3) Notice of New MedPro's inability to convert
Series A Stock into shares of Common Stock.
(4) Breach of a term of the purchase agreement or the
certificate of designation or any other agreement
delivered in connection with contemplated
transactions that has a materially adverse effect
and is not a curable breach of a covenant that
continues for more than 10 business days.
Expenses New MedPro will bear all expenses of any registration
described above, other than any underwriting,
discounts, commissions, transfer taxes or fees
incurred by the holders of registrable securities in
connection with the sale of registrable securities.
Assignment The registration rights of the holders of registrable
securities can be assigned to the holders and
subsequent successors and assigns.
20
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the shares of DSRV common stock as of September 28,
2007 by (i) each person who is known by us to be the beneficial owner of more
than five percent of the outstanding shares of DSRV Common Stock, (ii) each
of our directors and executive officers, and (iii) all directors and
executive officers as a group.
The table is based upon information derived from our stock records.
Unless otherwise subject to community property laws where applicable, we
believe that each of the shareholders named in this table has sole voting and
investment power with respect to the shares indicated as beneficially owned.
Applicable percentages are based upon 5,605,750 shares of Common Stock
outstanding as of September 30, 2007.
Name and Address Number of Shares of Percentage of
of Beneficial Owner(1) Common Stock Owned Common Stock
- -------------------------------------------------------------------------------
Vision Opportunity Master Fund, Ltd.(2)(3) 5,016,150 89.48 %
Robert Scherne (3) 18,750 0.33 %
Lawrence Chimerine (3) 12,500 0.22 %
All officers and directors as a group 31,250 0.56 %
[2 persons]
- ----------------------
(1) Unless otherwise indicated, each of the listed shareholders has sole
voting and investment power over the shares.
(2) Adam Benowitz is the Chief Executive Officer and Director of Vision
Opportunity Master Fund, LLC.
(3) Business address is 20 W. 55th Street, Floor 5, New York, NY 10010.
21
USE OF PROCEEDS
The net proceeds from the Vision Group Investment, after payment of
estimated expenses of $1,360,000 related to the offering and the merger, are
anticipated to total approximately $11,640,000. New MedPro plans to use the net
proceeds to pay off outstanding debt and for the other anticipated uses shown
in the following table:
Gross offering proceeds $ 13,000,000
Financial advisory fee 1,040,000
Offering expenses 320,000
------------
Net offering proceeds $ 11,640,000
============
Repay Vision bridge loan 1,050,000
Repay Bank financing fees 150,000
Repay Shareholder loans (current portion) 1,790,000
Working capital 8,650,000
------------
Total uses $ 11,640,000
============
The precise amount and timing of the application of the net offering
proceeds depends on many factors, including, but not limited to actual funding
requirements. Until the proceeds are used, New MedPro may invest the proceeds,
depending on its cash flow requirements, in short and long-term investments
including, but not limited to, treasury bills, commercial paper, certificates
of deposit, securities issued by U.S. government agencies, money market funds,
repurchase agreements and other similar investments.
CAPITALIZATION
Historical As Adjusted As Adjusted
As of for the Private Further for the
Sept. 30,2007 Placement and the Reverse
Reverse Split Merger
------------ --------------- ----------------
Cash $ 12,769 $ 11,652,769(1) $ 10,047,656(2)
============ ============ ============
Payable to Shareholders $ -0- $ -0- $ 2,641,769
Long-term debt, including current portion -0- -0- 5,899,736
------------ ----------- ------------
Total debt and payable to shareholders $ -0- $ -0- 8,541,505
------------ ----------- ------------
Stockholders' equity (deficit):
Preferred stock ($0.01 par value, no shares
authorized, historical; 10,000,000 shares
authorized as adjusted and further adjusted; no
shares outstanding, historical;
6,668,230 shares outstanding as adjusted and
as further adjusted) -0- 66,682 66,682
Common stock ($0.001 par value, 100,000,000
shares authorized, historical; 90,000,000 shares
authorized, as adjusted and further adjusted;
5,605,750 shares outstanding historical;
1,401,438 shares outstanding as adjusted;
and 13,274,627 as further adjusted) 5,606 1,401 13,280
Additional paid-in capital $ 45,178 $12,979,897 $ 21,307,383
21,307,209
Accumulated (deficit) $ (105,853) $ (105,853) $(16,399,907)
------------ ----------- ------------
Total stockholders' equity (deficit) $ (55,069) $12,942,127 $ 4,987,438
------------ ----------- ------------
Total debt and stockholders' equity (deficit) $ (55,069) $12,942,127 $ 13,528,943
============ =========== ============
(1) Adjusted for receipt of net proceeds of the private placement in the
amount of $11,640,000.
(2)Adjusted to reflect application of net proceeds as described under "Use of
Proceeds".
22
PRO FORMA FINANCIAL INFORMATION
Exhibit B to this Information Statement presents the following
unaudited pro forma financial information:
* A pro forma condensed balance sheet as of December 31, 2006, which
gives effect to the Reverse Merger as if it had been consummated as
of December 31, 2006.
* A pro forma condensed statement of income for the year ended
December 31, 2006, which gives effect to the Reverse Merger as if it
had been consummated as of January 1, 2006.
* A pro forma condensed balance sheet as of September 30, 2006, which
Gives effect to the Reverse Merger as if it had been consummated as of
September 30, 2007.
* A pro forma condensed statement of income for the nine months ended
September 30, 2007, which gives effect to the Reverse Merger as if it
had been consummated as of January 1, 2007.
We prepared the pro forma information based upon the financial
statements of MedPro and Dentalserv.com giving effect to the proposed
transaction under the assumptions and adjustments set forth in the footnotes
to the pro forma consolidated condensed financial statements.
The pro forma consolidated condensed financial statements may not be
indicative of the results that actually would have occurred if the Reverse
Merger had been in effect on the dates indicated or which may be obtained in
the future. You should read the pro forma consolidated condensed financial
statements in conjunction with the financial statements and notes to
financial statements of MedPro and Dentalserv.com included in this
Information Statement. See "Index to Financial Statements" and "Incorporation
By Reference."
23
THE REVERSE MERGER
General
On September 5, 2007, DSRV and MedPro entered into an Agreement and Plan
of Merger providing for the merger of MedPro Safety Products, Inc. with and
into DSRV. The merger agreement was amended and restated on November 7, 2007.
When the amendments to the articles of incorporation of DSRV take effect
immediately before the completion of the merger, the following events will
occur:
* The 5,612,750 DSRV common shares currently outstanding will be combined
into 1,403,188 DSRV common shares in a 1-for-4 reverse stock split
* DSRV will be authorized to issue up to 10 million shares of preferred
stock, of which 6,668,230 shares will be designated as Series A Stock
with the powers, designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions described under "The Vision Capital Investment."
* Vision and other institutional investors would purchase 6,668,230 units
comprised of one share of Series A Stock and a variable series of
common stock purchase warrants for $13 million in cash, or $1.9495 per
Unit. The terms of the warrants are described under "The Vision
Capital Investment."
When the merger becomes effective, the following events will occur:
* MedPro will merge into DSRV (the "Reverse Merger");
* DSRV, the surviving corporation in the Reverse Merger, will change its
name to "MedPro Safety Products, Inc." (which we refer to as "New
MedPro").
* The former stockholders of MedPro will become entitled to receive
11,284,684 shares of New MedPro Common Stock for the 24,879,363 shares
of MedPro common stock to be outstanding immediately before the Reverse
Merger.
* New MedPro will continue MedPro's medical device safety products
business. The management of MedPro will become the management of New
MedPro, and persons designated by MedPro will replace the current board
of directors of DSRV.
Although this section describes the material terms of the Reverse
Merger, it is a summary of the Merger Agreement, which governs the
transaction. A copy of the Amended and Restated Merger Agreement, which is
an exhibit to the DSRV Current Report on Form 8-K/A-2 filed on November 14,
2007, is incorporated into this Information Statement by reference. See
"Incorporation by Reference." We urge you to carefully read the Amended and
Restated Merger Agreement.
24
Background
DSRV was formed under the laws of the State of Nevada on December 15,1999.
The Company had initially planned to develop a dental software package,
however, its principal stockholder became involved in other activities
inconsistent with the Company's business model. Thereafter, further attempts
to develop the dental software package in proved unacceptable and the project
was ultimately abandoned in late 2006.
On or around December 15, 2006, DSRV's board of directors concluded that the
implementation of the Company's business plan was no longer financially
feasible. The board of directors determined instead to pursue a strategy to
seek to acquire undervalued businesses with a history of operating revenues in
markets that provide room for growth (the "Acquisition Strategy"). The
Company's board of directors determined that DSRV should proactively seek to
identify, investigate and, if advisable, acquire companies that would enhance
DSRV's revenues and increase shareholder value.
The Company's criteria for evaluating and selecting prospective acquisitions
included ascertaining whether the business to be acquired (i) was an
established business with viable services or products, (ii) had an
experienced and qualified management team, (iii) had room for growth and/or
expansion into other markets, (iv) was accretive to earnings, (v) offered the
opportunity to achieve and/or enhance profitability, and (vi) increased
shareholder value (collectively, the "Acquisition Criteria").
DSRV's management believed that the future of the Company depended upon
the consummation of a merger, acquisition or other business combination
between the Company and a viable operating entity. As a result, the
Company's management proactively undertook the process of attempting to
execute the Acquisition Strategy.
Change of Control
In November 2006, Harry Miller, then the Company's Chief Executive Officer,
Chairman of its Board of Directors and principal stockholder, was referred to
Adam Benowitz, Director of Vision Opportunity Master Fund, and, as a result of
the discussions that ensued, discovered that the strategic interests of DSRV
and Vision were aligned. The Company's Acquisition Strategy fit with
Vision's goal of acquiring a controlling interest in a public listed company
without assets or significant business operations that could be utilized as a
vehicle for a future merger with a privately held investment target company.
Furthermore, Vision's evaluative criteria for determining investment
candidates were consistent with the Acquisition Criteria.
As a result, pursuant to a stock purchase agreement dated and closed
December 15, 2006, Vision assumed control of the Company by acquiring an
aggregate total of 5,016,150 shares ("Shares") of our Common Stock from Mr.
Miller and Messrs. Lorne Demorse and Zane Weaver. Vision purchased the
Shares, comprising 89.83% of DSRV's issued and outstanding voting
securities, for $650,000, or approximately $0.13 per Share, with funds from
its working capital. In the transaction, Mr. Miller appointed the Company's
current officers and director designated by Vision prior to resigning those
positions in December, 2006.
25
Reasons for the Merger
Vision is a New York based, hedge fund, primarily engaged in making private
investments in public equity. To that end, Vision makes investments to
private equity only to a limited amount because, as an integral component of
its business model, Vision requires some measure of liquidity for its
investments. In October 2006, Vision undertook the process of seeking to
identify an inactive public company that Vision could acquire to utilize at
some future time as a vehicle in connection with an investment in a privately
held company. To the extent that Vision, at some time in the future,
identified an investment candidate with strong management, operations and a
solid business model that happened to be privately held, Vision could merge
the company with the investment target, thus enhancing the future liquidity
for its investment.
In December 2006, Vision was introduced to Craig Turner of MedPro by Warren
Rustand of SC Capital. At that time, MedPro was seeking a minimum of ten
million dollars in outside investment capital to enhance its operations and
fund the development of new products. In evaluating a potential investment
in MedPro, Vision attributed a twenty two million dollar pre-money valuation
to MedPro by analyzing its historical financial performance, current
revenues, supply chain and distribution relationships. Furthermore, Vision
analyzed the historical performance of two other similarly sized, publicly
listed companies in the medical products sector (Retractable Technologies
(AMEX:RVP) and SHPI (OTCBB:SHPI)) and estimated that MedPro could achieve a
market capitalization fifty percent greater than its pre-money valuation
within one year of the initial investment.
On March 9, 2007, MedPro and Vision entered into a term sheet for an
investment transaction pursuant which Vision and other accredited investors
would purchase a minimum of ten million dollars of convertible preferred
shares of stock in MedPro, such convertible preferred stock being convertible
at any time at the option of the holder thereof into common stock of MedPro.
The term sheet provided that the investment transaction would be contingent
upon a merger of MedPro into a shell company concurrent with the closing of
the transactions contemplated thereby.
At the time of the execution of the term sheet referred to above, DSRV was a
non-operating shell company whose sole business had been to identify,
evaluate and investigate various companies with the intent that, if such
investigation warranted, it would consummate a reverse merger transaction in
which DSRV would acquire a company with an operating business with the intent
of continuing the acquired company's business as a publicly held entity.
The merger would satisfy the strategic objectives of each of DSRV, Vision and
MedPro. Specifically, the merger would (i) result in the consummation of the
Acquisition Strategy pursued by the former board of directors of DSRV; (ii)
satisfy Vision's desire to ensure that the transaction with MedPro would
result in an investment in a publicly listed company; and (iii) provide
MedPro with the investment capital it desired on commercially reasonable
terms.
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Purpose of the Reverse Stock Split
The 1-for-4 reverse stock split will reduce the number of the Company's
outstanding shares of Common Stock in order to (i) better match the number of
shares outstanding with the size of the Company in terms of market
capitalization, shareholders' equity, operations and potential earnings and
(ii) facilitate higher levels of institutional stock ownership, where
investment policies generally prohibit investments in lower-priced securities
such as DSRV Common Stock.
Assuming the Company achieves profitability, the reverse stock split
will result in a share count that is more consistent with the Company's
potential economics. Specifically, the lower share count will facilitate more
meaningful levels of per share earnings and better enable its shareholders to
identify changes in operating results as the Company eventually moves towards
profitability.
Furthermore, the reverse stock split may result in a higher stock price
which may encourage investor interest and will improve the marketability of
the Company's Common Stock to a broader range of investors, and thus improve
liquidity. Because of the trading volatility often associated with low-priced
stocks, many brokerage firms and institutional investors have internal
policies and practices that either prohibit them from investing in low-priced
stocks or tend to discourage individual brokers from recommending low-priced
stocks to their customers.
After the effective date of the reverse stock split, each shareholder will
own fewer shares of the Common Stock, but the per-share value of these shares
should correspondingly increase. To that end, the reverse stock split will
affect all of the Company's shareholders uniformly.
Merger Consideration
The merger agreement provides that each MedPro stockholder will be
entitled to receive one share of New MedPro Common Stock for each 2.0945
shares of MedPro Common Stock outstanding immediately before the effective
time of the Reverse Merger.
Effective Date and Time of Merger
The Merger Agreement provides that the Reverse Merger will be completed
on a date as soon as practicable after the satisfaction or waiver of the
conditions to the completion of the Reverse Merger. The Reverse Merger will
become effective at the time and date specified in the certificate of merger
to be filed with the Secretary of State of the State of Nevada.
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Conditions to the Merger
The obligations of MedPro and Dentalserv.com to carry out the Reverse
Merger are subject to satisfaction (or, if permissible, waiver) of the
following conditions at or before the time the Reverse Merger becomes
effective:
* Approval of the Merger Agreement and the Reverse Merger by the
stockholders of MedPro and Dentalserv.com;
* No temporary restraining order, preliminary or permanent injunction or
other order preventing the consummation of the merger shall be in
effect or pending, and no action must have been taken that makes the
consummation of the merger illegal; and
* All required regulatory approvals, waivers, and consents must have been
obtained.
The obligation of Dentalserv.com to carry out the Reverse Merger is
subject to satisfaction (or, if permissible, waiver) of the following
additional conditions at or before the time the Reverse Merger becomes
effective:
* The representations and warranties of MedPro in the Merger Agreement
must be true and correct in all material respects when made and on the
effective date;
* MedPro must have performed and complied in all material respects with
all covenants, obligations and conditions of the Merger Agreement;
* The President and Chief Financial Officer of MedPro must execute a
certificate on behalf of MedPro certifying the prior two conditions
have been fulfilled;
* Dentalserv.com must have received any required consents of third
parties;
* No temporary restraining order, preliminary or permanent injunction or
other order limiting or restricting MedPro's conduct or operation of
business shall be in effect or pending; and
* No material adverse effect must have occurred to MedPro.
The obligation of MedPro to carry out the Reverse Merger is subject to
satisfaction (or, if permissible, waiver) of the following additional
conditions at or before the time the Reverse Merger becomes effective:
* The representations and warranties of Dentalserv.com in the Merger
Agreement must be true and correct in all material respects when made
and on the effective date;
* Dentalserv.com must have performed and complied in all material
respects with all covenants, obligations and conditions of the Merger
Agreement;
* The President and Chief Financial Officer of Dentalserv.com must
execute a certificate on behalf of Dentalserv.com certifying the prior
two conditions have been fulfilled;
* No temporary restraining order, preliminary or permanent injunction or
other order limiting or restricting Dentalserv.com's conduct or
operation of business shall be in effect or pending;
* No material adverse effect must have occurred to Dentalserv.com;
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* Dentalserv.com must have provided copies of the resignation its
director and officers and appointed certain individuals to the be
officers and directors of Dentalserv.com, effective as of closing;
* Dentalserv.com Common Stock must be quoted on the OTCBB and there must
not be an action or proceeding pending or threatened against
Dentalserv.com by the NASD to prohibit or terminate the quotation; and
* Dentalserv.com must be in compliance with the reporting requirements
under the Exchange Act and must have timely filed all Exchange Act
reports for the 12 months preceding the closing.
Representations and Warranties
The Merger Agreement contains representations and warranties by
Dentalserv.com and MedPro regarding various legal, financial, business and
regulatory matters. The representations and warranties will not survive after
the merger. The full text of these representations and warranties can be
found in the Merger Agreement attached as Appendix B.
This information statement contains a description of the
representations, warranties, and covenants made in the Merger Agreement, and
in agreements, some of which are attached to this information statement.
These representations, warranties and agreements have been made solely for
the benefit of the other party to such agreements, may be subject to
important qualifications, exceptions and limitations agreed to by the
contracting parties and may not be complete, and such representations,
warranties and agreements therefore should not be relied on by any other
person. Any such covenants, representations or warranties may have been
qualified or superseded by disclosures contained in separate schedules or
exhibits not contained in this Information Statement, may reflect the
parties' negotiated risk allocation in the particular transaction rather than
facts, may be qualified by materiality standards that differ from those that
others may consider material, may not be true as of the date of this
Information Statement or any other date, and are subject to amendments,
changes or waivers by the parties.
Covenants
Each of Dentalserv.com and MedPro has agreed to:
* Use its best efforts to effectuate the Reverse Merger and to fulfill
and cause to be fulfilled the conditions to the closing;
* Carry on its business in the ordinary course;
* Pay debts and taxes or other obligation when due;
* Use all reasonable efforts consistent with past practice and policies
to preserve intact its present business organizations;
* Use reasonable best efforts consistent with past practice to keep
available the services of its present officers and key employees; and
* Use reasonable best efforts consistent with past practice to preserve
its relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it.
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Each of Dentalserv.com and MedPro has agreed not to do any of following
without the prior written consent of the other:
* Cause or permit any amendments of its articles or certificate of
incorporation or bylaws;
* Declare any dividends, stock splits or reclassify any of its capital
stock, authorize the issuance of any other securities, or repurchase
shares of its capital stock except from former employees, directors and
consultants in accordance with certain agreements;
* Alter the period of exercisability or vesting of options or other
rights granted under its stock option agreements, if any, or authorize
cash payments in exchange for any options or other rights granted under
any of such agreements, subject to certain exceptions;
* Enter into any material contract, or violate, or amend or otherwise
modify or waive any of the terms of any of its contracts, except in the
ordinary course of business;
* Issue any shares of capital stock, other than the issuance of shares of
its Common Stock pursuant to the conversion of preferred stock, or
exercise of stock options, warrants or other rights already
outstanding, or as otherwise excepted;
* Sell, lease, license or otherwise dispose of or encumber any of its
material properties or assets except in the ordinary course of business
consistent with past practice;
* Incur any indebtedness in the aggregate of $500,000, except in the
ordinary course of business;
* Pay, discharge or satisfy in an amount in excess of $50,000 any claim,
liability or obligation, other than reflected or reserved against in
its financial statements;
* Make any capital expenditures, capital additions, or capital
improvements except in the ordinary course of business and consistent
with past practice that does not exceed $100,000;
* Acquire the equity or assets of another business organization;
* Make any material election in respect of taxes, change any accounting
method, or file any material tax return or settle any tax related claim
or assessment;
* Revalue any of its assets other than in the ordinary course of
business;
* Make any change to its accounting methods except as required by GAAP;
and
* Take any action which would make any of its representations and
warranties contained in the Merger Agreement untrue or incorrect, or
prevent it from performing or cause it not to perform its covenants.
No Solicitation
MedPro or any representative of MedPro may not initiate or solicit any
inquires or the making of any offer or proposal that constitutes or could be
reasonably expected to lead to a proposal or offer relating to any
alternative acquisition proposal. MedPro must notify Dentalserv.com of the
receipt of any alternative acquisition proposal, the identity of any party
making the proposal and terms and conditions of the offer. MedPro must keep
Dentalserv.com informed of the status and details of any such inquiry, offer
or proposal. Upon the signing of the Merger Agreement MedPro agreed to
terminate any existing solicitation, activity, discussion, or negotiation
with anyone other than Dentalserv.com.
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Waiver, Amendment, Termination, Expenses
At any time before the effectiveness of the Reverse Merger either party
may, to the extent legally allowed:
* Extend the time for the performance of any of the obligations or other
acts of the other party;
* Waive any inaccuracies in the representations and warranties; and
* Waive compliance with any of the agreements or conditions for the
benefit of such party contained herein.
The boards of directors of the parties may also mutually amend the
Merger Agreement in writing at any time provided that the amendment must not:
* Alter or change the amount or kind of consideration to be received on
conversion of MedPro common stock;
* Alter or change any term of the Articles of Incorporation of
Dentalserv.com to be effected by the Reverse Merger; or
* Alter or change any of the terms and conditions of the Merger Agreement
if the change would have a materially adverse affect on the holders of
MedPro common stock.
The Merger Agreement may be terminated, and the Reverse Merger may be
abandoned:
* By the mutual consent of MedPro and Dentalserv.com;
* By either party, if, without fault of the terminating party the closing
has not occurred by on or before December 31, 2007;
* By MedPro, if Dentalserv.com breaches any of its representations,
warranties, or obligations;
* By Dentalserv.com, if MedPro breaches any of its representations,
warranties, or obligations; or
* By either party if (a) any permanent injunction or other order of a
court or other competent authority preventing the consummation of the
Reverse merger becomes final and non-appealable or (b) the stockholders
of MedPro or Dentalserv.com do not approve the Reverse Merger.
If the Merger Agreement is terminated pursuant to any of the provisions
described above, it will become void and there will be no liability or
obligation on the part of MedPro or Dentalserv.com, except to the extent that
the termination results from the breach by a party of any of its
representations, warranties or covenants. The provisions in the Merger
Agreement regarding confidentiality, expenses and termination fees, filing a
Form 8-K, indemnification, amendments, and best efforts will remain in full
force and effect and survive any termination of the Merger Agreement.
Each party will pay the expenses it incurs in connection with the
Merger Agreement and the Reverse Merger, except that if any party terminates
the Merger Agreement as a result of the breach of any representation,
warranty or covenants by the other party, the terminating party is entitled
to reimbursement for all of the out-of-pocket costs and expenses incurred in
connection with the Merger Agreement and the Reverse Merger.
Accounting Treatment
For accounting purposes, MedPro will be treated as the entity that
acquired DSRV. New MedPro will account for the merger using the purchase
method of accounting. Under this accounting method, New MedPro would record
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the acquired identifiable assets and liabilities assumed at their fair market
value at the time the merger is completed. Any excess of the cost of DSRV
over the sum of the fair values of tangible and identifiable intangible
assets less liabilities assumed would be recorded as goodwill. New MedPro's
reported income would include the operations of DSRV after the merger.
Financial statements of New MedPro issued after completion of the merger
would reflect the impact of the merger.
Operations After the Merger
After the Reverse Merger, New MedPro will continue to operate MedPro's
current medical device safety products business. The management of MedPro
will become the management of New MedPro, and four persons designated by
MedPro will become the directors of New MedPro.
Interest of Certain Persons in the Merger and Related Actions
As a purchaser of preferred shares and units to be offered by DSRV in
its private placement, Vision has a direct interest in the approval of the
amendment to authorize DSRV to issue preferred shares.
None of the directors or executive officers of DSRV has any substantial
interest resulting from the private placement or the Reverse Merger that is
not shared by all other shareholders in accordance with their respective
ownership interests. Our current directors or executive officers will be
replaced in those capacities by persons designated by MedPro when the Reverse
Merger takes effect.
In anticipation of the closing of the Reverse Merger and the Private
Placement, MedPro has borrowed $1,000,000 from Vision, to be paid back in
full upon the closing of the merger or upon the termination of the merger
agreement. The loan bears interest at the rate of 8% per year and requires
that MedPro pay an origination fee of $50,000. The loan is secured by certain
personal property, intangibles and receivables of MedPro.
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THE VISION CAPITAL INVESTMENT
In August 2007, DSRV entered into a preferred stock purchase agreement
with Vision, pursuant to which the "Vision Investment Group will make a $13
million cash investment in New MedPro. This transaction will close at the
effective time of the merger, at which time New MedPro will issue 6,668,230
units to the investors. Each unit is comprised of one share of a new series
of convertible preferred stock and a variable series of common stock purchase
warrants, as described later in this section. The purchase price will be
$1.9495 per unit.
If each series of the warrants were to be issued and exercised in full
for cash consideration, New MedPro would issue up to an additional 25,286,692
shares of its common stock, subject to adjustment if standard anti-dilutive
were triggered, for an additional cash investment totaling approximately
$51.4 million. To the extent one or more warrant holders utilize the cashless
exercise option on the Series A, B and C warrants, and receive upon exercise
only the number of shares having a market value equal to the difference
between the then-current trading price of the New MedPro common stock and the
warrant exercise price, New MedPro will issue fewer shares to, and receive
less cash consideration from exercising warrant holders, and New MedPro
stockholders will realize a smaller reduction in their beneficial ownership
of New MedPro common stock.
Although this section describes the material terms of the Series A
Stock and stock purchase warrants, it is a summary of the certificate of
designation and the warrants, which govern the rights of the holders of those
securities. Copies of the certificate of designation, the warrants, and
related agreements, which are exhibits to the DSRV Current Report on Form 8-
K/A-2 filed on November 14, 2007, are incorporated into this Information
Statement by reference. See "Incorporation by Reference." We urge you to
carefully read those documents.
Description of the Series A Convertible Preferred Stock
Under the terms of the preferred stock purchase agreement with Vision,
the DSRV board of directors will adopt a certificate of designation,
authorizing the Company to issue up to 6,668,230 shares of a new series of
Series A Convertible Preferred Stock ("Series A Stock") that will be issued
to the Vision Investment Group. The following is a summary of the powers,
designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions of the Series
A Stock.
Stated Value
The stated value of each share of Series A Stock will be $1.95, subject
to adjustment for certain events, including stock splits and stock dividends.
Ranking
The Series A Stock will rank senior to New MedPro's Common Stock and
other classes of junior stock, but rank junior to New MedPro's indebtedness.
Dividends
The holders of Series A Stock are entitled to receive cash dividends at
the rate of 5% of the stated liquidation preference amount ($1.95 per share).
Dividends will be prorated for shares not outstanding for a full year.
Dividends are cumulative, and will accrue and be payable upon any
liquidation of the Company, as described below. Dividends on Series A Stock
will be paid prior to dividends on any junior stock.
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Liquidation Rights
Upon liquidation, dissolution or winding up of the Company, the holder
of Series A Stock is entitled to a liquidation preference of $1.95 per share
plus any accrued and unpaid dividends, prior to any amounts being paid on New
MedPro Common Stock or any junior stock. If New MedPro's assets are not
sufficient to pay in full the liquidation preference, then all of the assets
will be distributed among the holders of the Series A Stock.
Voting Rights
The Series A Stock holders have no general voting rights. So long as
there are 200,000 shares of Series A Stock outstanding, the affirmative vote
of 75% of the outstanding shares of Series A Stock is required for New MedPro
to take the following actions:
* To authorize the issuance of a series of stock ranking equal or
senior to the Series A Stock with respect to the distribution of
assets on liquidation, dissolution, and winding up.
* To amend provisions of the Series A Stock that will adversely affect
any rights of the stock.
* To repurchase, redeem, or pay dividends on shares of common stock
other than de minimus repurchases or contractual redemption
obligations.
* To amend the articles of incorporation or bylaws to materially and
adversely affect the rights of Series A Stock.
* To make any unauthorized distribution to the holders of stock junior
to the Series A Stock.
* To reclassify our outstanding securities in a way that adversely
affects Series A Stock rights.
* To voluntarily file for bankruptcy, liquidate assets or make an
assignment for the benefit of New MedPro's creditors.
* To discontinue involvement in the business of commercializing
medical devices.
Conversion Rights
The Series A Stock shares are convertible into shares of Common Stock
at any time, in whole or in part, at the option of the holder thereof;
provided that no fewer than 200,000 shares may be converted at any one
conversion.
For each share of Series A Stock converted, the holder will be entitled
to receive a number of shares of Common Stock equal to the quotient of, (1)
$1.95 (the liquidation preference amount), divided by, (2) the conversion
price in effect as of the date of the delivery of the holder's notice of
election to convert.
The conversion price is initially $1.95 per share, but is subject to
adjustment for certain events, including stock splits, stock dividends,
distributions, reclassifications or reorganizations. In addition, the
conversion price is subject to adjustment if the Company issues additional
shares of Common Stock or securities convertible into or exchangeable for
33
Common Stock, in either case at a price per common share less than the
conversion price then in effect. The conversion price adjustment does not
apply to the issuance of shares in certain transactions identified in the
certificate of designations unless the holder of the Series A Stock waives
the restriction.
A holder cannot convert shares of Series A Stock into Common Stock if
the conversion will result in the holder beneficially owning in aggregate
more than 9.9% of the New MedPro Common Stock outstanding.
Buy-In Rights
If, upon receipt of a notice of conversion, New MedPro fails to
transmit to the holder of Series A Stock, certificates representing the
shares of Common Stock issuable upon conversion, and the holder is required
to purchase shares of Common Stock to deliver in satisfaction of a sale of
the shares to have been issued upon the conversion, then New MedPro must pay
the holder in cash the amount by which the holder's total purchase price for
the Common Stock exceeds the amount obtained by multiplying, (1) the number
of shares of Common Stock issuable upon conversion of the Series A Stock that
New MedPro was required to deliver times, by (2) the price at which the sell
order giving rise to such purchase obligation was executed. In addition, at
the option of the holder, New MedPro must either reinstate the shares of
Series A Stock and the equivalent number of shares of Common Stock or deliver
to the holder the number of shares of Common Stock that would have been
issued if New MedPro has timely complied with its conversion and delivery
obligations.
Redemption Rights
Upon the occurrence of a "major transaction," each holder of Series A
Stock shall have the option to require New MedPro to redeem all or a portion
of the holder's Series A Stock equal to 100% of the liquidation preference
amount plus any accrued but unpaid dividends. New MedPro may elect to pay in
shares of Common Stock, in which case the price per share will be based on
the conversion price then in effect.
A "major transaction" includes certain consolidation or merger
transactions, the sale of more than 50% of New MedPro's assets, or the
purchase of more than 50% of the outstanding shares of Common Stock,
Upon the occurrence of one of the triggering events listed below,
each holder of Series A Stock can require New MedPro to redeem all or a
portion of the holder's shares of Series A Stock at a price per share equal
to 120% of the liquidation preference amount plus any accrued but unpaid
dividends and liquidated damages.
Triggering events include:
1) Lapse of the effectiveness of the registration statement for 20
consecutive trading days, or unavailability of the registration
statement for sale of New MedPro Common Stock for 20 consecutive
trading days and New MedPro Common Stock cannot be sold in the
public securities market, provided that the unavailability is not
due to factors solely within the control of the holder of the Series
A Stock.
2) Suspension from listing or trading on any one of, or the failure of
New MedPro's Common Stock to be listed or traded on at least one of,
the OTC Bulletin Board, the Nasdaq Capital Market, the Nasdaq Global
34
Market, the New York Stock Exchange, or the American Stock Exchange
for 5 consecutive trading days.
3) Notice of New MedPro's inability to convert Series A Stock into
shares of Common Stock.
4) Failure to comply with a conversion notice for 15 days.
5) Deregistration of common stock so it is no longer publicly traded.
6) Consummation of a "going private" transaction so that the Common
Stock is no longer registered under the Securities Exchange Act of
1934.
7) Breach of a term of the purchase agreement or the certificate of
designation or any other agreement delivered in connection with
contemplated transactions that has a materially adverse effect and
is not a curable breach of a covenant that continues for more than
10 business days.
For triggering events (1), (2), (3), and (7), New MedPro has the option
to pay in cash or shares of Common Stock (in which case, the price per share
shall be based on the conversion price then in effect). For (4), (5), and
(6), New MedPro will redeem the applicable Series A Stock for cash.
Rights if Unable to Fully Convert
If Dentalserv.com cannot issue shares of Common Stock for any reason,
it will issue as many shares of Common Stock as it can. With respect to the
unconverted Series A Stock, the holder can elect within 5 business days of
New MedPro's receipt of notice:
* To redeem the unconverted stock at a price equal to the major
transaction redemption price, provided that New MedPro has the option
to pay in cash or shares of Common Stock.
* If New MedPro cannot fully convert because it failed to have a
sufficient number of shares of common stock registered for resale under
the registration, to require it to issue restricted shares of Common
Stock.
* To void its conversion notice and retain the shares of Series A Stock.
* To exercise its buy-in rights.
No Preemptive Rights
Except as noted in the following paragraph, a holder of Series A
Stock will not have the right to subscribe for, purchase or
receive any part of any new or additional shares of any class
of the company's shares, or any of the company's debt securities
convertible into its shares, except for the holder's conversion
rights. New MedPro's board of directors will have the power to
authorize the company to issue shares (other than Series A Stock)
or debt securities on such terms and for such consideration as
they deem advisable.
For one year following the effective date of the registration
statement covering the resale of shares of New MedPro common stock
issuable upon the conversion of Series A Stock or the exercise of the
related warrants, each holder of Units will have the option to
purchase up to its pro rata portion of all or a portion of the
securities being offered in any subsequent financing on the same,
absolute terms and conditions as contemplated by such subsequent
financing. A subsequent financing means any proposed offer or sale
of New MedPro's common stock, or any debt or equity securities
convertible, exercisable or exchangeable into its common stock, to
any third party. The right would not apply to shares issued to
acquire patents for technology, under employee benefit plans and
certain other corporate transactions. A Unit holder electing to
participate in a subsequent financing would have the right to acquire
a percentage of the offered shares in the subsequent financing
obtained by dividing (x) the number of shares of Series A Stock
purchased by such Unit holder by (y) the total number of shares of
Series A Stock purchased by all of the Unit holders who elect to
participate in the subsequent financing.
Restriction on Issuance of Stock
The affirmative vote of 75% of the outstanding shares of Series A Stock
is required to issue shares of the Series A Stock other than in the private
placement to the Vision Investment Group.
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Amendments
The holders of 75% of the outstanding shares of Series A Stock must
affirmative vote to change the certificate of designation or the articles of
incorporation in a manner that alters the rights of the Series A Stock.
Description of Common Stock Purchase Warrants
Each Unit is comprised of one share of Series A Stock, one Series A
Warrant and one Series B Warrant. If an investor purchases Units in the
offering for an aggregate purchase price of $5,000,000 or more, one Series J
Warrant and one Series C Warrant will also be included in each Unit
purchased. Each Series J Warrant and each series C Warrant may be exercised
to purchase one share of authorized, previously unissued of New MedPro
Common Stock. The Series C Warrant may only be exercised following exercise
of the corresponding Series J Warrant. Each series of warrant may be
exercised on the following terms:
Series A Warrant
Entitles holder to purchase one (1) share of Common Stock at a purchase
price of $1.81 per share, 93% the purchase price per share of Series A Stock.
Series B Warrant
Entitles holder to purchase one additional share of Common Stock at a
purchase price of $1.99 per share, 102% of the purchase price per share of
Series A Stock.
Series J Warrant
For investors purchasing an aggregate of at least 2,762,431 Units in
the offering, each purchased Unit will also include a Series J Warrant and a
Series C Warrant, each to purchase one further additional share of Common
Stock at a purchase price of $2.18 per share, 112% of the purchase price per
share of Series A Stock.
Series C Warrant
For investors receiving Series J Warrants, and Series C Warrants, the
Series C Warrants only become exercisable following exercise of the
corresponding Series J Warrant.
Adjustments to the Exercise Price and Number of Shares Available
The price per share and number of shares available under each series of
Warrant is subject to adjustment in the following circumstances:
* the recapitalization, reorganization or reclassification of New
MedPro;
* the consolidation, merger or sale of New MedPro;
* stock dividends, stock splits or reverse stock splits made by New
MedPro; or
* the issuance of additional shares of Common Stock or Common Stock
equivalents, or other distributions made to the holders of Common
Stock other than permitted issuances.
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Cashless Exercise
In lieu of exercising their warrants for cash, the holders of Series A,
Series B and Series C Warrants may make a cashless exercise of their
warrants, and receive a number of shares of Common Stock having an aggregate
market value equal to the difference between the market value of the shares
of Common Stock for which the warrant is being exercised on the date of
exercise and the aggregate exercise price of that number of shares.
Buy-In Rights
If New MedPro fails to transmit to the holder of a warrant,
certificates representing the shares of Common Stock issuable upon exercise
of the warrant, and the holder is required to purchase shares of Common Stock
to deliver in satisfaction of a sale of the shares to have been issued upon
the exercise of the warrant, then New MedPro must pay the holder in cash the
amount by which the holder's total purchase price for the Common Stock
exceeds the amount obtained by multiplying (1) the number of shares of Common
Stock issuable upon exercise of the warrant that New MedPro was required to
deliver times (2) the price at which the sell order giving rise to such
purchase obligation was executed.
Registration Rights
DSRV entered into a registration rights agreement with the Vision
Investor Group requiring New MedPro, after the merger, to register the
"registrable securities" of the purchasers of units, so those securities can
be publicly sold. "Registrable securities" are the shares of New MedPro
Common Stock issuable upon (a) the conversion of the Series A Stock and (b)
the exercise of the Series A, Series B, Series J and Series C Warrants. The
registration statement will cover additional shares of Common Stock issued in
connection with stock splits, dividends or other similar transactions with
respect to the registrable securities.
In addition, former MedPro shareholders who are expected to own
approximately 32.8% of the shares of Common Stock outstanding upon the
completion of the Reverse Merger and will not sign lock-up agreements with
the Vision Investor Group may elect to have their New MedPro shares included
in the registration statement, which would enable them to sell their shares
without compliance with the Rule 144 conditions. Certain directors and
executive officers of MedPro, who will own approximately 52.7% of the shares
of New MedPro Common Stock outstanding after the Reverse Merger, have entered
into lock-up agreements with the Vision Investor Group. The lock-up
agreements are described under "Shares Eligible For Sale After the Merger."
Resale Registration
New MedPro must file a registration statement within 60 days after
closing, subject to certain exceptions, to register all registrable
securities. New MedPro must use commercially reasonable efforts to promptly
cause the registration statement to become effective and stay continuously
effective, including post-effective amendments and additional registration
statements, until the earlier of (i) the date when all registrable securities
covered under the registration statement have been sold or (ii) the date when
the registrable securities can be sold without any restriction pursuant to
Rule 144 of the Securities Act.
37
Liquidated Damages
If New MedPro fails to file:
* The registration statement within 60 days after closing (other than
as a result of the Commission being unable to accept the filing or
circumstances beyond its control);
* A request for acceleration of effectiveness of the registration
statement within 3 business days after the SEC notifies New MedPro
that a registration statement will not be further reviewed; or
* A subsequent registration statement if the original registration
statement ceases to be effective before expiration of the
effectiveness period, or
If New MedPro breaches the disclosure provision discussed above, it
will pay liquidated damages to each holder equal to 1.5% of the holder's
initial investment in the Series A Stock then held by the holder for each
calendar month, or portion thereof, until the failure or breach is cured.
Liquidated damages will not exceed an aggregate of 20% of the amount of the
holder's initial investment in the Series A Stock.
Piggy-Back Registrations
If New MedPro registers shares of its Common Stock for a public sale
(other than registrations in connection with the acquisition of a business or
in connection with employee benefit plans), then New MedPro must include the
shares of Common Stock issuable upon the conversion of Series A stock or the
exercise of warrants upon the request of the holder, subject to customary
limitations in connection with underwritten stock offerings.
Demand Registration Rights
Series A Stock holders may make a written request for registration of
shares of Common Stock not previously registered that are issued upon the
occurrence of a "major transaction" or "triggering event." New MedPro will
use its reasonable best efforts to register the shares no later than 120 days
after the holder's request and keep the registration statement continuously
effective for as long as the holder shall request, but no later than the date
that the shares of Common Stock may be offered for resale to the public
without restriction pursuant to Rule 144.
A "major transaction" includes certain consolidation or merger
transactions, the sale of more than 50% of New MedPro's assets, or the
purchase of more than 50% of the outstanding shares of Common Stock.
"Triggering events" include:
1) Lapse of the effectiveness of the registration statement for 20
consecutive trading days, or unavailability of the registration
statement for sale of New MedPro's Common Stock for 20
consecutive trading days and New MedPro's Common Stock cannot be
sold in the public securities market, provided that the
unavailability is not due to factors solely within the control of
the holder of the Series A Stock.
2) Suspension from listing or trading on any one of, or the failure
of New MedPro's common stock to be listed or traded on at least
one of, the OTC Bulletin Board, the Nasdaq National Market, the
38
Nasdaq Global Market, the New York Stock Exchange, Inc., or the
American Stock Exchange, Inc. for 5 consecutive trading days.
3) Notice of New MedPro's inability to convert Series A Stock into
shares of Common Stock.
4) Breach of a term of the purchase agreement or the certificate of
designation or any other agreement delivered in connection with
contemplated transactions that has a materially adverse effect
and is not a curable breach of a covenant that continues for more
than 10 business days.
Expenses
New MedPro will bear all expenses of any registration described above,
other than any underwriting, discounts, commissions, transfer taxes or fees
incurred by the holders of registrable securities in connection with the sale
of registrable securities.
Indemnification
New MedPro has agreed to indemnify the holders of registrable
securities and their officers, directors, managers, partners, members,
shareholders, agents, brokers, investment advisors and employees and each
person who controls them, against any losses which may arise out of or
relating to any violation of securities laws or any untrue statement of
material fact, or an omission of a required or necessary material fact
contained in any registration statement, prospectus or amendment, other than
any untrue statement or omission from a preliminary prospectus if New MedPro
furnished an amended prospectus, or if the untrue statements or omissions are
based solely upon information regarding the holder provided by the holder.
The holders of registrable securities have agreed to indemnify
New MedPro and each person who controls New MedPro against all losses arising
out of or based solely upon an untrue statement or omission of a required or
necessary material fact contained in any registration statement, prospectus
or amendment, only to the extent that the holder furnished the information to
New MedPro. The amounts owed by the holders shall not exceed the net
proceeds received by the holder from the sale of registrable securities under
the registration statement.
Rule 144 Sales
New MedPro will prepare and furnish all reports required by the
Securities Exchange Act of 1934, as long as the holder owns Series A Stock,
Warrants or registrable securities. At the holder's request, New MedPro will
act to enable the holder to sell conversion shares and warrant shares without
registration in accordance with the conditions of Rule 144 under the
Securities Act. At the holder's request, New MedPro will deliver the holder
a written certification of a duly authorized officer as to whether New MedPro
has complied with Rule 144.
Assignment
The registration rights of the holders of registrable securities are
automatically assignable (and apply to the holders and subsequent successors
and assigns) if:
* The holder agrees in writing with the assignee to assign such rights
and gives New MedPro a copy of the agreement within a reasonable time,
39
* New MedPro is given written notice of the name and address of the
assignee and the securities with respect to which the registration
rights are being assigned,
* The further disposition of the securities by the assignee is restricted
unless the securities are registered in a registration statement under
the registration agreement or are exempt from registration,
* If, before New MedPro receives the written notice above, the assignee
agrees in writing with New MedPro to be bound by the provisions of the
registration agreement, and
* The transfer will be made in accordance with the applicable
requirements of the Series A Stock purchase agreement.
Potential Uses of Authorized, Unissued Preferred Stock
The proposed amendment to the articles of incorporation will create 10
million authorized shares of "blank check" preferred stock, principally for
the purpose of designating the Series A Stock to be sold to the Vision
Investment Group. However, more than 3 million preferred shares will remain
available for designation and issuance after the sale of the Series A Stock.
The term "blank check" refers to preferred stock, the creation and
issuance of which is authorized in advance by the shareholders and the terms,
rights, and features of which are determined by the Board upon issuance. The
authorization of blank check preferred will permit the Board to authorize and
issue preferred stock from time to time in one or more series. The Board will
have the authority, at its discretion, to adopt resolutions to designate new
series of preferred stock, to set the number of shares of each series, and to
determine the voting powers, designations, preferences and relative,
participating, optional or other special rights, qualifications limitations
or restrictions of the series. These include dividend rights (including
whether the dividends are cumulative), dividend rates, terms of redemption
(including sinking fund provisions), redemption prices, conversion rights and
liquidation, in each case without any further action or vote by the
shareholders. The Board must make any determination to issue additional
preferred stock based on its judgment regarding the best interests of the
Company and its shareholders.
The Board believes that having preferred stock available for issuance
from time to time with rights and preferences that can be determined by the
Board will provide the Company with increased financial flexibility in
meeting its present and future capital requirements by allowing the Board to
negotiate the terms of a security that can be issued for cash or as part or
all of the consideration required to be paid by the Company for acquisitions
of other businesses or assets.
Any issuance of preferred stock with voting rights, could, in certain
circumstances, have the effect of delaying or preventing a change in control
of the Company by increasing the number of outstanding shares entitled to
vote and by increasing the number of votes required to approve a change in
control of the Company. Shares of voting or additional convertible preferred
stock could be issued, or rights to purchase such shares could be issued to
render more difficult or discourage an attempt to obtain control of the
Company by means of a tender offer, proxy contest, merger or otherwise. The
ability of the Board to issue such additional shares of preferred stock, with
the rights and preferences it deems advisable, could discourage an attempt by
a party to acquire control of the Company by tender offer or other means.
Such issuances could therefore deprive shareholders of potential benefits
40
that could result from such an attempt. Moreover, the issuance of such
additional shares of preferred stock to persons friendly to the Board could
make it more difficult to remove incumbent managers and directors from office
even if such change were to be favored by shareholders generally.
41
DENTALSERV.COM
Dentalserv.com (the "Company") was formed under the laws of the State
of Nevada on December 15, 1999. Dentalserv.com had planned to develop a
dental practice software package in the period from 2000 to 2003 but its
principal stockholder became involved in other activities. Attempts to
develop the package in 2005 proved unworkable and the project was not pursued
into 2006. On December 15, 2006, the Company's principal stockholder and two
other shareholders sold 5,016,150 shares (90%) of Dentalserv.com Common Stock
to Vision Opportunity Master Fund, LLC for $650,000 cash. The stock sale was
accompanied by the resignation and replacement of the Company's sole officer
and director.
The Company currently has no full-time employees. It conducts its
administrative activities in a portion of the premises occupied by its
principal stockholder, Vision Opportunity Master Fund, LLC,("Vision"). Vision
has waived payment of any rent for the Company's use of its offices.
Description of Dentalserv.com Capital Stock
Material Terms of the Common Stock
The holders of shares of Common Stock are entitled to one vote for each
share held of record on each matter submitted to stockholders. Shares of
Common Stock do not have cumulative voting rights for the election of
directors. The holders of shares of Common Stock are entitled to receive such
dividends as the Board of Directors may from time to time declare out of
funds of Dentalserv.com legally available for the payment of dividends. The
holders of shares of Common Stock do not have any preemptive rights to
subscribe for or purchase any stock, obligations or other securities of
Dentalserv.com and have no rights to convert their Common Stock into any
other securities.
There are no outstanding options or warrants to purchase shares of
Dentalserv.com common stock.
On any liquidation, dissolution, or winding up of Dentalserv.com,
holders of shares of Common Stock are entitled to receive pro rata on all of
the assets of Dentalserv.com available for distribution to stockholders.
The foregoing summary of the material terms of the capital stock of
Dentalserv.com does not purport to be complete and is subject in all respects
to the provisions of, and is qualified in its entirety by reference to, the
provisions of the Articles of Incorporation of Dentalserv.com, attached
hereto as Exhibit C.
Dividends Restrictions
There are no restrictions in Dentalserv.com's Articles of Incorporation
or bylaws that restrict it from declaring dividends. The Nevada Revised
Statutes, however, prohibit it from declaring dividends where, after giving
effect to the distribution of the dividend:
* Dentalserv.com would not be able to pay its debts as they become due in
the usual course of business; or
* Dentalserv.com's total assets would be less than the sum of its total
liabilities, plus the amount that would be needed to satisfy the rights
42
of stockholders who have preferential rights superior to those
receiving the distribution.
Dentalserv.com has never declared nor paid any cash dividends on its
capital stock and does not anticipate paying cash dividends in the
foreseeable future. The payment by Dentalserv.com of dividends, if any, in
the future, rests within the discretion of its Board of Directors and will
depend, among other things, upon Dentalserv.com's earnings, its capital
requirements and its financial condition, as well as other relevant factors.
Transfer Agent
Nevada Agency and Trust Co. Bank of America Plaza, Suite 880, 50 West
Liberty Street, Reno, NV 89501, has been appointed the transfer agent of
Dentalserv.com's Common Stock.
Market Information
Starting in April 2006, DSRV shares of Common Stock began trading in
the OTC "Pink sheets." In the Fourth Quarter of 2006 Dentalserv.com shares of
Common sSock were included for quotation on the OTC Bulletin Board under the
symbol "DSRV." An active trading market for the shares of Dentalserv.com
Common Stock has not yet developed, and no assurance can be given that an
active trading market for the shares of Dentalserv.com common stock will
develop or if developed, will be maintained.
The following table sets forth the range of high and low prices for
Dentalserv.com Common Stock as reported by OTCBB.com since trading began in
April 2006, prior to which no transactions occurred. These prices represent
reported transactions, do not include retail markups, markdowns or
commissions, and may not necessarily represent actual transactions.
Bid Price
Period High Low
------ ---- ---
2007:
Fourth Quarter $ .45 $ .31
Third Quarter $ .45 $ .35
Second Quarter $2.00 $ .50
First Quarter $3.50 $2.00
2006:
Fourth Quarter $4.00 $3.00
Third Quarter $2.05 $1.20
Second Quarter $2.05 $0.29
The closing bid and asked prices of Dentalserv.com Common Stock on
September 28, 2007 were $.45 and $.60, respectively. However, trading volume
has recently been virtually non-existent. There are no outstanding options or
warrants to purchase shares of Dentalserv.com common stock.
Holders of Record
As of September 28, 2007, there were approximately 225 holders of
record and beneficial owners of Dentalserv.com Common Stock.
43
Dividends
Dentalserv.com has not paid any cash dividends on its Common Stock to
date, and Dentalserv.com does not anticipate declaring or paying any
dividends in the foreseeable future. Dentalserv.com anticipates that for the
foreseeable future New MedPro will follow a policy of retaining earnings, if
any, in order to finance the expansion and development of its business.
Payment of dividends is within the discretion of the Company's Board of
Directors and will depend upon earnings, capital requirements, and operating
and financial condition, among other factors.
44
MEDPRO SAFETY PRODUCTS, INC.
Overview
Founded in 1995, MedPro Safety Products, Inc. has developed and
acquired a portfolio of medical device safety products incorporating
proprietary needlestick prevention functionalities. Located in Lexington,
Kentucky, MedPro has 96 shareholders and five employees.
MedPro's strategy for the next 24 months focuses on commercializing
four products in three related product sectors. MedPro plans to enter into
strategic partnership agreements with major medical products distribution
partners, which whenever possible, would be fixed "take-or-pay" contracts.
MedPro has entered into such a distribution agreement with one such
distribution partner for one model of its blood collection devices and is
negotiating the terms of distribution arrangements with respect to a second
model. Through another strategic relationship, MedPro has acquired rights
covering five patents and over fifteen potential products, including a
proprietary safety syringe product with a unique "anti-blunting" feature and
a prefilled pharmaceutical safety syringe. MedPro is discussing the terms of
distribution arrangement for a "take-or-pay" contract for the "anti-blunting"
product. MedPro's product development plans also include a safety dental
syringe and a needleless intravenous line based on patents and designs it
controls.
MedPro has invested approximately $12 million in its technology to
date, including patent, regulatory, compliance, acquisition, and marketing
efforts.
Market Opportunity
MedPro has acquired technology and developed products across multiple
medical device safety segments. Initially, MedPro plans to offer four
products in the U.S. in three related medical device sectors: blood
collection, clinical healthcare syringe market, and intravenous devices.
* The Blood Collection Market. Based on its research and discussions
with potential distribution partners, MedPro estimates the total annual
market for blood collection at 700 million units in the U.S. and 1.5 to
2 billion units worldwide. This market has largely converted to safety
devices, with 83% of acute-care facilities using some form of safety
blood collection device. The U.S. market is concentrated with two
companies, Smiths Medical and Becton Dickenson, representing greater
than 80% of the market. Neither of the two major suppliers currently
offers a fully passive device.
* The Intravenous Market. Winged butterfly systems are used for blood
collection in the clinical healthcare setting. Of a market for winged
butterfly systems estimated at 200 million units per year, only 35%
utilize safety features. The MedPro butterfly system will incorporate
fully passive safety deployment functionality. MedPro believes that
this feature will accelerate the transition to safety devices to the
penetration levels seen in other related market segments such as safety
syringes.
* The U.S. Clinical Market. The MedPro "anti-blunting" safety syringe
product is positioned for the $2 billion U.S. clinical health care
market, the largest worldwide single market for syringes. The market
45
includes 6,000 hospitals, 17,000 nursing homes, 55,000 community
pharmacies, 660,000 physicians and 2.2 million nurses.
Products
MedPro anticipates that it will launch the following four products in the
next 18 months.
* Vacumate Blood Collection Safety Products. The MedPro blood collection
products are passive medical devices formatted in two models supported
by three issued patents and one pending patent. Currently, there are
no fully passive (automatic) blood collection products on the market.
- The Tube-Activated Product. The product prevents the operator
from drawing blood without having first engaged the safety
system. MedPro anticipates the United States Food and Drug
Administration ("FDA") will issue a 510(k) clearance for this
product as soon as December 2007, based in part upon the approval
already issued to the skin-activated model.
- The Skin-Activated Product. Currently the only fully passive
product design available. This model has received a 510(k)
clearance to market from the FDA.
* Intravenous Butterfly Valve. The MedPro Needleless Intravenous
Butterfly Valve incorporates MedPro's core technology into a collection
system that will be similar to current conventional systems in both
appearance and operation. The product is a fully passive system and
will provide a safety engagement system that will be familiar to
operators.
* Anti-Blunting Safety Syringe. Using a two-stage passive protective
system, there are two separate models of this "anti-blunting" safety
syringe. One is designed specifically for fillable syringes and the
other for prefilled syringes. MedPro has acquired rights for both
models through its agreement with SGPF LLC, an affiliate. There are
one patent and four U.S. patent applications relating these designs,
which we believe gives MedPro a competitive advantage in the market.
This product may also be supplied without the anti-=blunting feature,
to be used as a fillable safety syringe.
Product Development
Since the passage of the 2001 Needlestick Prevention Act, MedPro has
focused on safety solutions employing inherent passive needles or needleless
replacements that require no operator activation of the safety mechanism.
MedPro's R&D approach has been to identify and acquire leading edge
technology with a view to developing medical device safety products with
significant commercial potential. Accordingly, all of MedPro's intellectual
property, research, and development has come from either acquisitions or
technology agreements with third party inventors. The most significant of
these relationships is with Visual Connections, Inc., a California
intellectual property company. Visual Connections and its founder have
entered into a technology acquisition agreement with SGPF LLC, a limited
liability company owned by W. Craig Turner, MedPro's Chairman. The agreement
gives SGPF the right to acquire rights to one patent, eight patent
applications and the related safety syringe technology, which MedPro has the
right to acquire from SGPF. Visual Connections and its founder have
46
developed intellectual property that for needlestick reduction solutions
across a wide range of applications. MedPro has had a long-term relationship
with Visual Connections, and expects to continue this relationship for the
foreseeable future.
In addition to the four products MedPro plans to launch in the next 18
months, MedPro has several products in the development pipeline that it
believes have the potential to provide significant future revenues. These
include:
* Safe-Mate[R] Dental Safety Needles. MedPro owns and is currently
distributing a single-patient, multi-injection safety needle designed
for use within the dental market. Safe-Mate[R] is an engineered sharps
injury protection technology that provides a safe, simple and cost-
effective solution to reduce the risk of accidental needlestick
injury. Providing a sheathing safety needle designed for multiple uses
on a single patient, Safe-Mate[R] is the first and only dental safety
needle to fit most standard metal syringes.
* Key-Lok[TM] Needleless IV System. MedPro's patented latex-free
Key-Lok[TM] System will enable health care providers to administer
medications free of unprotected needles, essentially eliminating the
likelihood of many accidental needlestick injuries, while reducing
cross contamination dangers. The product is designed to be cost-
competitive and, MedPro believes, functionally superior to the leading
product currently on the market.
* Prefilled Safety Syringe - MedPro's patent pending design allows
pharmaceutical companies to fill a medicament cartridge in their
existing factories which then snaps into MedPro's pre-assembled safety
syringe. This design is fully compatible with existing pharmaceutical
manufacturing lines, avoiding the need to change existing assembly
processes. The design works with both glass and plastic medicament
cartridges.
As part of its commercialization strategy, MedPro identifies potential
marketing partners for a specific technology that MedPro believes offer a
combination of market share access, distribution capability, and credibility
in the market as a superior supplier of value-added safety technology to
medical device consumers.
Strategy
MedPro aims to create significant shareholder value over the short to
medium term by marketing its safety products through alliances with partners
capable of worldwide distribution. The key elements of its strategy include:
* Obtain institutional financing to finance product introductions, which
the investment by the Vision Investment Group will provide.
* Enter the U.S. healthcare market with the introduction of the Vacumate
blood collection products through major medical distribution partners.
* Finish development of the Winged Butterfly device and introduce it to
the market.
* Enter the U.S. clinical market with the introduction of the "Anti-
Blunting" Safety Syringe in 1 ml and 3 ml versions. Evaluate offering
this product in a syringe size of 5ml or larger, to be used with
interchangeable needles.
47
* Broaden distribution channels by establishing partnership alliances
with more medical product distributors.
* Complete the development and evaluate the market demand of additional
products in the pipeline that appear to have strong market potential.
Over the next 18 months, MedPro plans to introduce four products
through firm "take or pay" contracts with Greiner Bio-One and other
distribution partners that provide for specific terms and unit volumes. As
of September 28, 2007, MedPro had entered into one such agreement for the
distribution of one of its blood collection products. The table below
summarizes the products and channel partners included in MedPro's core growth
plan.
- -------------------------------------------------------------------------------------------
Product Status Contract or Proposed Terms
- -------------------------------------------------------------------------------------------
Skin-Activated
Blood Collection In negotiations with two suppliers. Three-year "take or pay"
contract.
- -------------------------------------------------------------------------------------------
Tube Activated
Blood Collection Contract signed with Greiner Bio-One. Five-year "take or pay"
Production anticipated to begin in contract for 110 million
first quarter of 2008, subject to units and $30.8 million.
FDA 510(k) clearance.
- -------------------------------------------------------------------------------------------
Butterfly Valve In discussions with three suppliers. Three-year "take or pay"
contract.
- -------------------------------------------------------------------------------------------
"Anti-Blunting" Safety In discussions with two suppliers. Two-year "take or pay"
Syringe Term sheet contract.
- -------------------------------------------------------------------------------------------
Pre-filled Safety Preliminary discussions with two No Proposal to date.
Syringe suppliers.
- -------------------------------------------------------------------------------------------
Intellectual Property and Licenses
MedPro owns or holds rights to acquire various intellectual property,
including patents, patent applications, technology, trade secrets, know-how,
copyrights and trademarks in the United States and other countries. MedPro is
also licensed under domestic and foreign patents, patent applications,
technology, trade secrets, know-how, copyrights and trademarks owned by
others. In the aggregate, these intellectual property assets and licenses are
of material importance to MedPro's business. MedPro believes, however, that
no single patent, technology, trademark, intellectual property asset or
license is material in relation to MedPro's business as a whole.
Competition
MedPro operates in the increasingly complex and challenging medical
device marketplace. Technological advances, federal regulations in the United
States and some foreign markets, and scientific discoveries have accelerated
the pace of change in medical technology, and the regulation of increasingly
more sophisticated and complex medical products is increasing. Companies of
varying sizes compete in the global medical technology field. Some are more
specialized than MedPro with respect to particular markets, and some have
greater financial resources than MedPro. New companies have entered the
48
field, particularly in the areas of safety-engineered devices and in life
sciences, and established companies have diversified their business
activities into the medical technology area. Other firms engaged in the
distribution of medical technology products have become manufacturers of
medical devices and instruments as well. Acquisitions and collaborations by
and among other companies seeking a competitive advantage also affect the
competitive environment.
A company's ability to compete in the medical device market depends on
many factors, including price, quality, innovation, service, reputation,
distribution, and promotion. In order to increase revenue growth by focusing
on products that deliver greater benefits to patients and medical
professionals, and to maintain an advantage in the competitive environment in
which it operates, MedPro must continue to invest in research and
development, quality management, quality improvement, product innovation and
productivity improvement. MedPro will compete against companies with
substantially more financial resources to invest for these purposes.
Suppliers
MedPro anticipates no material shortages of equipment, fixtures or
other products that are necessary to its operations. Generally, alternate
suppliers are available for all of MedPro's raw materials and supplies.
MedPro also maintains production relationships with multiple manufacturing
partners whenever possible to avoid dependence upon a single production
source.
Government Regulation
MedPro operates in the medical device safety products industry. The
development, manufacture and marketing of products sold by MedPro may be
subject to extensive regulation by various government agencies, including the
FDA and the U.S. Federal Trade Commission, as well as various state and local
agencies. These and other agencies regulate production processes, product
attributes, packaging, labeling, advertising, storage and distribution and
establish and enforce standards for safety, purity and labeling. In addition,
other governmental agencies (including the U.S. Occupational Safety and
Health Administration), establish and enforce health and safety standards and
regulations in the workplace.
Information Technology
MedPro is in the process of selecting a fully integrated IT platform
that will enable it to fully and efficiently satisfy its sales and ordering
processes while generating the appropriate level of internal control. MedPro
has identified a full service vendor that will be responsible to data
integrity, IT security, managed network services, disaster recovery, offsite
encrypted data storage, and support of all voice and data communications,
both internally and externally. The system will provide a high level of
security, backup, and risk management that management believes will
significantly reduce the risk of IT failure and resultant negative impact on
operations.
Employees
As of September 30, 2007, MedPro had five employees. None of MedPro's
employees are subject to a collective bargaining agreement.
49
Properties
MedPro leases its office and storage facility in Lexington, Kentucky,
under a non-cancelable operating lease. The lease runs through 2012 at a
monthly rent of $6,500, with an option for two five-year extension options.
Website
MedPro maintains a website at www.medprosafety.net, and provides a
linked site to each of its products. Currently, the Safe-Mate and Vacu-Mate
products are listed on that site.
Legal Proceedings
MedPro is not a party to any pending legal proceedings as of this date.
Certain Relationships and Related Party Transactions
MedPro leases its office and storage facility in Lexington, Kentucky,
on the terms described under "Properties" above. The Lessor is a partnership
in which MedPro's Chairman and CEO holds an interest.
Bridge Loan
In anticipation of the closing of the merger and the private placement
to the Vision Investment Group, MedPro has borrowed $1,000,000 from Vision,
to be paid back in full upon the closing of the merger or upon the
termination of the merger (the "Bridge Loan"). The Bridge Loan bears
interest at a rate of 8% per year and requires that MedPro pay an origination
fee of $50,000. The Bridge Loan is secured by certain personal property,
intangibles and receivables of MedPro.
Vacumate Merger
On May 22, 2007, Vacumate LLC, a subsidiary in which MedPro owned a 40%
interest, merged into MedPro (the "Vacumate Merger"). Vacumate held rights
to develop certain medical products, such that MedPro's ownership interest in
Vacumate represented a substantial portion of MedPro's total assets. The
purpose of the Vacumate Merger was to combine Vacumate and MedPro in a manner
that gave the equity owners of each company value in the combined company
equivalent to the value held in each of the predecessor companies. In the
Vacumate Merger:
* each of the 60 ownership units of Vacumate held by owners other than
MedPro converted automatically into 228,205.33 shares of the common
stock of the combined company; and
* each of the shares of MedPro common stock issued and outstanding
immediately before the effective time was reduced to 0.4 shares of the
common stock of the combined company.
In the Vacumate Merger, MedPro's Chairman, W. Craig Turner, and members
of his family received approximately 7.5 million shares of the common stock
of the combined company for the 33 Vacumate units they owned.
50
Technology Development and Option Agreement
On February 19, 2007, MedPro entered into a Technology Development and
Option Agreement (the "Technology Agreement") with SGPF, LLC. W. Craig Turner
who is a director or executive officer of MedPro, owns 100% of the equity
units of SGPF. The Technology Agreement provides that SGPF will acquire
technology and related products known as the "Blunt Technology" comprised of
the Safety Syringe System, with and without a Distal Protective Needle, in a
Fillable and Pre-filled Configuration. MedPro will manage and direct the
development of the Blunt Technology with the objective of fully
commercializing the Blunt Technology as quickly as possible. MedPro must pay
up to $375,000 towards the cost of developing the Blunt Technology. MedPro
will have the option to purchase the Blunt Technology for $2,500,000 in cash,
reimbursement for certain development costs, and $2,500,000 in common stock
of MedPro based on a value of $1.81 per share. MedPro will also assume the
remaining patent payments that are due at the time that it executes its
option.
SGPF's agreement with Visual Connections and its founder gives SGPF the
right to acquire rights to the Blunt Technology, including rights to the
related patent and patent applications. The agreement provides for the
transfer of the rights to the Blunt Technology upon SGPF's making an initial
transfer payment of $250,000. Thereafter, SGPF would pay Visual Connections
transfer payments totaling $2,750,000 in installments over three years.
Beginning in February 2007, SGPF would also pay a royalty of 5% of on the
first $250,000 of adjusted gross sales of products using the Blunt Technology
in any calendar year, and 4% of the adjusted gross sales of such products for
remainder of the year.
Key-Lok[TM]
During 2006, MedPro acquired a needless IV system, known as Key-Lok[TM],
a product owned by Baton Ventures, LLC, an entity managed by Baton Development,
Inc., an entity owned by Gary A. Peterson, MedPro's Vice Chairman. In the
transaction, MedPro issued 1,600,780 shares of MedPro common stock to Baton
Ventures and assumed outstanding legal bills of approximately $10,000. Baton
Ventures also elected to convert a total of $452,000 in additional bridge
loans to 731,530 shares of MedPro common stock.
Convertible Notes
Upon approval of the Merger Agreement, four holders of convertible
notes issued by MedPro ("Notes") will receive 476,013.5 shares of MedPro
common stock at an assumed price per share of $0.6512 to retire the
outstanding principal and interest on the Notes totaling approximately
$310,000. A fifth Note holder received $472,983 in cash to retire his Note.
To facilitate the cash payment to the Note holder, MedPro issued 1,136,363.6
shares of its common stock to three of its existing stockholders in
consideration of cash proceeds totaling $500,000.
Loans to MedPro
Certain officers, directors, shareholders, and their
affiliated entities have made loans to MedPro on varying terms,
including interest rates and conversion features. As of September 30, 2007,
MedPro's indebtedness to these related parties totaled $4,016,869. Included in
this amount is a $2,000,000 promissory note that carries an interest rate
of 6% and is payable to CRM Companies, Inc., an entity that is owned by
MedPro's Chairman. After the merger, MedPro intends to pay off the current
51
portion of all of the outstanding notes payable to and advances from
shareholders.
Stock Price and Dividend Information
As of October 31, 2007, MedPro had approximately 100 shareholders. No
active trading market exists for MedPro common stock, nor has MedPro paid any
dividends on its common stock. Transactions involving MedPro common stock
occur infrequently and on privately negotiated terms. The following table
presents stock price information for transactions reported to MedPro since
January 1, 2005. In several of the transactions, MedPro issued shares of its
common stock in exchange for assets or to retire obligations. See MedPro
Safety Products, Inc. -- Certain Relationships and Related Party
Transactions.
Period Price Per Share Number of Shares
------ --------------- ----------------
2007 $0.44-0.6182 2,016,777
2006 $0.78 4,062,850
2005 $0.52 5,498,407
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF MEDPRO
Overview
MedPro Safety Products, Inc. has developed and acquired a portfolio of
medical device safety products incorporating proprietary needlestick
prevention functionalities. MedPro has generated revenues since 2005
principally from sales of its single-patient, multi-injection safety needle
designed for use within the dental market.
MedPro's strategy for the next 24 months focuses on completing the
steps necessary to commence distribution of four additional products in three
related product sectors. MedPro plans to enter into strategic partnership
agreements with major medical products distribution partners, which whenever
possible, would be fixed "take-or-pay" contracts. MedPro has entered into
one such agreement with a distribution partner for one model of its blood
collection devices and is negotiating the terms of distribution arrangements
with respect to a second model. In addition, MedPro is discussing the terms
of a similar distribution arrangement with potential partners for a
proprietary safety syringe product with a unique "anti-blunting" feature and
a prefilled pharmaceutical safety syringe. MedPro's product development
plans also include a safety dental syringe and a needleless intravenous line
based on patents and designs it controls.
MedPro has invested approximately $12 million in its technology to
date, including patent, regulatory, compliance, acquisition, and marketing
efforts.
52
Critical Accounting Estimates and Judgments
Our consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States ("GAAP"). The
preparation of our financial statements requires management to make estimates
and judgments that affect the reported amounts of assets, liabilities,
revenues, expenses and related disclosures. We base our estimates on
historical experience and various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from
these estimates. The significant accounting policies that are believed to be
the most critical to fully understanding and evaluating the reported
financial results include revenue recognition, inventory valuations for slow
moving items, and impairment of goodwill, and the recovery of deferred income
tax assets.
We recognize sales and associated cost of sales when delivery has
occurred and collectability is probable. There have been minimal returns for
credit, so no reserve for product returns has been established. We provide
for probable uncollected amounts through a charge to earnings and a credit to
the allowance for doubtful accounts based on our assessment of the current
status of individual accounts. We currently believe all accounts receivable
are collectible and no allowance is necessary.
We determine our inventory value at the lower of cost (first-in, first-
out method) or market value. In the case of slow moving items, we may write
down or calculate a reserve to reflect a reduced marketability for the item.
The actual percentage reserved depends on the total quantity on hand, its
sales history, and expected near term sales prospects. When we discontinue
sales of a product, we will write down the value of inventory to an amount
equal to its estimated net realizable value less all applicable disposition
costs.
Our intangible assets consist principally of intellectual properties
such as regulatory product approvals and patents. We amortize our intangible
assets over their estimated period of benefit, ranging from one to ten years
upon being placed in full production. We evaluate the recoverability of
intangible assets periodically and take into account events or circumstances
that warrant revised estimates of useful lives or indicate that impairment
exists.
As part of the process of preparing our consolidated financial
statements, we must estimate our actual current tax liabilities together with
assessing temporary differences resulting from differing treatment of items
for tax and accounting purposes. These differences result in deferred tax
assets and liabilities, which are included within the consolidated balance
sheet. We must assess the likelihood that the deferred tax assets will be
recovered from future taxable income and, to the extent we believe that
recovery is not likely, a valuation allowance must be established. To the
extent we establish a valuation allowance or increase or decrease this
allowance in a period, the impact will be included in the tax provision in
the statement of operations.
Results of Operations
Comparison of the Six Month Periods Ended June 30, 2007 and 2006
MedPro recorded losses for both the nine month periods ended September
30, 2007 and September 30, 2006 of $(1,981,011) and $(2,414,368), respectively.
Losses from operations were $(1,981,357) and $(2,416,179) for those periods of
2007 and 2006. The net losses for the periods included net other income of
$346 and $1,811.
53
Sales for the first nine months of 2007 were $58,784 compared to $71,743
for the first nine months of 2006, principally due to sales of the Safemate(tm)
device. Inventory levels have increased to accommodate expected demand and
MedPro does not expect to experience supply problems during the balance of
2007 and future periods. Management expects to use some of the net proceeds
of the investment by the Vision Investment Group for an advertising campaign
to reintroduce the Safemate(tm) product in the marketplace.
The gross margins for the product sales during the first nine months of
2007 and 2006 were as follows:
2007 % 2006 %
-------- ------- -------- -------
Sales $ 58,784 100.00% $ 71,743 100.00%
Cost of Sales 10,182 17.32% 16,676 23.24%
Gross Margin $ 48,602 82.68% $ 55,067 76.76%
Management wrote down the Needlyzer(tm) device to net realizable value
in 2004. The margin on this device was relatively small after the write down.
Sourcing the Safemate(tm) device offshore in 2006 reduced costs and improved
the margin. Due to relatively low sales levels, the effect of minor inventory
adjustments in 2007 and higher sales prices for the Needlyzer(tm) in 2007 have
influenced the higher than expected gross margin in the first nine months of
2007. Management estimates the gross margin on future sales to be approximately
40%.
Total operating expenses of $2,029,960 during the first nine months of
2007 reflected the renewed activity in product development for the
Vacu-Mate(tm) blood collection device, higher salary expense, more significant
interest costs, and higher professional fees in connection with the new product
and the reintroduction of the dental needle. Operating expenses during the
first nine months of 2006 were $2,471,246, or $441,286 higher than the
corresponding period of 2007. The largest component of increased costs in 2006
related to the cost to acquire and develop the Vacu-Mate(tm) patent. Other
income and expenses in both periods were immaterial.
Total assets were $5,564,110 as of September 30, 2007 and $5,227,559 as
of September 30, 2006. These figures were relatively flat from year to year.
The major additions to assets related to the Key Lok(tm) intellectual property
(approximately $489,000) and manufacturing equipment (approximately
$500,000).
Total liabilities declined from $12,435,874 to $12,299,373 (a change of
$(136,501)) as a result of the discharge of debt by the principal shareholder,
the conversion of debt to common stock by Baton and the reduction of debt
from payments. The money to liquidate these debts and to fund the operating
losses also came from net new capital of $3,263,401, including the previously
listed conversion and new capital infusion. Additional debt of $1,000,000 from
Vision Capital and a new bank loan and line of credit, replacing existing debt
and partially funding current operating losses, in the amounts of $5,000,000
in term debt and $1,500,000 ($1,492,500 outstanding at September 30, 2007) in
a working capital line, were secured in 2007.
The accumulated deficit went from $(14,919,843) as of September 30, 2006
to $(16,512,671) as of September 30, 2007, due to the net effect of 2007 and
2006 operating losses (for the entire year) and the impact of the discharge of
debt on the last half of 2006. The full year loss for 2006 was $(1,393,087),
less than the loss for the first nine months of 2006.
Comparison of Years Ended December 31, 2006 and 2005
MedPro incurred losses of $(1,021,281) for 2006 and $(3,286,549) for
2005. Losses from operations were $(1,342,941) and $(336,221), respectively.
54
The net losses for the periods included net other income and (expense) of
$321,660 and $(2,950,328).
Sales of the Safemate(tm) dental needle were $60,803 for 2006 and
$48,054 for 2005. Sales of the Needlyzer(tm) for the same periods were
$20,565 and $10,741, respectively. The Needlyzer(tm) device has not proven
to be commercially viable in the United States but we have seen some limited
interest in third world countries for use in limiting transmission of blood
borne pathogens through needle sharing or reuse. Sales of the Safemate(tm)
device were adversely affectively by limited marketing, as management focused
on development of the Vacu-Mate(tm) blood collection device, and the effects
of the interruption of supplies due to difficulty with a former supplier.
The gross margins for the product sales in 2006 and 2005 were as
follows:
2006 % 2005 %
-------- ------- -------- -------
Sales $ 81,368 100.00% $ 58,795 100.00%
Cost of Sales 38,016 46.72% 41,609 70.76%
Gross Margin $ 43,352 53.28% $ 17,186 29.24%
Management wrote down the Needlyzer(tm) device to net realizable value
in 2004. The margin on this device was expected to be relatively small after
the write down. Sourcing the Safemate(tm) device offshore in 2006 reduced
costs and improved the margin on this device.
Total operating expenses increased by $1,032,886 in 2006 to $1,386,293,
reflecting renewed activity in product development for the Vacu-Mate(tm)
device, additional employees, and renewed travel activity in connection with
the new product and the reintroduction of the dental needle. These expenses
totaled $353,407 in 2005. Interest expense was $985,202 and $2,972,174 for
the two years. MedPro borrowed money at risk adjusted rates that exceeded
rates available to more commercially successful companies. The impact of the
discharge of indebtedness by the Company's principal shareholder resulted in
an income item of $1,294,526 late in 2006.
Total assets grew from $3,402,380 in 2005 to $4,640,512 in 2006. The
most significant changes were in fixed assets and intellectual property
additions. The major additions to assets relate to the Key Lok(tm)
intellectual property (approximately $489,000) and manufacturing equipment
(approximately $500,000).
Total liabilities declined from $11,504,406 to $10,061,564 (a change
of $(1,442,842)) as a result of the discharge of debt by the principal
shareholder, the conversion of debt to common stock by Baton and the
reduction of debt from payments. The money to liquidate these debts and to
fund the operating losses also came from net new capital of $3,702,255,
including the previously listed conversion and new capital infusion.
The accumulated deficit went from $(14,163,932) in 2005 to
$(15,185,213) in 2006 due to the operating loss in 2006 of $(1,021,281).
Liquidity and Capital Resources
As described under "Use of Proceeds," we estimate the net proceeds
from the investment by the Vision Investment Group will total $11,640,000
after payment of the placement fee and offering expenses. Immediately after
the Reverse Merger, we expect to use approximately $3,000,000 of the net
proceeds to repay a bridge loan from Vision, the current portion of
shareholder loans,
55
and financing fees to our bank. The remaining $8,500,000 will be working
capital and the principal source of funding for New MedPro's operations
through December 31, 2008. Other sources of funds include revenues from the
sale of our medical safety products, including anticipated revenues from the
sale of the blood collection product we expect to launch in 2008, and the
commitment for funding made by our Chairman.
We have entered into a "take or pay" agreement with a worldwide medical
products company for distribution of our tube-activated blood collection
system. We anticipate a January 2008 launch of this product, subject to the
receipt of FDA 510(k) clearance and the completion of production
arrangements. Assuming no delay in the launch, New MedPro could receive
revenues from the sale of the collection tube activated product beginning in
the first quarter of 2008. Our agreement requires our distributor to
purchase a minimum of $1.4 million of the product during the year beginning
when we make the first commercial shipment of the product to the distributor.
CRM Companies, Inc., an entity that is owned by MedPro's Chairman, W.
Craig Turner, has funded MedPro's recent operations through loans. Mr.
Turner has also committed to continue to cover any cash deficits that New
MedPro incurs through December 31, 2008, and has also personally guaranteed
up to $5.5 million of MedPro's bank debt. See "MedPro Safety Products, Inc.
- - Certain Relationships and Related Party Transactions." MedPro's
indebtedness under its credit agreement bears interest at the prime rate plus
2%, calls for monthly payments of approximately 139,000 beginning in August
2008, and matures on August 1, 2011.
We estimate we will need approximately $10,000,000 to fund our
operations through the end of 2008. Our primary cash requirements will be to
fund (a) launching our blood collection products for distribution, (b)
continuing development of our safety syringe products and other medical
device safety products based on the technology for which we hold rights, and
(c) increasing our administrative capability as needed to support expanded
day-to-day operations. In addition, we expect to reserve up to approximately
$3,000,000 of our anticipated working capital to take advantage of
opportunities to acquire technology or distribution rights for products that
complement or expand our product portfolio.
We may require additional funding to complete the development of and
launch all of the safety products for which we currently own intellectual
property rights. In addition, development or production costs may increase
beyond the amounts on which we have based our current funding assumptions.
The Vision Investment Group has the right to fund our future financing needs
by exercising stock purchase warrants, although we have no assurance they
would do so and any such exercise may depend on the then-prevailing trading
price for New MedPro common stock.
Although we plan to continue to outsource our developmental and
manufacturing resource needs, we also plan to expand our in-house
capabilities. We expect to employ a senior product development officer and
project engineer to direct the development of our portfolio of products and
to work directly with our external product development firm. This will allow
our current management personnel to focus on production and marketing as our
products complete the regulatory approval process and distribution can begin.
During the next year, we expect to add additional administrative
support personnel and infrastructure as necessary to support the planned
expansion of our operations. New MedPro will need to add personnel and
56
substantially increase the related administrative expenses to continue
product development, increase sales and marketing activities, and comply with
period reporting and internal control requirements. We expect to purchase
computer systems and related equipment for approximately $90,000 to support
our data and communications requirements. In addition, we recently engaged a
full service IT support firm to ensure appropriate support of our systems,
telephone, and backup of corporate records for a total of approximately
$24,000 over the next twelve months. New MedPro will also need to purchase
product inspection equipment for approximately $100,000 in connection with
the launch of its blood collection product.
We anticipate spending a minimum of $200,000 through the end of 2008
for legal, accounting and other compliance-related expenses arising from New
MedPro's reporting and other obligations under the Securities Exchange Act
and its commitment during the six months following the Reverse Merger to
register shares beneficially owned by the Vision Investment Group for
possible resale under the Securities Act of 1933. In addition, under the
terms of its stock purchase agreement with the Vision Investment Group, New
MedPro has committed to spend $240,000 for investor relations and corporate
marketing activities during the twelve months following the Reverse Merger.
While we expect MedPro to realize significant revenue from the launch
of the first of two models of the blood collection product, the amount of
revenue realized in 2008 will depend upon our ability to procure regulatory
approval and other factors that could delay the launch. MedPro will also
continue to develop products from its portfolio. As a result, we do not
expect MedPro to show an operating profit in the current fiscal year, or over
the next twelve months. We believe there is a well defined market for
MedPro's products, and supported by federal Needlestick Prevention Act, which
requires the use of products similar to those MedPro is developing. We are
optimistic about the prospects for our blood collection products based upon
our pre-marketing activities over the past two years, general interest in the
skin activated product, and our minimum volume distribution contract. At
current production cost estimates, we expect MedPro to have operating margins
of approximately 40%, although margins could be adversely affected by
continued increases in the cost of necessary raw materials used. We will
monitor MedPro's cash flow carefully and will maintain limited, but
necessary, employment levels required to sustain operations.
Our current sales estimates are exclusively for product sales in the
United States. We do not anticipate revenue from the marketing of the tube
activated blood collection device in Europe, although its distributor has
received preliminary favorable interest from pre-launch marketing and
demonstration activates. Our ability to generate future European and other
foreign sales will depend upon regulatory approvals for MedPro's products.
MedPro's growth will depend upon our ability to enter into sales and
distribution agreements for its other technologies, as they become available
for distribution
57
FINANCIAL INFORMATION
You can find financial statements and other financial information of
DSRV in its 2006 Annual Report on Form 10-KSB and its Quarterly Report on
Form 10-QSB for the fiscal quarter ended September 30, 2007, which accompany
this Notice and the Information Statement.
This Information Statement also includes the financial statements of
MedPro listed under "Index to Financial Statements," below.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" certain information we
file with them, which means that we can disclose important information by
referring you to those documents. The information incorporated by reference
is considered to be a part of this Information Statement. We incorporate by
reference the documents listed below.
* DSRV Annual Report on Form 10-KSB for the fiscal year ended December
31, 2006.
* DSRV Quarterly Report on Form 10-QSB for the fiscal quarter ended
September 30, 2007; and
* DSRV Current Reports on Form 8-K/A filed September 10, and Form 8-K/A-2
filed November 14, 2007.
Copies of the DSRV Annual Report and Quarterly Report listed above
accompany this Information Statement. You may request a copy of the Current
Report on form 8-K/A-2, at no cost, by telephoning us at (212) 849-8248 or by
writing us at the following address:
Dentalserv.com
20 West 55th Street, Fifth Floor
New York, New York 10019
#####################
By Order of the Board of Directors:
DentalServ.Com
By: /s/ Lawrence Chimerine
---------------------------------
Lawrence Chimerine, President and
Chief Executive Officer
New York, New York
November___, 2007
58
INDEX TO FINANCIAL STATEMENTS OF MEDPRO
MedPro Safety Products, Inc.
Page
----
Balance Sheet as of September 30, 2007 (Unaudited) F-1
Statements of Operations for the Nine Months Ended
September 30, 2007 and 2006 (Unaudited) F-2
Statements of Cash Flows for the Nine Months Ended
September 30, 2007 and 2006 (Unaudited) F-3
Notes to Financial Statements F-4
Opinion of Registered Public Accounting Firm F-13
Balance Sheet as of December 31, 2006 F-14
Statements of Operations for the Years Ended
December 31, 2006 and 2005 F-16
Statements of Changes in Stockholders' Equity for the Years F-17
Ended December 31, 2006 and 2005
Statements of Cash Flows for the Years Ended
December 31, 2006 and 2005 F-18
Notes to Financial Statements F-19
59
MEDPRO SAFETY PRODUCTS, INC.
BALANCE SHEET (Unaudited)
As of
30-Sep-07
-------------
ASSETS
Current Assets
Cash 877,215
Receivables 9,264
Other Current Assets
Inventory 546,944
Deferred Costs 178,373
-------------
Total Current Assets 1,611,796
Fixed Assets
Equipment and Leasehold Improvements 89,885
Accumulated Depreciation (76,910)
-------------
Total Fixed Assets 12,975
Other Assets
Intellectual Property and Acquired Equipment 3,939,338
-------------
Total Other Assets 3,939,338
TOTAL ASSETS 5,564,109
LIABILITIES
Current Liabilities
Payables 736,741
Payroll Liabilities 24,866
Current Portion of Bank Debt 83,991
Related Party Loans and Accrued Interest 3,856,947
-------------
Total Current Liabilities 4,702,545
Long Term Liabilities
Notes and Accrued Interest 7,105,746
Convertible Notes 491,083
-------------
Total Long Term Liabilities 7,596,829
Total Liabilities 12,299,374
STOCKHOLDERS' EQUITY
Capital Stock 248,794
Paid in Capital 9,528,614
Retained Earnings (16,512,671)
-------------
Total Stockholders' Equity (6,735,263)
TOTAL EQUITY AND LIABILITIES 5,564,111
See Notes to Financial Statements.
F-1
MEDPRO SAFETY PRODUCTS, INC.
STATEMENTS OF OPERATIONS (Unaudited)
Jan-Sept 2007 Jan-Sept 2006
------------- -------------
INCOME/EXPENSE
Income
Sales 58,784 71,743
Cost of Goods Sold (10,182) (16,676)
------------- -------------
Gross Profit 48,602 55,067
Expense
Selling Expenses 284,505 226,149
Bank Charges 8,317 573
Insurances 28,396 24,947
Interest Expense 674,652 1,265,969
Lease 13,500 13,988
Professional Fees 490,485 177,351
Capital Advisory Fees 20,000 -
Labor 262,341 26,734
Taxes 22,698 11,622
Product Development 225,066 723,914
------------- -------------
Total Expense 2,029,960 2,471,247
Net Ordinary Income (1,981,358) (2,416,180)
Other Income/Expense
Other Income 46,083 21,447
Other Expense (45,737) (19,635)
------------- -------------
Total Other Income 346 1,812
NET INCOME (LOSS) (1,981,012) (2,414,368)
See Notes to Financial Statements.
F-2
MEDPRO SAFETY PRODUCTS, INC.
STATEMENTS OF CASH FLOWS (Unaudited)
Jan-Sept 2007 Jan-Sept 2006
------------- -------------
OPERATING ACTIVITIES
Net Income (1,981,011) (2,414,368)
Adjustments to reconcile Net Income
to net cash provided by operations:
Receivables (122,008) (4,406)
Prepaid Items 45,654 -
Inventory (31,932) 16,676
Deferred Costs (183,333) -
Payables 35,700 (62,647)
Payroll Liabilities 14,879 (43,623)
Accrued Expenses 92,851 23,441
------------- -------------
Net Cash from Operations (2,129,200) (2,484,927)
Investing Activities
Depreciation 4,465 (3,920)
Investments and M&A (2,650,216) (989,122)
------------- -------------
Net Cash from Investing Activities (2,645,751) (993,042)
Financing Activities
Loans 7,641,642 2,587,075
Assumption of Vacu-Mate
Acquisition Deficit (2,514,899) -
Capital Stock AND Paid In Capital 500,000 1,187,622
------------- -------------
Net Cash from Financing 5,626,743 3,774,697
NET CASH FOR PERIOD 851,792 296,728
Beginning Period Cash 25,423 3,811
------------- -------------
Ending Cash Balance 877,215 300,539
See Notes to Financial Statements.
F-3
MedPro Safety Products, Inc, and Subsidiary
Notes to Consolidated Financial Statements, Unaudited
For the Nine Months Ended September 30, 2007 and 2006
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of Business - MedPro Safety Products, Inc ("MedPro") was
originally incorporated in Kentucky in 1995 and later in Delaware in
1999. VACUMATE, LLC ("VACUMATE"), a subsidiary of MedPro Safety
Products, Inc at September 30, 2007 and 2006, was formed as a Kentucky
Limited Liability Company in March of 2003. VACUMATE, LLC, was created
in order to fund the acquisition of a safety blood collection system.
The technology purchase was completed by VACUMATE, LLC, during 2004.
MedPro Safety Products ("MPS") and VACUMATE, LLC (the "Company") are
located in Lexington, Kentucky and are engaged in the business of
selling medical equipment that protects the public from needle stick
injuries and enhances the safety of patients and medical professionals
in the healthcare industry. The Company has developed and /or
acquired proprietary and unique technology that management believes
will deliver the highest level of risk reduction technology to the
industry.
Principles of Consolidation -The Company applies FIN 46(R),
"Consolidation of Variable Interest Entities," and FASB 141 in its
principles of consolidation. FIN 46 (R) addresses arrangements where a
company does not hold a majority of the voting or similar interests of
a variable interest entity (VIE). Under FIN 46 (R) a company must
consolidate a VIE if it is determined that it is the primary
beneficiary.
For the nine months ended September 30, 2007 and 2006, substantially
all of the equity interests of MedPro and VACUMATE were represented by
common ownership and MedPro had a direct equity ownership of 40
percent of VACUMATE. From inception until January 10, 2007, MedPro
provided all management functions for VACUMATE under an agency
agreement. On January 10, 2007 a merger was effected whereby MedPro
issued approximately 13.7 million of its post-split shares (see Note
10) to acquire all of the then outstanding interests of the non-MedPro
owners of VACUMATE. Upon the effective date of the merger, the non-
MedPro owners of VACUMATE controlled 60% of the resulting company and
the pre-merger shareholders of MedPro controlled 40% of the resulting
company which continued under the name of MedPro Safety Products, Inc.
The merger agreement was approved in principal by MedPro's Board of
Directors and the Members of VACUMATE on August 24, 2006 and approved
by the shareholders of MedPro on January 10, 2007.
As a result of the above relationships, including common management,
ownership, and operations, these consolidated financial statements
include the accounts of both MedPro and VACUMATE. Inter-company
balances and transactions have been eliminated in consolidation.
Basis of Presentation - The accompanying consolidated financial
statements (unaudited) have been prepared assuming the Company will
continue as a going concern. The Company has incurred recurring
losses from operations accumulating to $(16,512,671) at September 30,
F-4
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
2007, resulting in negative cash flows from operations. The Company
has historically depended on borrowings to fund operations. See Notes
4, 5, and 6 for details of the Company's debt. At September 30, 2007,
current liabilities exceeded current assets by $3,090,748 and total
liabilities exceeded totals assets by $6,735,263. Management's plan
for the Company to meet its cash flow needs through the end of 2007
and to ultimately achieve profitability is discussed below.
The Company has obtained from its Chairman and majority shareholder a
commitment to provide it the necessary funding to meet its cash flow
needs through the end of 2007. Also, the Company's Chairman and
majority shareholder has personally guaranteed up to $5.5 million of
the Company's bank debt. In return for the guarantee, the Chairman
and majority shareholder are to receive a fee of $250,000 plus 6
percent interest on the $250,000 fee from January 1, 2007 until it is
paid and the Chairman's personal guarantee is released by the bank.
Additionally, the Company has secured a contract with a major
European-based multinational medical company for the supply of its
blood collection safety devices over a five-year period. The contract
is for more than 100 million units or approximately $30 million of
product. The Company has obtained conditional financing commitments
from third party lenders in amounts the Company believes will be
sufficient to permit it to fulfill the contract requirements. There
can be no assurances that the Company will meet the conditions to the
financing commitments; that the financing arrangements will be
sufficient to fulfill the requirements of the contract; or that
fulfilling the contract will ultimately be profitable to the Company.
Accounting Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenues and Costs Recognition - The Company derives its revenues from
the sales of protective needle equipment. Revenues and accounts
receivable are currently derived from the sale of the Needlyzer(tm)
(needle destruction device) and Safe-Mate(r) (safety dental needle)
products. Revenues and accounts receivable are recognized when
delivery has occurred and collectability is probable. The Company
anticipates generating revenue from its tube-activated Vacu-Mate
device by the end of the fourth quarter of 2007. Cost of goods sold
includes all direct production costs and shipping and handling costs.
General and administrative costs are charged to the appropriate
expense as incurred.
Accounts Receivable - As is customary in the industry, the Company
does not require collateral from customers in the ordinary course of
business. Accounts receivable are stated at the amount management
expects to collect from outstanding balances. Management provides for
probable uncollected amounts through a charge to earnings and a credit
to the allowance for doubtful
F-5
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
accounts based on its assessment of the current status of individual
accounts. Management believes that all accounts receivables are
collectible, and an allowance for doubtful accounts is not necessary
at September 30, 2007 and 2006. The Company does not accrue finance
charges on its past due accounts receivable. Balances that are still
outstanding after management has used reasonable collection efforts
are written off through a charge to the allowance and a credit to
accounts receivable.
Inventory - Inventory consists of Safe-Mate(r) safety needles and
Needlyzer(tm) devices and is carried at the lower of cost or market value
on a first-in first-out basis. The Company took an inventory write
down for its Needlyzer(tm) device, reflecting its policy to liquidate
these inventories and discontinue efforts to market the device (See
also Note 3).
Property and Equipment - Property and equipment are stated at cost
less accumulated depreciation and amortization. Depreciation and
amortization for assets placed in service is provided using the
straight-line method over their estimated useful lives. The cost of
normal maintenance and repairs is charged against earnings.
Expenditures which significantly increase asset values or extend
useful lives are capitalized. The gain or loss on the disposition of
property and equipment is recorded in the year of disposition.
Intangible Assets - Intangible assets consist principally of
intellectual properties such as regulatory product approvals and
patents. Intangible assets are amortized using the units-of-
production method over their estimated period of benefit, ranging from
one to ten years upon being placed in full production. We evaluate the
recoverability of intangible assets periodically and take into account
events or circumstances that warrant revised estimates of useful lives
or that indicate that impairment exists. All of our intangible assets
are subject to amortization. No material impairments of intangible
assets have been identified during any of the periods presented.
Amortization was immaterial for all periods presented.
Research and Development Costs - Research and development costs are
charged to expense as incurred. These expenses do not include an
allocation of salaries and benefits for the personnel engaged in these
activities. Although not expensed as research and development, all
salaries and benefits for the periods ended September 30, 2007 and
2006, have been expensed. The Company incurred no research and
development costs during the period ended September 30, 2007 and 2006,
respectively.
Advertising - Advertising costs are expensed as incurred. The Company
incurred $21,514 and $59,494 of such costs during the period ended
September 30, 2007 and 2006, respectively.
Income Taxes -Income tax expense is provided for the tax effects of
transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes. Deferred taxes are
recognized for differences between the basis of assets and liabilities
for financial statement and income tax purposes. The differences
relate primarily to the effects of net operating loss carry forwards
and differing basis, depreciation methods, and lives of depreciable
assets. The deferred
F-6
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
tax assets represent the future tax return consequences of those
differences, which will be deductible when the assets are recovered.
Cash and Cash Equivalents - For the purposes of the Statements of Cash
Flows, the Company considers cash and cash equivalents to be cash in
all bank accounts, including money market and temporary investments
that have an original maturity of three months or less.
Concentration of Credit Risk - From time to time during the periods
ended September 30, 2007 and 2006, certain bank account balances were
in excess of federally insured limits. The company has not
experienced losses in such accounts and believes it is not exposed to
any significant credit risk on cash.
Recent Accounting Pronouncements
In June 2006, FIN 48, "Accounting for Uncertainty in Income Taxes, "an
interpretation of SFAS No. 109, clarifies the accounting for
uncertainties in income taxes recognized in an enterprise's financial
statements. The Interpretation requires that we determine whether it
is more likely than not that a tax position will be sustained upon
examination by the appropriate taxing authority. If a tax position
meets the more likely than not recognition criteria, FIN 48 requires
the tax position be measured at the largest amount of benefit greater
than fifty percent (50%) likely of being realized upon ultimate
settlement. This accounting standard is effective for fiscal years
beginning after December 15, 2006. The effect, if any, of adopting
FIN 48 is not expected to have a material effect on our financial
position and results of operations.
In September 2006, the Staff of the SEC issued Staff Accounting
Bulletin No. 108, "Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements"
("SAB No. 108"). SAB No. 108 provides guidance on the consideration
of the effects of prior year misstatements in quantifying current year
misstatements for the purpose of determining whether the current
year's financial statements are materially misstated. SAB 108 is
effective for the Company's fiscal year 2007 annual financial
statements. The adoption of SAB 108 is not expected to have an impact
on our financial position, results of operations or cash flows.
In September 2006, the FASB issued Statement No. 157, "Fair Value
Measurements" ("SFAS 157"). This standard defines fair value,
establishes the framework for measuring fair value in accounting
principles generally accepted in the United States and expands
disclosure about fair value measurements. This pronouncement applies
under other accounting standards that require or permit fair value
measurements.
Accordingly, this statement does not require any new fair value
measurement. This statement is effective for fiscal years beginning
after November 15, 2007 and interim periods within those fiscal years.
We are currently evaluating the requirements of SFAS No. 157 and have
not yet determined the impact on our financial statements.
F-7
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities-including an amendment
of FAS 115 ("SFAS No.159"). SFAS No. 159 allows companies to choose,
at specified election dates, to measure eligible financial assets and
liabilities at fair value that are not otherwise required to be
measured at fair value. Unrealized gains and losses shall be reported
on items for which the fair value option has been elected in earnings
at each subsequent reporting date. SFAS No. 159 also establishes
presentation and disclosure requirements. SFAS No. 159 is effective
for fiscal years beginning after November 15, 2007 and will be applied
prospectively. We are currently evaluating the impact of adopting
SFAS No. 159 on our financial position, results of operations or cash
flows.
NOTE 2 - ACQUISITION
During 2006, the Board of Directors authorized the acquisition of Key-
Lok(tm) Needleless IV system. The effect of this acquisition is
reflected in the September 30, 2007 financial statements. This entity
was owned by Baton Ventures, LLC, which is managed by Baton
Development, Inc., an entity owned by the Company's Vice Chairman.
The Company has evaluated the product for approximately two years,
during which the Company established a strategic plan for developing
this product. The product has previously been manufactured, and it
received a 510(k) clearance to market from the United States Food and
Drug Administration (USFDA).
Key-Lok(tm) was initially pre-marketed through a number of potential
customers and/or distributors, and through these efforts it was
determined that the product required minor modifications to achieve
acceptance in the marketplace. These modifications have been
engineered but not integrated into existing tooling. The acquisition
included all materials, production equipment tooling, assembly
equipment, supplies, and a packaging machine. The Company agreed to
purchase Key-Lok(tm) from Baton Ventures, LLC for 1,600,780 shares of
common stock or approximately $989,000.
NOTE 3 - INVENTORY
The Company's legacy product, Needlyzer(tm), has not experienced the
success anticipated by the Company. The Company has made a decision
to discontinue its selling strategy regarding this product, and plans
to liquidate its inventory completely. It is currently in
negotiations with a customer that has expressed interest in purchasing
the remaining inventories. This customer purchased 72 devices and
related equipment from the Company in 2006 for approximately $315 per
unit, and has indicated that they are working on a proposal to
purchase the remaining inventory that the company has on hand. The
Company has reduced the value of this inventory from its original cost
to an amount that is equivalent to its estimated net realizable value
less all applicable disposition costs. The write down of the
inventory from its original cost occurred in December 31, 2004, and
amounted to $394,474.
F-8
NOTE 4 - NOTES PAYABLE TO AND ADVANCES FROM SHAREHOLDERS
Notes payable to and advances from shareholders represent loans and
advances received from officers, directors, shareholders, and entities
in which they exert significant control over. They are comprised of
the following:
September 30, 2007 September 30, 2006
------------------ ------------------
Short-term advances with no stated terms
settled in the ordinary course of business $ 3,536,847 $ 3,584,980
Demand and Promissory Notes with
interest rates and conversion features 320,100 570,100
Other shareholder loans, advances and
accrued expenses payable to shareholders 159,922
------------------ ------------------
$ 4,016,869 $ 4,155,080
================== ==================
The promissory notes generally contained interest rates ranging to 20%
per annum plus penalty interest when they reached maturity and
remained unpaid. At September 30, 2006 they included $570,100 in notes
that by their terms were convertible at approximately $3.70 per share.
The Company has made an offer to the holders of these convertible
notes whereby they may convert their notes into shares of the
Company's common stock at a rate of $0.65 per share. At September 30,
2007, the Company had retired $250,000 of these notes.
At September 30, 2007 and 2006, an additional $200,000 in promissory
notes were payable to a Director of the Company. The notes are non-
interest bearing until July 1, 2007 at which time interest accrues at
6% per annum. The Company has also offered to convert these notes into
shares of the Company's common stock at a rate of $0.65 per share.
At September 30, 2007, the balance of the promissory notes was
represented by a $2,000,000 note to a company controlled by the
Company's Chairman. Interest on the outstanding principal balance will
be calculated at 6.0%, beginning on January 1, 2007, on the then
unpaid principal balance until the balance has been retired.
Principal and all accrued interest on the note must be repaid on the
date the Company completes an equity or debt financing resulting in
gross proceeds to the Company of at least $6,000,000. The note also
allows for various penalty provisions in the form of additional
interest, as defined in the note, if all principal and accrued
interest is not repaid by December 31, 2007. The note is callable if
not repaid by December 31, 2008. The balance of this debt, in open
note form, was $1,584,980 at September 30, 2006.
F-9
NOTE 4 - NOTES PAYABLE TO AND ADVANCES FROM SHAREHOLDERS (Continued)
During 2006, approximately $2.6 million of the 2005 balance of
promissory notes was repaid from the proceeds of the $5,000,000 term
note discussed in Note 6. Also during 2006 another approximately
$1.6 million of the 2005 balance of promissory notes were converted
into shares of the Company stock.
NOTE 5 - RELATED PARTY TRANSACTIONS
The $2,000,000 demand note payable discussed in Note 4 above is to CRM
Companies, Inc. ("CRM") an entity that is owned by the Company's
Chairman, CEO, and majority stockholder. The note originated on
September 1, 2006 as part of a corporate debt restructuring of the
Company. CRM has continually loaned money to the Company, provided
services for the Company, paid various Company related expenses
directly, guaranteed Company loans, and subsidized the office lease
expense on behalf of the Company, which is located in a building,
owned by a partnership in which the Chairman is a partner. CRM agreed
to forgive amounts otherwise owed or accruable to it under its loan
agreements with the Company in exchange for 2,950,000 shares of common
stock valued at $1,822,805 and a promissory note payable from
the Company in the amount of $2,000,000. The Company recognized a
gain of $1,294,526 in the last half of calendar year in connection
with the debt forgiveness from CRM.
Prior to September 1, 2006, all monies advanced by CRM were considered
advances with no definitive repayment terms. The balance of these
advances totaled $1,657,581 at September 30, 2006.
In addition to the transactions discussed above and in Note 4, the
company incurred interest expense on the indebtedness to shareholders
totaling approximately $95 thousand for the nine months ended
September 30, 2007. Accounts payable to officers and employees of the
Company totaled approximately $297 thousand and $272 thousand at
September 30, 2007 and 2006, respectively.
NOTE 6 - LONG-TERM DEBT
Long-term debt at September 30, 2007 and 2006 consists of the
following:
September 30, 2007 September 30, 2006
------------------ ------------------
Payable to Fifth Third Bank, Term Loan interest
payable at prime plus 2%, monthly payments of
$138,889 beginning August 2008, maturing
August 2011, collateralized by assignment of
intellectual properties $ 5,000,000 0
F-10
NOTE 6 - LONG-TERM DEBT (Continued)
September 30, 2007 September 30, 2006
------------------ ------------------
Payable to Fifth Third Bank, Revolving Line
of Credit, Interest at prime, payable monthly
NOTE 6 - LONG-TERM DEBT (continued)
beginning April 2007, due August 1, 2008 1,492,500 0
Payable to Whitaker Bank, Draw Loan, interest
payable at 7.5%, monthly payments of principal
and interest of $10,000, due through July 23,
2010, secured by certain inventory of the
Company. 373,246 518,095
------------------ ------------------
$ 6,865,746 $ 518,095
================== ==================
The revolving line of credit, as amended in May 2007, permits the
Company to draw up to $1,500,000.
Maturities of long-term debt are summarized as follows:
2007 $ 21,561
2008 1,839,357
2009 1,476,724
2010 1,734,234
2011 1,589,327
-----------
$ 6,661,203
===========
NOTE 7 - SHAREHOLDERS' EQUITY
The Company maintains two classes of stock. Common stock with a par
value of $0.01 per share, and Preferred Class A Stock with a par value
of $.01 per share. The Company was authorized to issue 25,000,000
shares of Common Stock and 5,000,000 shares of Preferred Class A
Stock. The Company had outstanding 24,879,333 and 22,974,583 shares
of Common Stock at September 30, 2007 and 2006, respectively, and no
Preferred Class A Stock. In addition there were also options to
acquire common stock that were outstanding at September 30, 2007 and
2006, in the amounts of 10,000 and 25,000, respectively. The options
that were outstanding at September 30, 2007 and 2006, were not issued
as part of a plan, but were issued as inducements for investors and
shareholders to provide funding.
F-11
NOTE 7 - SHAREHOLDERS' EQUITY (Continued)
The Preferred Class A Stock is cumulative with liquidation preferences
and is convertible, at the option of the holder, at any time into
shares of common stock. The Preferred Class A Stock also
carries an automatic conversion feature in the event that the Company
raises at least $20 million dollars in a public offering.
During the year ended December 31, 2005:
Baton Ventures, LLC, an entity managed by Baton Development, Inc., an
entity owned by the Company's Vice Chairman, converted its Convertible
Note, in the amount of $1,000,000, and executed a total of 1,618,313
options associated with this note. In return for interest earned on
its Convertible Note made to the Company through December 2005 and
subsequently converted (above), the Company settled the interest
amount and issued 798,372 shares of Common Stock to
Baton Ventures, LLC and its participating investors for the total
accrued interest amount of $493,336.
Also, Baton Ventures, LLC converted additional loans totaling $50,000
made to the Company, and executed a total of 80,915 options associated
with those loans. For interest earned on this additional investment
of $50,000, the Company settled the accrued interest of $24,667 and
issued an additional 39,919 shares of Common Stock to Baton Ventures,
LLC.
In return for loans totaling $117,320 made to the Company by Baton
Development, Inc., an entity owned by the Company's Vice Chairman,
from April 2003 through December 2005, the Company issued 312,853
shares of Common Stock to Baton Development, Inc.
During the year ended December 31, 2006:
In recognition for service to the Company, the Board of Directors
granted a total of 450,000 shares of stock to its Board members and
Corporate Secretary. Each person received a grant of 25,000 shares
each year for the years 2003, 2004, and 2005, as the Board had not
issued any shares or compensation to its Board during that period.
In return for the execution of a debt reduction agreement with the
Company, CRM agreed to waive all associated warrants, current loans,
accrued interest payable, and all other considerations in return for
the note payable of $2,000,000 discussed in Note 4 and a grant of
2,950,000 shares of common stock. At the time of the agreement, CRM
had loans in excess of $3,000,000, associated warrants for the
issuance of these loans, accrued management fees payable, and
estimated accrued interest due in excess of $1,500,000. CRM agreed to
eliminate or forgive all debt, interest payable, warrants, options,
and any other associated compensation due in exchange for the common
shares and the note payable. This completes consideration of notes,
payments, and all other activities executed by CRM during the period
from January 1999 through September 2006, see note 5 for more details.
NOTE 7 - SHAREHOLDERS' EQUITY (Continued)
The Company elected to acquire a needleless IV system, known as Key-
Lok(tm), a product owned by Baton Ventures, LLC, an entity managed by
Baton Development, Inc., an entity owned by the Company's Vice
Chairman. The purchase was accomplished with stock, and was acquired
for a total of 1,600,780 shares and the assumption of outstanding
legal bills of approximately $10,000.
In addition, Baton Ventures, LLC elected to convert a total of
$452,000 in additional bridge loans to capital stock. These loans
were capitalized with the issuance of 731,510 shares of common stock.
An entity that had previously performed accounting and tax services
for the Company, elected to convert its outstanding receivable with
the Company. A Board member and corporate Treasurer, was a member of
this firm. The total outstanding payable of $37,099 was capitalized
with the issuance of 60,040 shares of Common Stock to the firm's three
partners, including the Board member, in equal number of shares.
Also during 2006, three shareholders converted notes/accounts payable
to shares of common stock. Two note holders converted $98,500 in
outstanding notes payable to 159,462 shares of common stock, and one
shareholder/employee converted $100,000 of the Company's account
payable to him into 161,838 shares of common stock.
NOTE 8 - INCOME TAXES
The company incurred no current or net deferred income tax expense or
benefit for the six months periods ended September 30, 2007 and 2006.
Deferred income taxes reflect the net effects of temporary differences
between the carrying amount of assets and liabilities for financial
statement purposes and the amounts used for income tax purposes.
Please see the footnotes to the audited statements for deferred tax
analysis as of the years ended December 31, 2006 and 2005.
NOTE 9 - LEASE COMMITMENT WITH RELATED PARTY
The Company leases its office and storage facility in Lexington,
Kentucky, under a non-cancelable operating lease with a related party.
On January 10, 2007, the Company signed a lease addendum that among
other things extended the term of the April 16, 1998 lease. The
addendum allowed for an extension of the original lease through August
2012 in accordance with renewal language in the 1998 lease. The
addendum also contains two five year extension options. The addendum
also acknowledged that the company was in good standing and was not in
arrears on lease payments or in default of any provisions within the
lease or subsequent addendums. The addendum calls for payments of
$3,500 each month for the period from January 1, 2007, through July
31, 2007.
Monthly lease payments will increase to $6,500 beginning August 1,
2007, and continuing for the remainder of the initial five year lease
term.
NOTE 9 - LEASE COMMITMENT WITH RELATED PARTY (Continued)
Total lease expense was $13,500 and $13,988 for the nine months ended
June 30, 2007 and 2006, respectively. Future minimum annual lease
payments at September 30, 2007, are as follows:
2007 $ 19,500
2008 78,000
2009 78,000
2010 78,000
2011 78,000
2012 52,000
NOTE 10 - SUBSEQUENT EVENTS
As discussed in Note 1, on January 10, 2007 the Company affected the
share exchange in connection with its merger with VACUMATE, LLC. This
merger was approved by the Board of Directors in 2006, and approved by
its shareholders at the Annual Shareholders Meeting. The merger was a
stock for stock merger that provided MedPro shareholders with a post-
merger ownership of 40.0% and the non-MedPro members of VACUMATE, LLC,
an ownership of 60.0% in the newly merged company. All members of
VACUMATE, LLC, were existing Company shareholders. The transaction was
completed utilizing a reverse stock split whereby then existing MedPro
shareholders received .4 newly issued shares for each share then held
and post-split shares were issued to the non-MedPro members of
VACUMATE, LLC. Following the reverse stock split and merger, the
company had approximately 22.8 million post-split shares issued and
outstanding. The Company also amended its charter to authorize up to
25 million shares of its common stock.
F-12
Report of Independent Registered Public Accounting Firm
To the Board of Directors and
Shareholders of MedPro Safety Products, Inc.:
We have audited the accompanying consolidated balance sheets of MedPro
Safety Products, Inc. and Subsidiary as of December 31, 2006 and 2005,
and the related consolidated statements of operations, shareholders'
deficiency and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free
of material misstatement. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, 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 financial position
of MedPro Safety Products, Inc. and Subsidiary as of December 31, 2006
and 2005, and the results of their operations and cash flows for the
years then ended in conformity with accounting principles generally
accepted in the United States of America.
/s/ Rodefer Moss & Co., PLLC
- ----------------------------
Knoxville, Tennessee
August 13, 2007
F-13
MEDPRO SAFETY PRODUCTS, INC. and SUBSIDIARY
Consolidated Balance Sheets
December 31, 2006 and 2005
2006 2005
---------- ----------
ASSETS
Current Assets
Cash $ 59,954 $ 3,811
Accounts receivable 4,576 6,273
Inventory 515,013 551,128
Other current assets 45,654 -
---------- ----------
Total current assets 625,197 561,212
---------- ----------
Property and Equipment
Equipment and tooling 500,000 -
Leasehold improvements 44,764 44,764
Furniture and fixtures 37,025 33,730
Trade show booth 7,341 3,421
---------- ----------
589,130 81,915
Less: accumulated depreciation 71,695 66,172
---------- ----------
Property and equipment, net 517,435 15,743
---------- ----------
Other Assets
Intellectual properties 3,314,547 2,825,425
Deferred financing costs 183,333 -
---------- ----------
Total other assets 3,497,880 2,825,425
---------- ----------
Total assets $4,640,512 $3,402,380
========== ==========
See notes to consolidated financial statements.
F-14
MEDPRO SAFETY PRODUCTS, INC. and SUBSIDIARY
Consolidated Balance Sheets
December 31, 2006 and 2005
2006 2005
---------- ----------
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current Liabilities
Accounts payable and accrued expenses $ 831,031 $ 782,780
Accrued interest payable 576,222 2,760,339
Current portion of long term debt 83,991 77,484
Notes payable to and advances from
shareholders 2,961,216 7,365,708
---------- ----------
Total current liabilities 4,452,460 10,986,311
---------- ----------
Long-Term Liabilities
Notes payable - long term portion 5,609,104 518,095
---------- ----------
Total liabilities 10,061,564 11,504,406
---------- ----------
Shareholders' Deficiency
Common stock
$.01 par value; 25,000,000 shares
authorized; 22,795,529 and
16,681,899 shares issued and
outstanding 227,955 166,819
Additional paid-in capital 9,536,206 5,895,087
Accumulated deficit (15,185,213) (14,163,932)
---------- ----------
Total shareholders' deficiency (5,421,052) (8,102,026)
---------- ----------
Total liabilities and
shareholders' deficiency $4,640,512 $3,402,380
========== ==========
See notes to consolidated financial statements.
F-15
MEDPRO SAFETY PRODUCTS, INC. and SUBSIDIARY
Consolidated Statements of Operations
For the Years Ended December 31, 2006 and 2005
2006 2005
----------- -----------
Sales
Needlyzer $ 20,565 $ 10,741
SafeMate 60,803 48,054
----------- -----------
Total sales 81,368 58,795
Cost of Goods Sold 38,016 41,609
----------- -----------
Gross profit 43,352 17,186
----------- -----------
Operating Expenses
Salaries, wages, and payroll taxes 496,322 182
Product development costs 352,952 114,100
Professional and insurance 156,294 140,803
General and administrative 271,473 74,379
Travel and entertainment 103,729 14,628
Depreciation and amortization 5,523 9,315
----------- -----------
Total operating expenses 1,386,293 353,407
Loss from operations (1,342,941) (336,221)
----------- -----------
Other Income (Expenses)
Interest expense (985,202) (2,972,174)
Income from debt forgiveness with
related party 1,294,526 -
Interest income 22,289 -
Other (9,953) 21,846
----------- -----------
Total other income (expenses) 321,660 (2,950,328)
----------- -----------
Provision for income taxes - -
----------- -----------
Net loss $(1,021,281) $(3,286,549)
=========== ===========
See notes to consolidated financial statements.
F-16
MEDPRO SAFETY PRODUCTS, INC. and SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
For the Years Ended December 31, 2006 and 2005
Common Stock Additional
------------------------ Paid-In Accumulated
Shares Amount Capital Deficiency Total
---------- ----------- ----------- ------------ ------------
Balance, January 1, 2005 11,183,492 $ 111,835 $ 2,435,363 $ (10,877,383) $ (8,330,185)
Shares issued in conversion of debt 5,498,407 54,984 3,342,551 3,397,535
Capital contributed through payment of
expenses by the Company's
shareholders - - 117,173 117,173
Net loss (3,286,549) (3,286,549)
---------- ----------- ----------- ------------ ------------
Balance, December 31, 2005 16,681,899 $ 166,819 $ 5,895,087 $(14,163,932) $ (8,102,026)
Shares issued in conversion of debt 4,062,850 40,629 2,394,450 2,435,079
Shares issued for equipment and
intangibles 1,600,780 16,008 973,114 989,122
Shares issued in payment of services 450,000 4,500 273,555 278,055
Net loss (1,021,281) (1,021,281)
---------- ----------- ----------- ------------ ------------
Balance, December 31, 2006 22,795,529 $ 227,955 $ 9,536,206 $(15,185,213) $ (5,421,052)
========== =========== =========== ============ ============
See notes to consolidated financial statements.
F-17
MEDPRO SAFETY PRODUCTS, INC. and SUBSIDIARY
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2006 and 2005
2006 2005
----------- -----------
Cash Flows From Operating Activities
Net loss $(1,021,281) $ (3,286,549)
Adjustments to reconcile net loss to net cash
flows from operating activities:
Depreciation 5,523 9,315
Amortization of financing costs 16,667 -
Stock issued for services 278,055 -
Gain on retirement of debt (1,294,526) -
Payment of expenses by shareholders in
contribution of capital - 117,173
Changes in operating assets and liabilities
Accounts receivable 1,697 (5,761)
Inventory 36,115 (57,018)
Other current assets (45,654) -
Accounts payable and accrued expenses (101,749) (3,021)
Accrued interest payable (103,759) 456,513
----------- -----------
Net cash flows from operating activities (2,228,912) (2,769,348)
Cash Flows From Investing Activities
Purchases of property and equipment (7,216) -
----------- -----------
Net cash flows from investing activities (7,216) -
----------- -----------
Cash Flows From Financing Activities
Proceeds from bank borrowings 5,175,000 -
Proceeds from issuance of notes to and
advances from shareholders 200,000 2,832,340
Payments on notes payable and advances
from shareholders (3,082,729) (69,596)
----------- -----------
Net cash flows from financing activities 2,292,271 2,762,744
----------- -----------
Net increase (decrease) in cash 56,143 (6,604)
Cash at the Beginning of the Year 3,811 10,415
----------- -----------
Cash at the End of the Year $ 59,954 $ 3,811
=========== ===========
Supplemental Disclosures of Cash Flow
Information
Cash paid for interest $ 1,076,213 $ 50,404
=========== ===========
Supplemental Disclosure of Non-Cash Investing
and Financing Activities
Issuance of common stock for equipment
and tooling and intellectual properties $ 989,121 $ -
=========== ===========
Issuance of common stock in settlement of
debt $ 2,435,079 $ 3,397,535
=========== ===========
See notes to consolidated financial statements.
F-18
MEDPRO SAFETY PRODUCTS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
December 31, 2006 and 2005
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of Business - MedPro Safety Products, Inc ("MedPro") was
originally incorporated in Kentucky in 1995 and later in Delaware in
1999. VACUMATE, LLC ("VACUMATE"), a subsidiary of MedPro Safety
Products, Inc at December 31, 2006 and 2005, was formed as a Kentucky
Limited Liability Company in March of 2003. VACUMATE, LLC, was
created in order to fund the acquisition of a safety blood collection
system. The technology purchase was completed by VACUMATE, LLC,
during 2004. MedPro Safety Products ("MPS") and VACUMATE, LLC (the
"Company") are located in Lexington, Kentucky and are engaged in the
business of selling medical equipment that protects the public from
needle stick injuries and enhances the safety of patients and medical
professionals in the healthcare industry. The Company has developed
and /or acquired proprietary and unique technology that management
believes will deliver the highest level of risk reduction technology
to the industry.
Principles of Consolidation - The Company applies FIN 46(R),
"Consolidation of Variable Interest Entities," and FASB 141 in its
principles of consolidation. FIN 46 (R) addresses arrangements where
a company does not hold a majority of the voting or similar interests
of a variable interest entity (VIE). Under FIN 46 (R) a company must
consolidate a VIE if it is determined that it is the primary
beneficiary.
For the years ended December 31, 2006 and 2005, substantially all of
the equity interests of MedPro and VACUMATE were represented by
common ownership and MedPro had a direct equity ownership of 40
percent of VACUMATE. From inception until January 10, 2007, MedPro
provided all management functions for VACUMATE under an agency
agreement. On January 10, 2007 a merger was effected whereby MedPro
issued approximately 13.7 million of its post-split shares (see Note
10) to acquire all of the then outstanding interests of the non-
MedPro owners of VACUMATE. Upon the effective date of the merger, the
non-MedPro owners of VACUMATE controlled 60% of the resulting company
and the pre-merger shareholders of MedPro controlled 40% of the
resulting company which continued under the name of MedPro Safety
Products, Inc. The merger agreement was approved in principal by
MedPro's Board of Directors and the Members of VACUMATE on August 24,
2006 and approved by the shareholders of MedPro on January 10, 2007.
As a result of the above relationships, including common management,
ownership, and operations, these consolidated financial statements
include the accounts of both MedPro and VACUMATE. Inter-company
balances and transactions have been eliminated in consolidation.
Basis of Presentation - The accompanying consolidated financial
statements have been prepared assuming the Company will continue as a
going concern. The Company has incurred recurring losses from
operations accumulating to $(15,185,213) at December 31, 2006,
resulting in negative cash flows from operations. The Company has
historically depended on borrowings to fund operations. See Notes 4,
5, and 6 for details of the Company's debt. At December 31, 2006,
current liabilities exceeded current assets by $3,827,263 and total
liabilities exceeded totals assets by $5,421,052. Management's plan
for the Company to meet its cash flow needs through the end of 2007
and to ultimately achieve profitability is discussed below.
The Company has obtained from its Chairman and majority shareholder a
commitment to provide it the necessary funding to meet its cash flow
needs through the end of 2007. Also, the Company's Chairman and
majority shareholder has personally guaranteed up to $5.5 million of
the Company's bank debt. In return for the guarantee, the Chairman
and majority shareholder are to receive a fee of $250,000 plus 6
percent interest on the $250,000 fee from January 1, 2007 until it is
paid and the Chairman's personal guarantee is released by the bank.
F-19
MEDPRO SAFETY PRODUCTS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
December 31, 2006 and 2005
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Additionally, the Company has secured a contract with a major
European-based multinational medical company for the supply of its
blood collection safety devices over a five-year period. The contract
is for more than 100 million units or approximately $30 million of
product. The Company has obtained conditional financing commitments
from third party lenders in amounts the Company believes will be
sufficient to permit it to fulfill the contract requirements. There
can be no assurances that the Company will meet the conditions to the
financing commitments; that the financing arrangements will be
sufficient to fulfill the requirements of the contract; or that
fulfilling the contract will ultimately be profitable to the Company.
Accounting Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Revenues and Costs Recognition - The Company derives its revenues
from the sales of protective needle equipment. Revenues and accounts
receivable are currently derived from the sale of the Needlyzer(tm)
(needle destruction device) and Safe-Mate(r) (safety dental needle)
products. Revenues and accounts receivable are recognized when
delivery has occurred and collectability is probable. The Company
anticipates generating revenue from its tube-activated Vacu-Mate
device by the end of the third quarter of 2007.
Cost of goods sold includes all direct production costs and shipping
and handling costs. General and administrative costs are charged to
the appropriate expense as incurred.
Accounts Receivable - As is customary in the industry, the Company
does not require collateral from customers in the ordinary course of
business. Accounts receivable are stated at the amount management
expects to collect from outstanding balances. Management provides
for probable uncollected amounts through a charge to earnings and a
credit to the allowance for doubtful accounts based on its assessment
of the current status of individual accounts. Management believes
that all accounts receivables are collectible, and an allowance for
doubtful accounts is not necessary at December 31, 2006 and 2005.
The Company does not accrue finance charges on its past due accounts
receivable. Balances that are still outstanding after management has
used reasonable collection efforts are written off through a charge
to the allowance and a credit to accounts receivable.
Inventory - Inventory consists of Safe-Mate(r) safety needles and
Needlyzer(tm) devices and is carried at the lower of cost or market
value on a first-in first-out basis. The Company took an inventory
write down for its Needlyzer(tm) device, reflecting its policy to
liquidate these inventories and discontinue efforts to market the
device (See also Note 3).
Property and Equipment - Property and equipment are stated at cost
less accumulated depreciation and amortization. Depreciation and
amortization for assets placed in service is provided using the
straight-line method over their estimated useful lives. The cost of
normal maintenance and repairs is charged against earnings.
Expenditures which significantly increase asset values or extend
useful lives are capitalized. The gain or loss on the disposition of
property and equipment is recorded in the year of disposition.
Intangible Assets - Intangible assets consist principally of
intellectual properties such as regulatory product approvals and
patents. Intangible assets are amortized using the units-of-
production method over their estimated period of benefit, ranging
from one to ten years upon being placed in full production. We
evaluate the recoverability of intangible assets periodically and
take into account events or circumstances that warrant revised
estimates of useful lives or that indicate that impairment exists.
All of our intangible assets are subject
F-20
MEDPRO SAFETY PRODUCTS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
December 31, 2006 and 2005
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
to amortization. No material impairments of intangible assets have
been identified during any of the periods presented. Amortization was
immaterial for all periods presented.
Research and Development Costs - Research and development costs are
charged to expense as incurred. These expenses do not include an
allocation of salaries and benefits for the personnel engaged in
these activities. Although not expensed as research and development,
all salaries and benefits for the years ended December 31, 2006 and
2005, have been expensed. The Company incurred no research and
development costs during the years ended December 31, 2006 and 2005,
respectively.
Advertising - Advertising costs are expensed as incurred. The
Company incurred $71,277 and $66 of such costs during the years ended
December 31, 2006 and 2005, respectively.
Income Taxes -Income tax expense is provided for the tax effects of
transactions reported in the financial statements and consist of
taxes currently due plus deferred taxes. Deferred taxes are
recognized for differences between the basis of assets and
liabilities for financial statement and income tax purposes. The
differences relate primarily to the effects of net operating loss
carry forwards and differing basis, depreciation methods, and lives
of depreciable assets. The deferred tax assets represent the future
tax return consequences of those differences, which will be
deductible when the assets are recovered.
Cash and Cash Equivalents - For the purposes of the Statements of
Cash Flows, the Company considers cash and cash equivalents to be
cash in all bank accounts, including money market and temporary
investments that have an original maturity of three months or less.
Concentration of Credit Risk - From time to time during the years
ended December 31, 2006 and 2005, certain bank account balances were
in excess of federally insured limits. The company has not
experienced losses in such accounts and believes it is not exposed to
any significant credit risk on cash.
Recent Accounting Pronouncements
In June 2006, FIN 48, "Accounting for Uncertainty in Income Taxes,"
an interpretation of SFAS No. 109, clarifies the accounting for
uncertainties in income taxes recognized in an enterprise's financial
statements. The Interpretation requires that we determine whether it
is more likely than not that a tax position will be sustained upon
examination by the appropriate taxing authority. If a tax position
meets the more likely than not recognition criteria, FIN 48 requires
the tax position be measured at the largest amount of benefit greater
than fifty percent (50%) likely of being realized upon ultimate
settlement. This accounting standard is effective for fiscal years
beginning after December 15, 2006. The effect, if any, of adopting
FIN 48 is not expected to have a material affect on our financial
position and results of operations.
In September 2006, the Staff of the SEC issued Staff Accounting
Bulletin No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year
Financial Statements" ("SAB No. 108"). SAB No. 108 provides guidance
on the consideration of the effects of prior year misstatements in
quantifying current year misstatements for the purpose of determining
whether the current year's financial statements are materially
misstated. SAB 108 is effective for the Company's fiscal year 2007
annual financial statements. The adoption of SAB 108 is not expected
to have an impact on our financial position, results of operations or
cash flows.
In September 2006, the FASB issued Statement No. 157, "Fair Value
Measurements" ("SFAS 157"). This standard defines fair value,
establishes the framework for measuring fair value in accounting
principles generally accepted in the United States and expands
disclosure about fair value measurements. This pronouncement applies
under other accounting standards that require or permit fair value
measurements.
F-21
MEDPRO SAFETY PRODUCTS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
December 31, 2006 and 2005
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Accordingly, this statement does not require any new fair value
measurement. This statement is effective for fiscal years beginning
after November 15, 2007 and interim periods within those fiscal
years. We are currently evaluating the requirements of SFAS No. 157
and have not yet determined the impact on our financial statements.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities-including an amendment
of FAS 115 ("SFAS No.159"). SFAS No. 159 allows companies to choose,
at specified election dates, to measure eligible financial assets and
liabilities at fair value that are not otherwise required to be
measured at fair value. Unrealized gains and losses shall be reported
on items for which the fair value option has been elected in earnings
at each subsequent reporting date. SFAS No. 159 also establishes
presentation and disclosure requirements. SFAS No. 159 is effective
for fiscal years beginning after November 15, 2007 and will be
applied prospectively. We are currently evaluating the impact of
adopting SFAS No. 159 on our financial position, results of
operations or cash flows.
NOTE 2 - ACQUISITION
During 2006, the Board of Directors authorized the acquisition of
Key-Lok(tm) Needleless IV system. This entity was owned by Baton
Ventures, LLC, which is managed by Baton Development, Inc., an entity
owned by the Company's Vice Chairman. The Company has evaluated the
product for approximately two years, during which the Company
established a strategic plan for developing this product. The product
has previously been manufactured, and it received a 510(k) clearance
to market from the United States Food and Drug Administration
(USFDA). Key-Lok was initially pre-marketed through a number of
potential customers and/or distributors, and through these efforts it
was determined that the product required minor modifications to
achieve acceptance in the marketplace. These modifications have been
engineered but not integrated into existing tooling. The acquisition
included all materials, production equipment tooling, assembly
equipment, supplies, and a packaging machine. The Company agreed to
purchase Key-Lok from Baton Ventures, LLC for 1,600,780 shares of
common stock or approximately $989,000.
NOTE 3 - INVENTORY
The Company's legacy product, Needlyzer(tm), has not experienced the
success anticipated by the Company. The Company has made a decision
to discontinue its selling strategy regarding this product, and plans
to liquidate its inventory completely. It is currently in
negotiations with a customer that has expressed interest in
purchasing the remaining inventories. This customer purchased 72
devices and related equipment from the Company in 2006 for
approximately $315 per unit, and has indicated that they are working
on a proposal to purchase the remaining inventory that the company
has on hand. The Company has reduced the value of this inventory
from its original cost to an amount that is equivalent to its
estimated net realizable value less all applicable disposition costs.
The write down of the inventory from its original cost occurred in
December 31, 2004, and amounted to $394,474.
F-22
MEDPRO SAFETY PRODUCTS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
December 31, 2006 and 2005
NOTE 4 - NOTES PAYABLE TO AND ADVANCES FROM SHAREHOLDERS
Notes payable to and advances from shareholders represent loans and
advances received from officers, directors, shareholders and entities
in which they exert significant control over. They are comprised of
the following:
2006 2005
------------- -------------
Short-term advances with no stated terms
settled in the ordinary course of business $ 191,116 $ 331,320
Demand and Promissory Notes with
interest rates and conversion features 2,770,100 7,034,388
------------- -------------
$ 2,961,216 $ 7,365,708
============= =============
The promissory notes generally contained interest rates ranging to
20% per annum plus penalty interest when they reached maturity and
remained unpaid. At December 31, 2006 and 2005 they included $570,100
in notes that by their terms were convertible at approximately $3.70
per share. The Company has made an offer to the holders of these
convertible notes whereby they may convert their notes into shares of
the Company's common stock at a rate of $0.65 per share. At December
31, 2006 and 2005, an additional $200,000 in promissory notes were
payable to a Director of the Company. The notes are non-interest
bearing until July 1, 2007 at which time interest accrues at 6% per
annum. The Company has also offered to convert these notes into
shares of the Company's common stock at a rate of $0.65 per share. At
December 31, 2006, the balance of the promissory notes was
represented by a $2,000,000 note to a company controlled by the
Company's Chairman as described in the next paragraph.
Interest on the outstanding principal balance will be calculated at
6.0%, beginning on January 1, 2007, on the then unpaid principal
balance until the balance has been retired. Principal and all accrued
interest on the note must be repaid on the date the Company completes
an equity or debt financing resulting in gross proceeds to the
Company of at least $6,000,000. The note also allows for various
penalty provisions in the form of additional interest, as defined in
the note, if all principal and accrued interest is not repaid by
December 31, 2007. The note is callable if not repaid by December
31, 2008.
During 2006, approximately $2.6 million of the 2005 balance of
promissory notes was repaid from the proceeds of the $5,000,000 term
note discussed in Note 6. Also during 2006, another approximately
$1.6 million of the 2005 balance of promissory notes were converted
into shares of the Company stock.
Subsequent to December 31, 2006, the Company has repaid $250,000 of
the convertible promissory notes discussed above.
NOTE 5 - RELATED PARTY TRANSACTIONS
The $2,000,000 demand note payable discussed in Note 4 above is to
CRM Companies, Inc. ("CRM") an entity that is owned by the Company's
Chairman, CEO, and majority stockholder. The note originated on
September 1, 2006 as part of a corporate debt restructuring of the
Company. CRM has continually loaned money to the Company, provided
services for the Company, paid various Company related expenses
directly, guaranteed Company loans, and subsidized the office lease
expense on behalf of the Company, which is located in a building,
owned by a partnership in which the Chairman is a partner. CRM agreed
to forgive amounts otherwise owed or accruable to it under its loan
agreements with the Company in exchange for 2,950,000 shares of
common stock valued at $1,822,805 and a promissory note payable from
the Company in the amount of $2,000,000. The Company recognized a
gain of $1,294,526 in connection with the debt forgiveness from CRM.
F-23
MEDPRO SAFETY PRODUCTS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
December 31, 2006 and 2005
NOTE 5 - RELATED PARTY TRANSACTIONS (continued)
Prior to September 1, 2006, all monies advanced by CRM were
considered advances with no definitive repayment terms. The balance
of these advances totaled $3,188,363 at December 31, 2005.
In addition to the transactions discussed above and in Note 4, the
company incurred interest expense on the indebtedness to shareholders
totaling approximately $415 thousand and $2.8 million for the years
ended December 31, 2006 and 2005, respectively. Accounts payable to
officers and employees of the Company totaled approximately $195
thousand and $295 thousand at December 31, 2006 and 2005,
respectively.
NOTE 6 - LONG-TERM DEBT
Long-term debt at December 31, 2006 and 2005 consists of the
following:
2006 2005
------------- -------------
Payable to Fifth Third Bank, Term Loan, interest
payable at prime plus 2%, monthly payments of
$138,889 beginning August 2008, maturing
August 1, 2011, collateralized by an
assignment of intellectual properties $ 5,000,000 $ -
Payable to Fifth Third Bank, Revolving Line of
Credit, interest at prime, monthly beginning
April 2007, due August 1, 2008 175,000 -
Payable to Whitaker Bank, Draw Loan, interest
payable at 7.5%, monthly payments of
principal and interest of $10,000, due
through July 23, 2010, secured by certain
inventory of the Company 518,095 595,579
------------- -------------
5,693,095 595,579
Less: current portion 83,991 77,484
------------- -------------
Long-term portion $ 5,609,104 $ 518,095
============= =============
The revolving line of credit, as amended in March 2007, permits the
Company to draw up to $1,000,000.
Maturities of long-term debt are summarized as follows:
2008 959,956
2009 1,764,205
2010 1,912,721
2011 972,222
-----------
$ 5,609,104
===========
F-24
MEDPRO SAFETY PRODUCTS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
December 31, 2006 and 2005
NOTE 7 - SHAREHOLDERS' EQUITY
The Company maintains two classes of stock. Common stock with a par
value of $0.01 per share, and Preferred Class A Stock with a par
value of $.01 per share. The Company was authorized to issue
25,000,000 shares of Common Stock and 5,000,000 shares of Preferred
Class A Stock. The Company had outstanding 22,795,529 and 16,681,899
shares of Common Stock at December 31, 2006 and 2005, respectively,
and no Preferred Class A Stock. In addition there were also options
to acquire common stock that were outstanding at December 31, 2006
and 2005, in the amounts of 25,000 and 103,337, respectively. The
options that were outstanding at December 31, 2006 and 2005, were not
issued as part of a plan, but were issued as inducements for
investors and shareholders to provide funding. Of the 103,337 options
outstanding at December 31, 2005, 78,337 options expired unexecuted
during the year ended December 31, 2006.
The Preferred Class A Stock is cumulative with liquidation
preferences and is convertible, at the option of the holder, at any
time into shares of common stock. The Preferred Class A Stock also
carries an automatic conversion feature in the event that the Company
raises at least $20 million dollars in a public offering.
During the year ended December 31, 2005:
Baton Ventures, LLC, an entity managed by Baton Development, Inc., an
entity owned by the Company's Vice Chairman, converted its
Convertible note, in the amount of $1,000,000, and executed a total
of 1,618,313 options associated with this note.
In return for interest earned on its Convertible Note made to the
Company from April 2003 through December 2005 and subsequently
converted (above), the Company settled the interest amount and issued
798,372 shares of Common Stock to Baton Ventures, LLC and its
participating investors for the total accrued interest amount of
$493,336. In return for loans totaling $312,853 made to the Company
from April 2003 through December 2005, the Company issued 312,853
shares of Common Stock to Baton Development, Inc., an entity owned by
the Company's Vice Chairman. Also, for additional loans totaling
$50,000 made to the Company from April 2003 through December 2005,
the company issued an additional 80,915 shares to Baton Development,
Inc. For interest earned on this additional investment of $50,000
the Company settled the accrued interest of $24,667 and issued an
additional 39,919 shares to Baton Development, Inc.
In return for loans totaling $993,013 made to the Company from April
2003 through December 2005, the Company issued 2,648,035 shares to
CRM, an entity owned by the Company's Chairman. Issuance of these
shares was made and approved by the Board of Directors.
During the year ended December 31, 2006:
In recognition for service to the Company, the Board of Directors
granted a total of 450,000 shares of stock to its Board members and
Corporate Secretary. Each person received a grant of 25,000 shares
each year for the years 2003, 2004, and 2005, as the Board had not
issued any shares or compensation to its Board during that period.
In return for the execution of a debt reduction agreement with the
Company, CRM agreed to waive all associated warrants, current loans,
accrued interest payable, and all other considerations in return for
the note payable of $2,000,000 discussed in Note 4 and a grant of
2,950,000 shares of common stock. At the time of the agreement, CRM
had loans in excess of $3,000,000, associated warrants for the
issuance of these loans, accrued management fees payable, and
estimated accrued interest due in excess of $1,500,000. CRM agreed to
eliminate or forgive all debt, interest payable, warrants, options,
and any other associated compensation due in exchange for the common
shares and the note payable. This completes consideration of notes,
payments, and all other activities executed by CRM during the period
from January 1999 through September 2006, see note 5 for more
details.
F-25
MEDPRO SAFETY PRODUCTS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
December 31, 2006 and 2005
The Company elected to acquire a needleless IV system, known as Key-
Lok(tm), a product owned by Baton Ventures, LLC, an entity managed by
Baton Development, Inc., an entity owned by the Company's Vice
Chairman. The purchase was accomplished with stock, and was acquired
for a total of 1,600,780 shares and the assumption of outstanding
legal bills of approximately $10,000. In addition, Baton Ventures,
LLC elected to convert a total of $452,000 in additional bridge loans
to capital stock. These loans were capitalized with the issuance of
731,510 shares of common stock.
An entity that had previously performed accounting and tax services
for the Company, elected to convert its outstanding receivable with
the Company. A Board member and corporate Treasurer, was a member of
this firm. The total outstanding payable of $37,099 was capitalized
with the issuance of 60,040 shares of Common Stock to the firm's
three partners, including the Board member, in equal number of
shares.
Also during 2006, three shareholders converted notes/accounts payable
to shares of common stock. Two note holders converted $98,500 in
outstanding notes payable to 159,462 shares of common stock, and one
shareholder/employee converted $100,000 of the Company's account
payable to him into 161,838 shares of common stock.
NOTE 8 - INCOME TAXES
The company incurred no current or net deferred income tax expense or
benefit for the years ended December 31, 2006 and 2005. Deferred
income taxes reflect the net effects of temporary differences between
the carrying amount of assets and liabilities for financial statement
purposes and the amounts used for income tax purposes.
The tax effects of temporary differences that give rise to
significant portions of the deferred assets at December 31, 2006 and
2005 are presented below:
2006 2005
------------- -------------
Deferred tax assets (liabilities):
Fixed assets $ 3,152 $ 7,627
Accounts receivable - (226,100)
Inventory 124,754 129,226
Accrued interest payable 180,636 670,100
State deferred tax asset 588,958 551,596
Net operating loss carryforwards 3,028,886 2,544,856
Less: valuaton allowance (3,926,386) (3,677,305)
------------- -------------
Net deferred tax assets $ - $ -
============= =============
The Company has deferred tax liabilities as of December 31, 2006 and
2005 of $0 and $226,100, respectively, and the majority of its
deferred tax asset consists of a net operating loss carryforward (tax
effect) of $3,028,886 and $2,544,856, respectively, directly related
to its total net operating loss carryforwards of $8,908,489 and
$7,484,872, respectively. These net operating loss carryforwards
begin expiring in 2015, and are entirely offset by a valuation
allowance of $(3,926,386) and $(3,677,305) as of December 31, 2006
and 2005, respectively. In assessing the realizability of deferred
tax assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax
assets, projected future taxable income, and tax planning strategies
in making this assessment. Management believes it is more likely than
not that some portion or all of the deferred tax assets will not be
realized.
F-26
MEDPRO SAFETY PRODUCTS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements (continued)
December 31, 2006 and 2005
NOTE 9 - LEASE COMMITMENT WITH RELATED PARTY
The Company leases its office and storage facility in Lexington,
Kentucky, under a non-cancelable operating lease with a related
party. On January 10, 2007, the Company signed a lease addendum that
among other things extended the term of the April 16, 1998 lease.
The addendum allowed for an extension of the original lease through
August 2012 in accordance with renewal language in the 1998 lease.
The addendum also contains two five year extension options. The
addendum also acknowledged that the company was in good standing and
was not in arrears on lease payments or in default of any provisions
within the lease or subsequent addendums. The addendum calls for
payments of $3,500 each month for the period from January 1, 2007,
through July 31, 2007. Monthly lease payments will increase to
$6,500 beginning August 1, 2007, and continuing for the remainder of
the initial five year lease term.
Total lease expense was $24,488 and $0 for the years ended December
31, 2006 and 2005, respectively.
Future minimum annual lease payments at December 31, 2006, are as
follows:
2007 $ 57,000
2008 78,000
2009 78,000
2010 78,000
2011 78,000
2012 45,000
NOTE 10 - SUBSEQUENT EVENTS
As discussed in Note 1, on January 10, 2007 the Company affected the
share exchange in connection with its merger with VACUMATE, LLC. This
merger was approved by the Board of Directors in 2006, and approved
by its shareholders at the Annual Shareholders Meeting. The merger
was a stock for stock merger that provided MedPro shareholders with a
post-merger ownership of 40.0% and the non-MedPro members of
VACUMATE, LLC, an ownership of 60.0% in the newly merged company. All
members of VACUMATE, LLC, were existing Company shareholders. The
transaction was completed utilizing a reverse stock split whereby
then existing MedPro shareholders received .4 newly issued shares for
each share then held and post-split shares were issued to the non-
MedPro members of VACUMATE, LLC. Following the reverse stock split
and merger, the company had approximately 22.8 million post-split
shares issued and outstanding. Subsequent to December 31, 2006 the
Company also amended its charter to authorize up to 25 million shares
of its common stock.
F-27
[EXHIBIT A]
=================================================================
Articles of Amendment
of
Articles of Incorporation
of
DENTALSERV.COM
=================================================================
STATE OF NEVADA
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
DENTALSERV.COM
DENTALSERV.COM, a Nevada corporation (the "Corporation"), does hereby
certify that:
First: That the Board of Directors of DentalServ.Com (the
"Corporation") by unanimous written consent dated as of August 13,
2007, adopted resolutions setting forth proposed amendments to the
Articles of Incorporation of the Corporation as hereinafter amended,
declaring such amendments to be advisable and calling for the
submission of such amendments to the stockholders of the Corporation
for consideration thereof. The resolutions setting forth the proposed
amendments are as follows:
Resolved, that the Articles of Incorporation of the Corporation be
amended by changing Article I so that, as amended, said Article
shall be and read as follows:
ARTICLE I NAME
The name of this corporation is: "MEDPRO SAFETY PRODUCTS, INC."
Resolved, that the Articles of Incorporation of the Corporation be
amended by changing Article VI so that, as amended, said Article shall
be and read as follows:
ARTICLE VI AUTHORIZED CAPITAL STOCK
(a) The total number of shares which the Corporation shall
have authority to issue is One Hundred Million (100,000,000),
consisting of Ninety Million (90,000,000) shares of Common Stock, par
value $0.001 per share, (hereafter called the "Common Stock"), and Ten
Million (10,000,000) shares of Preferred Stock, par value $0.01 per
share, (hereinafter called the "Preferred Stock")
(b) As of 5:00 PM, Eastern Standard time, on the
date on which this Amendment to the Articles of Incorporation is
filed with the Secretary of State of the State of Nevada (the
"Effective Time"), each four (4) outstanding shares of common stock,
par value $.001 per share ("Old Common Stock"), without further
action on the part of the Corporation or any of the stockholders,
shall automatically be changed into one (1) share of Common
Stock (the "New Common Stock") (referred to herein as the
"Reverse Split"). At the Effective Time, as a result of the
Reverse Split, each holder of Old Common Stock shall
automatically become the holder of one share of New Common Stock
for every four shares of Old Common Stock held by such holder prior
thereto. Further, at the Effective Time, each certificate formerly
representing a stated number of shares of Old Common Stock shall, as a
result of the Reverse Split, represent one share of New Common Stock
for each four shares of Old Common Stock represented immediately prior
to the Reverse Split.
(c) Shares of Preferred Stock may be issued from time to
time in one or more series as may be established from time to time by
resolution of the Board of Directors of the Corporation (hereinafter
the "Board"), each of which series shall consist of such number of
shares and have such distinctive designation or title as shall be
fixed by resolution of the Board prior to the issuance of any shares
of such series. Each such class or series of Preferred Stock shall
have such voting powers, full or limited, or no voting powers, and
such preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions
thereof, as shall be stated in such resolution of the Board providing
for the issuance of such series of Preferred Stock.
The authorized stock of this corporation may be issued at such time,
upon such terms and conditions and for such consideration as the Board
of Directors will, from time to time determine. Stockholders will not
have pre-emptive rights to acquire unissued shares of the stock of
this corporation."
Second: That thereafter, pursuant to Section 78.320 of the Private
Corporations law, Nevada Revised Statutes, written consents approving
the amendments set forth above were signed by holders of outstanding
voting stock having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting on
such date at which all shares entitled to vote thereon were present
and voted.
Third: That said amendments were duly adopted in accordance with
the provisions of Sections 78.1955, 78.2055, 78.315 & 78.320 of
the Private Corporations law, Nevada Revised Statutes.
Fourth: That the capital of the Corporation shall not be reduced
under or by reason of said amendments.
By: /s/ Lawerence Chimerine
----------------------------
Name: Lawrence Chimerine, President, CEO
-----------------------------------
(Authorized Officer)
[EXHIBIT B]
MEDPRO SAFETY PRODUCTS, INC.
Pro Forma Balance Sheet
as of
December 31, 2006
MedPro DentalServ Pro forma Adjustments Combined
31 DEC 06 31 DEC 06 Debit Credit Total
---------- ---------- --------- ---------- ----------
ASSETS
Current Assets
Cash 59,954 -[1] 10,549,143 - 10,609,097
Accounts Receivable 4,576 - - - 4,576
Inventory 515,013 - - - 515,013
Other Current Assets 45,654 - - - 45,654
---------- ---------- ---------- ---------- ----------
Total Current Assets 625,197 - 10,549,143 - 11,174,340
---------- ---------- ---------- ---------- ----------
Property and Equipment
Equipment and Tooling 500,000 - - - 500,000
Leasehold Improvements 44,764 - - - 44,764
Furniture and Fixtures 37,025 - - - 37,025
Trade Show Booth 7,341 - - - 7,341
---------- ---------- ---------- ---------- ----------
589,130 - - - 589,130
Less: Accumulated Depreciation 71,695 - - - 71,695
---------- ---------- ---------- ---------- ----------
Property and Equipment, net 517,435 - - - 517,435
---------- ---------- ---------- ---------- ----------
Other Assets
Intellectual Properties 3,314,547 - - 3,314,547
Deferred Financing Costs 183,333 - - - 183,333
---------- ---------- ---------- ---------- ----------
Total Other Assets 3,497,880 - - - 3,497,880
---------- ---------- ---------- ---------- ----------
Total Assets 4,640,512 - 10,549,143 - 15,189,655
========== ========== ========== ========== ==========
Explanation of Adjustments:
[1] Addition to cash after all adjustments, issuance costs and pro forma
deemed payments.
See Notes to Financial Statements.
EXH B - 1
MEDPRO SAFETY PRODUCTS, INC.
Pro Forma Balance Sheet
as of
December 31, 2006
MedPro DentalServ Pro forma Adjustments Combined
31 DEC 06 31 DEC 06 Debit Credit Total
---------- ---------- --------- ---------- ----------
LIABILITIES AND SHAREHOLDERS'
(DEFICIT)/EQUITY
Current Liabilities
Accounts Payable and Accrued
Expenses 831,031 - 121,110[2] - 709,921
Accrued Interest Payable 576,222 - 92,253[3] - 483,969
Current Portion of Long Term Debt 83,991 - - - 83,991
Notes Payable to and Advances
from Shareholders 2,961,216 - 1,282,320[4] - 1,678,896
---------- ---------- --------- ---------- ----------
Total Current Liabilities 4,452,460 - 1,495,683 - 2,956,777
---------- ---------- --------- ---------- ----------
Long-Term Liabilities
Notes Payable - Long Term Portion 5,609,104 - - - 5,609,104
---------- ---------- --------- ---------- ----------
Total Liabilities 10,061,564 - 1,495,683 - 8,565,881
---------- ---------- --------- ---------- ----------
Shareholders' (Deficit)/Equity
Common Stock 227,955[5] 5,574[6] 220,254[7] - 13,275
DSRV Preferred Class A, $0.01 Par
Value, 10,000,000 Shares
Authorized, 6,668,230
Issued and Outstanding - - - 66,682[8] 66,682
Additional Paid-in Capital 9,536,206 21,898 27,472[11] 153,571[9] 9,684,203
Accumulated Deficit (15,185,213) (27,472) - 432,298[10] 14,780,387
---------- ---------- --------- ---------- ----------
Total Shareholders'
(Deficit)/Equity (5,421,052) - 247,726 652,552 (5,016,226)
---------- ---------- --------- ---------- ----------
Total Liabilities and
Shareholders' Deficiency 4,640,512 - 1,743,409 652,552 3,549,655
========== ========== ========= ========== ==========
Explanation of Adjustments:
[2] Payoff accrued expenses and accounts payable.
[3] Payoff accrued interest.
[4] Pay off certain Shareholder Loans and conversion of Shareholder debt.
[5] MedPro common stock, $0.01 par value; 25,000,000 shares authorized,
22,795,529 issued and outstanding.
[6] DSRV common stock, $0.001 par value; 90,000,000 shares authorized,
5,612,750 shares issued and outstanding.
[7] Reflects (a) 1 for 4 reverse stock split of DSRV common shares
immediately before the merger; (b) conversion of MedPro common shares
into 11,284,686 DSRV common shares in the merger; (c) issuance of
593,931 DSRV common shares as advisory fee in connection with the
merger.
[8] Represents par value of newly issued DSRV preferred shares.
[9] Reallocation of capital stock to Paid In Capital based on combination
of DSRV common shares in reverse stock split and conversion of MedPro
common shares to lower par value DSRV common shares in the merger. In
addition, issuance of preferred stock for purchase price of $13 million,
less par value.
[10] Effect on Accumulated Deficit of interest expense reduction and write
off of DentalServ Deficit for purchase accounting adjustments.
[11] Close out of DentalServ deficit to Additional Paid in Capital.
See Notes to Financial Statements.
EXH B - 2
MEDPRO SAFETY PRODUCTS, INC.
Pro Forma Income Statement
for the Year Ended
December 31, 2006
MedPro DentalServ Pro forma Adjustments Combined
31 DEC 06 31 DEC 06 Debit Credit Total
---------- ---------- --------- ---------- ----------
INCOME STATEMENT
Sales
Needlyzer 20,565 - - - 20,565
SafeMate 60,803 - - - 60,803
---------- ---------- --------- ---------- ----------
Total Sales 81,368 - - - 81,368
Cost of Goods Sold 38,016 - - - 38,016
---------- ---------- --------- ---------- ----------
Gross Profit 43,352 - - - 43,352
---------- ---------- --------- ---------- ----------
Operating Expenses
Salaries, Wages, and Payroll Taxes 496,322 - - - 496,322
Product Development Costs 352,952 - - - 352,952
Professional and Insurance 156,294 - - - 156,294
General and Administrative 271,473 6,359 - - 277,832
Travel and Entertainment 103,729 - - - 103,729
Depreciation and Amortization 5,523 - - - 5,523
---------- ---------- --------- ---------- ----------
Total Operating Expenses 1,386,293 6,359 - - 1,392,652
---------- ---------- --------- ---------- ----------
Loss from Operations (1,342,941) (6,359) - - (1,349,300)
---------- ---------- --------- ---------- ----------
Other Income (Expenses)
Interest Expense (985,202) - - 404,826[12] (580,376)
Income from Debt Forgiveness with
Related Party 1,294,526 - - - 1,294,526
Interest Income 22,289 - - - 22,289
Other (9,953) - - - (9,953)
---------- ---------- --------- ---------- ----------
Total Other Income (Expenses) 321,660 - - 404,826 726,486
---------- ---------- --------- ---------- ----------
Provision for Income Taxes - - - - -
---------- ---------- --------- ---------- ----------
Net (Loss) (1,021,281) (6,359) - 404,826 (622,814)
========== ========== ========= ========== ==========
Explanation of Adjustments:
[12] Reduction of interest expense and fees due to deemed debt repayments.
See Notes to Financial Statements.
EXH B - 3
MEDPRO SAFETY PRODUCTS, INC.
Pro Forma Balance Sheet
as of
30-Sep-07
MedPro DentalServ Pro forma Adjustments Combined
30 Sep 07 30 Sep 07 Debit Credit Total
---------- ---------- ---------- ---------- ------------
ASSETS
Current Assets
Cash 877,215 12,769 11,640,000[1] 2,482,328[2] 10,047,656
Accounts Receivable 9,264 - 9,264
Inventory 546,944 - - - 546,944
Other Current Assets - - - - -
---------- ---------- ---------- ---------- ------------
Total Current Assets 1,433,423 12,769 11,640,000 2,482,328 10,603,864
---------- ---------- ---------- ---------- ------------
Property and Equipment
Equipment and Tooling 500,005 - - - 500,005
Leasehold Improvements 44,764 - - - 44,764
Furniture and Fixtures 37,776 - - - 37,776
Trade Show Booth 7,341 - - - 7,341
---------- ---------- ---------- ---------- ------------
589,886 - - - 589,886
Less: Accumulated Depreciation 76,910 - - - 76,910
---------- ---------- ---------- ---------- ------------
Property and Equipment, net 512,976 - - - 512,976
Other Assets
Intellectual Properties 3,439,338 - - - 3,439,338
Deferred Financing Costs 178,373 - - - 178,373
---------- ---------- ---------- ---------- ------------
Total Other Assets 3,617,711 - - - 3,617,711
---------- ---------- ---------- ---------- ------------
Total Assets 5,564,110 12,769 11,640,000 2,482,328 14,734,551
========== ========== ========== ========== ============
Explanation of Adjustments
[1] Addition to cash from merger and Vision Capital infusion net of
issuance costs and fees.
[2] Payoff Bridge Loan, Shareholder Loans and Convertible Debt, and
Related Interest.
See Notes to Financial Statements.
EXH B - 4
MEDPRO SAFETY PRODUCTS, INC.
Pro Forma Balance Sheet (Contd.)
as of
30-Sep-07
MedPro DentalServ Pro forma Adjustments Combined
30 Sep 07 30 Sep 07 Debit Credit Total
---------- ---------- ---------- ---------- ------------
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current Liabilities
Accounts Payable and Accrued Expenses 761,609 22,838 - - 784,447
Accrued Interest Payable 421,160 - - - 421,160
Current Portion of Long Term Debt 83,991 - - - 83,991
Notes Payable to and Advances from
Shareholders 4,016,869 45,000 1,420,100[3] - 2,641,769
---------- ---------- ---------- ---------- ------------
Total Current Liabilities 5,283,629 67,838 1,420,100 - 3,931,367
---------- ---------- ---------- ---------- ------------
Long-Term Liabilities
Notes Payable - Long Term Portion 7,015,745 - 1,200,000[4] - 5,815,745
---------- ---------- ---------- ---------- ------------
Total liabilities 12,299,374 67,838 2,620,100 - 9,747,112
---------- ---------- ---------- ---------- ------------
Shareholders' (Deficit)/Equity
Common Stock 248,794[5] 5,606[6] 241,120[7] - 13,280
DSRV Preferred Class A, $0.01 Par
Value, 10,000,000 Shares Authorized,
6,668,230 Issued and Outstanding - - - 66,682[8] 66,682
Additional Paid-in Capital 9,526,245 45,178 105,853[9] 11,841,813[10] 21,307,383
Accumulated Deficit (16,510,303) (105,853) - 216,249[11] (16,399,907)
---------- ---------- ---------- ---------- ------------
Total Shareholders' (Deficit)/Equity (6,735,264) (55,069) 346,973 12,124,744 4,987,438
---------- ---------- ---------- ---------- ------------
Total Liabilities and Shareholders'
Deficiency 5,564,110 12,769 2,967,073 12,124,744 14,734,551
========== ========== ========== ========== ============
Explanation of Adjustments
[3] Shareholder Note Payment and Convertible Notes Payoff.
[4] Payoff Bank Fee and Bridge Loan.
[5] MedPro common stock, $0.01 par value; 25,000,000 shares authorized,
24,879,363 will be issued and outstanding at the merger.
[6] DSRV common stock, $0.001 par value; 90,000,000 shares authorized,
5,612,750 shares issued and outstanding.
[7] Reflects (a) 1 for 4 reverse stock split of DSRV common shares
immediately before the merger; (b) issuance of shares of MedPro
common for KeyLok acquisition, 1,600,780 pre merger shares;
(c) conversion of MedPro common shares into 11,284,686 DSRV common
shares in the merger; (d) issuance of 593,931 DSRV common shares as
advisory fee in connection with the merger.
[8] Issue preferred shares at issue price.
[9] Effect on Paid In Capital from close out of DentalServ deficit for
purchase accounting adjustments.
[10] Net Effect of Reallocation of Capital Stock and the Effect of the New
Capital Infusion from the Merger.
[11] Adjustment to Eliminate DentalServ Deficit and the Credit the Effect
of the Reduction of Interest Expense From the Deemed Payment of Debt.
See Notes to Financial Statements.
EXH B - 5
MEDPRO SAFETY PRODUCTS, INC.
Pro Forma Income Statement
for the Nine Months Ended
30-Sep-07
MedPro DentalServ Pro forma Adjustments Combined
30 Sep 07 30 Sep 07 Debit Credit Total
---------- ---------- ---------- ----------- ------------
INCOME STATEMENT
Sales - - - - -
Needlyzer 10,845 - - - 10,845
SafeMate 47,939 - - - 47,939
---------- ---------- ---------- ---------- ------------
Total Sales 58,784 - - - 58,784
Cost of Goods Sold 10,182 - - - 10,182
---------- ---------- ---------- ---------- ------------
Gross Profit 48,602 - - - 48,602
---------- ---------- ---------- ---------- ------------
Operating Expenses
Salaries, Wages, and Payroll Taxes 262,341 - - - 262,341
Product Development Costs 225,067 - - - 225,067
Professional and Insurance 518,881 - - - 518,881
General and Administrative 284,814 78,381 - - 363,195
Travel and Entertainment 59,740 - - - 59,740
Depreciation and Amortization 4,465 - - - 4,465
---------- ---------- ---------- ---------- ------------
Total Operating Expenses 1,355,308 78,381 - - 1,433,689
---------- ---------- ---------- ---------- ------------
Loss from Operations (1,306,706) (78,381) - - (1,385,087)
Other Income (Expenses)
Interest Expense (674,652) - 72,328[12] 182,724[13] (564,256)
Income from Debt Forgiveness with
Related Party - - -
Interest Income 892 - - - 892
Other (545) - - - (545)
---------- ---------- ---------- ---------- ------------
Total Other Income (Expenses) (674,305) - 72,328 182,724 (563,909)
Provision for Income Taxes - - - - -
---------- ---------- ---------- ---------- ------------
Net (Loss) (1,981,011) (78,381) 72,328 182,724 (1,948,996)
========== ========== ========== ========== ============
Explanation of Adjustments
[12] Interest Deemed Paid on Convertible Notes.
[13] Reduction of Interest Expenses on the Deemed Payment of Debt.
See Notes to Financial Statements.
EXH B - 6
MedPro Safety Products, Inc, And Subsidiary
Notes to Pro forma Consolidated Financial Statements
For the Nine Months Ended September 30, 2007 and
the Year Ended December 31, 2006
The attached pro forma Consolidated Balance Sheets and Consolidated
Statements of Operation for MedPro Safety Products, Inc. (and its
Subsidiary, Vacumate, LLC) and DentalServ.com were prepared on an
unaudited basis using the audited financial statements for December 31,
2006 and the unaudited financial statements for the interim period ended
September 30, 2007. Pro forma adjustments for each period were made as if
the current transaction had been executed on the first day of the
reporting period for these two sets of financial statements.
Pursuant to purchase accounting rules, MedPro Safety Products, Inc. will
be deemed to be the accounting survivor and DentalServ.com will be the
acquired corporation. The only assets of DentalServ.com at the time of
the merger (reverse takeover) will be cash. It has no other identifiable
intangible assets. Pursuant to purchase accounting rules, the deficit of
DentalServ.com is absorbed against MedPro's consolidated Additional Paid
in Capital. This resulted in a reduction of Additional Paid in Capital of
$105,853 and $27,472 for September 30, 2007 and December 31, 2006,
respectively.
The pro forma adjustments included a net increase in Capital Stock and
Additional Paid in Capital for $13,000,000 of new capital infusion, net of
$1,360,000 of issuance costs. This resulted in 13,274,627 shares of
$0.001 par value common stock with a carrying value of $13,275 as of
December 31, 2006 and a capital account of $13,454 as of September 30,
2007 on 13,274,756 shares. The pro forma adjustments also included the
deemed issuance of 6,688,230 of Class A Preferred shares with a par value
of $0.01 for a total of $66,682. The balance of the original capital and
remaining new capital infusion was credited to Additional Paid in Capital
for a total increase of $11,841,639 and $11,793,571 for June 30, 2007 and
December 31, 2006, respectively. The respective balance sheets for each
period were adjusted to reflect additional cash from the new capital
infusion, net of the deemed payment of debt and related interest charges
of $2,620,100 in 2007 and $1,495,683 in 2006. The related interest
expense deemed paid in each period was $110,396 in 2007 and $404,826 in
2006. The increase in cash in 2007 was $9,157,672 and $10,549,143 for the
2006 pro forma balance sheet.
On a pro forma basis, the restated deficit as of September 30, 2007 would
have been $(16,399,907). The reduction in the deficit as of that date was
as a result of a deemed closing of the current transaction as of January
1, 2007, and an expected (pro forma) reduction of certain debt (totaling
$2,620,100) and related interest accruals for the period ended September
30, 2007, thus resulting in a reduction of the loss for the period from
$(2,059,392) to $(1,948,996), for a difference of $110,396. The remainder
of the change in the actual versus the pro forma deficit for the nine
months ended September 30, 2007 related to absorption of the
DentalServ.com deficit into Additional Paid in Capital of $105,853.
Similar pro forma adjustments have been made for the year ended December
31, 2006, as if the current transaction closed on January 1, 2006. The
actual deficit of $(15,212,685) as of December 31, 2006 was reduced by
$404,826 and $27,472 to $(14,780,387) as a result of the deemed reduction
of debt as of January 1, 2006 and the absorption of the DentalServ.com
deficit of $27,472 into Additional Paid in Capital. The pro forma debt
reduction was $1,495,683 and the corresponding reduction of interest
accruals for the period ending December 31, 2006 was $404,826.
EXH B-7
[EXHIBIT C]
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BETWEEN
MEDPRO SAFETY PRODUCTS, INC.
AND
DENTALSERV.COM
November 7, 2007
______________________________________________________________________
Table of Contents
Page
----
ARTICLE I THE MERGER 1
1.1 The Merger 1
1.2 Closing; Effective Time 1
1.3 Effect of the Merger 2
1.4 Conversion of MedPro Common Stock 2
1.5 Surrender of Certificates 2
1.6 No Further Ownership Rights in MedPro Common Stock 3
1.7 Lost, Stolen or Destroyed Certificates 3
1.8 Tax Consequences 4
1.9 Withholding Rights 4
1.10 Taking of Necessary Action; Further Action 4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF DENTALSERV.COM 4
2.1 Organization, Standing and Power 4
2.2 Capital Structure 5
2.3 Authority 5
2.4 Financial Statements 6
2.5 Absence of Certain Changes 6
2.6 Absence of Undisclosed Liabilities 7
2.7 Litigation 7
2.8 Restrictions on Business Activities 7
2.9 Governmental Authorization 7
2.10 Title to Property 7
Page
----
2.11 Intellectual Property 7
2.12 Taxes 8
2.13 Labor Matters 8
2.14 Compliance With Laws 8
2.15 Minute Books 8
2.16 Brokers' and Finders' Fees 8
2.17 Vote Required 8
2.18 Board Approval 9
2.19 Over-the-Counter Bulletin Board Quotation 9
2.20 Representations Complete 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF MEDPRO 9
3.1 Organization, Standing and Power 9
3.2 Capital Structure 10
3.3 Authority 10
3.4 Financial Statements 11
3.5 Absence of Certain Changes 11
3.6 Absence of Undisclosed Liabilities 11
3.7 Litigation 12
3.8 Restrictions on Business Activities 12
Page
----
3.9 Taxes 12
3.10 Labor Matters 13
3.11 Intellectual Property 13
3.12 Interested Party Transactions 13
3.13 Compliance With Laws 13
3.14 Broker's and Finders' Fees 13
3.15 Minute Books 14
3.16 Vote Required 14
3.17 Board Approval 14
3.18 Representations Complete 14
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME 14
4.1 Conduct of Business 14
4.2 Restrictions on Conduct of Business 15
ARTICLE V ADDITIONAL AGREEMENTS 17
5.1 Effectiveness of Merger 17
5.2 Access to Information 17
5.3 Confidential Information; Non-Solicitation or Negotiation 17
5.4 Public Disclosure 18
5.5 Consents 18
5.6 Legal Requirements 19
5.7 Blue Sky Laws 19
5.8 Form 8-K 19
5.9 Indemnification 19
5.10 Tax Treatment 20
5.11 Best Efforts and Further Assurances 21
ARTICLE VI CONDITIONS TO THE MERGER 21
6.1 Conditions to Obligations of Each Party to Effect 21
the Merger
6.2 Additional Conditions to Obligations of Dentalserv.com 21
6.3 Additional Conditions to the Obligations of MedPro 22
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER 23
7.1 Termination 23
7.2 Effect of Termination 24
7.3 Expenses and Termination Fees 24
7.4 Amendment 25
7.5 Extension; Waiver 25
ARTICLE VIII GENERAL PROVISIONS 25
8.1 Non-Survival at Effective Time 25
8.2 Notices 25
8.3 Interpretation 26
8.4 Counterparts 27
8.5 Entire Agreement; Nonassignability; Parties in Interest 27
8.6 Severability 27
8.7 Remedies Cumulative 27
8.8 Governing Law 27
8.9 Rules of Construction 27
______________________________________________________________________
TABLE OF CONTENTS
-----------------
EXHIBITS
A - Certificate of Merger
B - Amended and Restated Articles of Incorporation
SCHEDULES
- ---------
Dentalserv.com Disclosure Schedule
MedPro Disclosure Schedule
_____________________________________________________________________
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the
---------
"Agreement") is made and entered into as of September 5, 2007, by
and among Dentalserv.com, a Nevada corporation ("Dentalserv.com") and
--------------
MedPro Safety Products Inc., a Delaware corporation ("MedPro").
------
R E C I T A L S
---------------
A. The Boards of Directors of Dentalserv.com and MedPro
believe it is in the best interests of their respective companies
and the stockholders of their respective companies that
Dentalserv.com and MedPro combine into a single Dentalserv.com
through the statutory merger of Dentalserv.com and MedPro (the
"Merger") and, in furtherance thereof, have approved the Merger.
------
B. Pursuant to the Merger, among other things, the
outstanding shares of MedPro common stock, $.01 par value
("MedPro Common Stock"), shall be converted into shares of
-------------------
Dentalserv.com Common Stock, $.001 par value ("Dentalserv.com
--------------
Common Stock").
- ------------
C. Dentalserv.com and MedPro desire to make certain
representations and warranties and other agreements in connection
with the Merger.
D. The parties intend, by executing this Agreement, to
adopt a plan of reorganization within the meaning of Section 368
of the Internal Revenue Code of 1986, as amended (the "Code"),
----
and to cause the Merger to qualify as a reorganization under the
provisions of Section 368 of the Code.
E. In respect of the foregoing, the parties entered into
an Agreement and Plan of Merger on September 5, 2007 (the "
Original Agreement").
F. In order to clarify certain matters, principally the
Exchange Ratio (as set forth in Section 1.4 hereof) and the Final
Date (as set forth in Section 7.1(b) hereof), the parties hereto
are entering into this Agreement which amends, restates and
replaces the Original Agreement, effective as of the date first
written above.
NOW, THEREFORE, in consideration of the covenants and
representations set forth herein, and for other good and valuable
consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
THE MERGER
----------
1.1 The Merger. At the Effective Time (as defined in
----------
Section 1.2) and subject to and upon the terms and conditions of
this Agreement and the Certificate of Merger substantially in the
form attached hereto as Exhibit A and in accordance with the
applicable provisions of the Nevada Revised Statutes ("Nevada
------
Law") and the Delaware General Corporation Law ("Delaware Law"),
- ---- ------------
MedPro shall be merged with and into Dentalserv.com, the separate
corporate existence of the MedPro shall cease and Dentalserv.com
shall continue as the surviving corporation and shall take the
name "MedPro Safety Products, Inc.". Dentalserv.com as the
surviving corporation after the Merger is hereinafter sometimes
referred to as the "Surviving Corporation."
---------------------
1.2 Closing; Effective Time. The closing of the
-----------------------
transactions contemplated hereby (the "Closing") shall take place
-------
as soon as practicable after the satisfaction or waiver of each
of the conditions set forth in Article VI hereof or at such other
----------
time as the parties hereto agree (the "Closing Date"). The
------------
Closing shall take place at the offices of Lord, Bissell &
Brook LLP, 885 Third Avenue, 26th Floor, New York, NY 10022,
or at such other location as the parties hereto
agree. In connection with the Closing, the parties hereto
shall cause the Merger to be consummated by filing the Certificate
of Merger with the Secretary of State of the State of Nevada, in
accordance with the relevant provisions of Nevada Law (the time
of such filing being the "Effective Time"). Promptly after the Closing,
--------------
a certified copy of the Certificate of Merger as filed with the Secretary
of State of the State of Nevada shall be filed with the Secretary of
State of the State of Delaware.
1.3 Effect of the Merger. At the Effective Time, the
--------------------
effect of the Merger shall be as provided in this Agreement, the
Certificate of Merger and the applicable provisions of Nevada Law
and Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time:
(a) all debts, liabilities and duties of MedPro shall
become the debts, liabilities and duties of the Surviving Corporation;
(b) the Articles of Incorporation of the Surviving
Corporation shall be the Articles of Incorporation attached to
the Certificate of Merger as filed with the Secretary of State of
the State of Nevada, until thereafter amended as provided by law
and such Articles of Incorporation;
(c) the Bylaws of MedPro, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation, except as to the name of the Surviving Corporation,
which shall be MedPro Safety Products, Inc., until thereafter
amended as provided by law, the Articles of Incorporation of the
Surviving Corporation and such Bylaws; and
(d) the persons designated by MedPro on Schedule 6.2(e)
---------------
shall become, in the manner set forth in Section 6.3(e), the
--------------
directors and officers of the Surviving Corporation from and after
the Effective Time, in each case until their respective successors
shall have been duly elected, designated or qualified, or until their
earlier death, resignation or removal in accordance with the
Surviving Corporation's Articles of Incorporation and Bylaws.
1.4 Conversion of MedPro Common Stock. At the Effective
---------------------------------
Time, by virtue of the Merger and without any action on the part
of the holders of MedPro Common Stock or the holders of the
Dentalserv.com Common Stock, each of the 24,879,363 shares of
MedPro Common Stock, which will then constitute all of the issued
and outstanding shares of the capital stock of MedPro, shall be
converted into 11,284,696 fully paid and nonassessable shares of
Dentalserv.com Common Stock (the "Exchange Ratio").
--------------
1.5 Surrender of Certificates.
-------------------------
(a) Exchange Agent. The transfer agent of
--------------
Dentalserv.com shall act as exchange agent (the "Exchange Agent")
--------------
in the Merger.
(b) Dentalserv.com to Provide Common Stock. Promptly
--------------------------------------
after the Effective Time, Dentalserv.com shall make available to
the Exchange Agent for exchange in accordance with this Article I,
through such reasonable procedures as Dentalserv.com may adopt,
the shares of Dentalserv.com Common Stock into which the
2
shares of MedPro Common Stock outstanding immediately prior to
the Effective Time were converted pursuant to Section 1.4.
-----------
(c) Exchange Procedures. Promptly after the Effective
-------------------
Time, the Surviving Corporation shall cause the Exchange
Agent to mail to each holder of record of a certificate or
certificates (the "Certificates") which immediately prior to
------------
the Effective Time represented outstanding shares of MedPro
Common Stock whose shares were converted into the right to
receive shares of Dentalserv.com Common Stock as set forth
in Section 1.4, pursuant to (i) a letter of transmittal and
-----------
(ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates or agreements
representing shares of MedPro Common Stock. Upon surrender
of a Certificate to the Exchange Agent or to such other
agent or agents as may be appointed by the Surviving
Corporation, together with such letter of transmittal, duly
completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall
be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Dentalserv.com
Common Stock and the Certificate so surrendered shall
forthwith be canceled. Until so surrendered, each
outstanding Certificate that, prior to the Effective Time,
represented shares of MedPro Common Stock will be deemed
from and after the Effective Time, for all corporate
purposes, to evidence the ownership of the number of full
shares of Dentalserv.com Common Stock into which such shares
of MedPro Common Stock were otherwise converted at the
Effective Time.
(d) Transfers of Ownership. If any certificate for
----------------------
shares of Dentalserv.com Common Stock are to be issued in a
name other than that in which the Certificate surrendered in
exchange therefor is registered, it will be a condition of
the issuance thereof that the Certificate so surrendered be
accompanied by a duly completed and validly executed letter
of transmittal in proper form for transfer and that the
person requesting such exchange will have paid to MedPro or
any agent designated by it any transfer or other taxes
required by reason of the issuance of a certificate for
shares of Dentalserv.com Common Stock in any name other than
that of the registered holder of the Certificate
surrendered, or established to the satisfaction of the
Surviving Corporation or any agent designated by it that
such tax has been paid or is not payable.
1.6 No Further Ownership Rights in MedPro Common Stock.
--------------------------------------------------
All shares of Dentalserv.com Common Stock issued upon the
surrender of Certificates pursuant to Section 1.5(c) shall be
--------------
deemed to have been issued in full satisfaction of all rights
pertaining to such securities, and there shall be no further
registration of transfers on the records of MedPro of shares of
MedPro Common Stock which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates
are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article I.
1.7 Lost, Stolen or Destroyed Certificates. If any
--------------------------------------
Certificates shall have been lost, stolen or destroyed, the
Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Certificates, upon the making of an affidavit of that
fact by the holder thereof, such shares of Dentalserv.com Common
Stock as may be required pursuant to Section 1.4.
-----------
3
1.8 Tax Consequences. It is intended by the parties
----------------
hereto that the Merger shall constitute a reorganization within
the meaning of Section 368 of the Code.
1.9 Withholding Rights. The Surviving Corporation shall
------------------
be entitled to deduct and withhold from the number of shares of
Dentalserv.com Common Stock otherwise deliverable under this
Agreement, such amounts as the Surviving Corporation is required,
and MedPro acknowledges and agrees is required, to deduct and
withhold with respect to such delivery and payment under the Code
or any provision of state, local, provincial or foreign tax law.
To the extent that amounts are so withheld, such withheld amounts
shall be treated for all purposes of this Agreement as having
been delivered and paid to the former holder of shares of MedPro
Common Stock in respect of which such deduction and withholding
was made by the Surviving Corporation.
1.10 Taking of Necessary Action; Further Action. If, at
--------------------------
any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right,
title and possession to all assets, property, rights, privileges,
powers and franchises of MedPro, the officers and directors of
MedPro and Dentalserv.com are fully authorized in the name of
their respective corporations or otherwise to take, and will
take, all such lawful and necessary action, so long as such
action is not inconsistent with this Agreement
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF DENTALSERV.COM
------------------------------------------------
In this Agreement, any reference to any event, change,
condition or effect being "material" with respect to any person
--------
means any material event, change, condition or effect related to
the condition (financial or otherwise), properties, assets
(including intangible assets), liabilities, business, operations
or results of operations of such person and its subsidiaries,
taken as a whole. In this Agreement, any reference to a "Material
--------
Adverse Effect" with respect to any person means any event,
- --------------
change or effect that is materially adverse to the condition
(financial or otherwise), properties, assets, liabilities,
business, operations or results of operations of such person and
its subsidiaries, taken as a whole.
Except as disclosed in that section of the document dated as
of the date of this Agreement and delivered by Dentalserv.com to
MedPro prior to the execution and delivery of this Agreement (the
"Dentalserv.com Disclosure Schedule") corresponding to the
Section of this Agreement to which any of the following
representations and warranties specifically relate or as
disclosed in another section of the Dentalserv.com Disclosure
Schedule unless it is reasonably apparent to MedPro from the
nature of the disclosure that it is applicable to another Section
of this Agreement, Dentalserv.com represents and warrants to
MedPro as follows:
2.1 Organization, Standing and Power. Dentalserv.com is a
--------------------------------
corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. Dentalserv.com has
the power to own its properties and to carry on its business as now
being conducted and as presently proposed to be conducted and is
duly authorized and qualified to do
4
business and is in good standing in each jurisdiction in which the
failure to be so qualified and in good standing would have a Material
Adverse Effect on Dentalserv.com. Dentalserv.com has delivered or
made available to MedPro a true and correct copy of the Articles of
Incorporation (the "Articles of Incorporation"), and the Bylaws,
-------------------------
or other charter documents, as applicable, of Dentalserv.com, as
amended to date. Dentalserv.com is not in violation of any of
the provisions of its charter or bylaws. Dentalserv.com does not
directly or indirectly own any equity or similar interest in, or
any interest convertible or exchangeable or exercisable for, any
equity or similar interest in, any corporation, partnership,
joint venture or other business association or entity.
Schedule 2.1 of the Dentalserv.com Disclosure Schedule lists, and
- - ------------------------------------------------------
Dentalserv.com has delivered to MedPro copies of, the charters of
each committee of Dentalserv.com's Board of Directors and any
code of conduct or similar policy adopted by Dentalserv.com.
2.2 Capital Structure. The authorized capital stock of
-----------------
Dentalserv.com consists of 90,000,000 shares of common stock,
$0.001 par value, of which there were issued and outstanding as
of the close of business as of the date hereof, 1,401,438 shares
of Dentalserv.com Common Stock, along with 28,888,186 warrants to
purchase shares of Dentalserv.com Common Stock, and 10,000,000
shares of preferred stock, $0.001 par value (the "Dentalserv.com
--------------
Preferred Stock"), of which 6,668,230 were issued and outstanding
- ---------------
as of the close of business as of the date hereof. There are no
other outstanding shares of capital stock or voting securities
and no outstanding commitments to issue any shares of capital
stock or voting securities after the date hereof. All outstanding
shares of Dentalserv.com Common Stock are duly authorized,
validly issued, fully paid and non-assessable and are free of any
liens or encumbrances other than any liens or encumbrances
created by or imposed upon the holders thereof, and are not
subject to preemptive rights or rights of first refusal created
by statute, the Articles of Incorporation or Bylaws of
Dentalserv.com or any agreement to which Dentalserv.com is a
party or by which it is bound.
2.3 Authority. Dentalserv.com has all requisite corporate
---------
power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby, subject only to
the adoption of this Agreement by Dentalserv.com's stockholders
holding a majority of the outstanding shares of Dentalserv.com
Common Stock. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the
part of Dentalserv.com, subject only to the adoption of this
Agreement by Dentalserv.com's stockholders holding a majority of
the outstanding shares of Dentalserv.com Common Stock. This
Agreement has been duly executed and delivered by Dentalserv.com
and constitutes the valid and binding obligation of
Dentalserv.com enforceable against Dentalserv.com in accordance
with its terms, except as enforceability may be limited by
bankruptcy and other laws affecting the rights and remedies of
creditors generally and general principles of equity. The
execution and delivery of this Agreement by Dentalserv.com does
not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both),
or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under (i)
any provision of the Articles of Incorporation or Bylaws of
Dentalserv.com, as amended, or (ii) any material mortgage, indenture,
lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Dentalserv.com or any of its
properties or assets, except where such conflict, violation, default,
termination, cancellation or acceleration
5
with respect to the foregoing provisions of subsection (ii) above
could not have had and could not reasonably be expected to have a
Material Adverse Effect on Dentalserv.com. No consent, approval,
order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other
governmental authority or instrumentality ("Governmental Entity")
-------------------
is required by or with respect to Dentalserv.com in connection
with the execution and delivery of this Agreement, or the
consummation of the transactions contemplated hereby and
thereby, except for (i) the filing of the Certificate of
Merger as provided in Section 1.2; (ii) the filing
-----------
with the SEC of Form D; (iii) the filing of a Form 8-K with the
SEC within four (4) business days after the Closing Date; (iv)
such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable
state securities laws and the securities laws of any foreign
country; (v) such filings, if any, as may be required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
("HSR"); and (vi) such other consents, authorizations, filings,
---
approvals and registrations which, if not obtained or made, would
not have a Material Adverse Effect on Dentalserv.com and would
not prevent, or materially alter or delay any of the transactions
contemplated by this Agreement.
2.4 Financial Statements. Dentalserv.com has provided to
--------------------
MedPro a correct and complete copy of the audited consolidated
financial statements (including any related notes thereto) of
Dentalserv.com for the fiscal year ended December 31, 2006 (the
"Financial Statements"). The Financial Statements were prepared
--------------------
in accordance with generally accepted accounting principles of
the United States ("GAAP") applied on a consistent basis
----
throughout the periods involved (except as may be indicated in
the notes thereto), and each fairly presents in all material
respects the financial position of Dentalserv.com at the
respective dates thereof and the results of its operations and
cash flows for the periods indicated.
2.5 Absence of Certain Changes. Since June 30, 2007 (the
--------------------------
"Dentalserv.com Balance Sheet Date"), Dentalserv.com has
---------------------------------
conducted its business in the ordinary course consistent with
past practice and there has not occurred: (i) any change, event
or condition that has resulted in, or is reasonably likely to
result in, or to the best of Dentalserv.com's knowledge any event
beyond Dentalserv.com's control that is reasonably likely to
result in, a Material Adverse Effect to Dentalserv.com; (ii) any
acquisition, sale or transfer of any material asset of
Dentalserv.com other than in the ordinary course of business and
consistent with past practice; (iii) any change in accounting
methods or practices by Dentalserv.com ; (iv) any declaration,
setting aside, or payment of a dividend or other distribution
with respect to the shares of Dentalserv.com, or any direct or
indirect redemption, purchase or other acquisition by
Dentalserv.com of any of its shares of capital stock; (v) any
material contract entered into by Dentalserv.com, other than in
the ordinary course of business, or any amendment or termination
of, or default under, any material contract to which
Dentalserv.com is a party; (vi) any amendment or change to
Dentalserv.com's Articles of Incorporation or Bylaws; or (vii)
any increase in or modification of the compensation or benefits
payable, or to become payable, by Dentalserv.com to any of its
directors or employees, other than pursuant to scheduled annual
performance reviews, provided that any resulting modifications
are in the ordinary course of business and consistent with
Dentalserv.com's past practices. Dentalserv.com has not agreed
since June 30, 2007 to do any of the things described in the
preceding clauses (i) through (vii) and is not currently involved
in any negotiations to take any of the actions described in the
preceding clauses (i) through (vii) (other than negotiations with
MedPro and its representatives regarding the transactions
contemplated by this Agreement).
6
2.6 Absence of Undisclosed Liabilities. Dentalserv.com
----------------------------------
has no material obligations or liabilities of any nature (matured
or unmatured, fixed or contingent) other than (i) those set forth
or adequately provided for in the Balance Sheet included in
Financial Statements (the "Dentalserv.com Balance Sheet"), (ii)
----------------------------
those incurred in the ordinary course of business and not
required to be set forth in Dentalserv.com Balance Sheet under
GAAP, (iii) those incurred in the ordinary course of business
since Dentalserv.com Balance Sheet date and not reasonably likely
to have a Material Adverse Effect on Dentalserv.com; and (iv)
those incurred in connection with the execution of this
Agreement.
2.7 Litigation. There is no private or governmental
----------
action, suit, proceeding, claim, arbitration, audit or
investigation pending before any agency, court or tribunal,
foreign or domestic, or, to the knowledge of Dentalserv.com,
threatened against Dentalserv.com of its officers or directors
(in their capacities as such) that, individually or in the
aggregate, would reasonably be expected to have a Material
Adverse Effect on Dentalserv.com. There is no injunction,
judgment, decree, order or regulatory restriction imposed upon
Dentalserv.com or its assets or business, or, to the knowledge of
Dentalserv.com any of its directors or officers (in their
capacities as such), that would prevent, enjoin, alter or
materially delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a
Material Adverse Effect on Dentalserv.com. Schedule 2.7 of
---------------
Dentalserv.com Disclosure Schedule lists all actions, suits,
- - ----------------------------------
proceedings, claims, arbitrations, audits and investigations
pending before any agency, court or tribunal that involve
Dentalserv.com.
2.8 Restrictions on Business Activities. There is no
-----------------------------------
agreement, judgment, injunction, order or decree binding upon
Dentalserv.com which has or reasonably could be expected to have
the effect of prohibiting or materially impairing any business
practice of Dentalserv.com, any acquisition of property by
Dentalserv.com or the conduct of business by Dentalserv.com.
2.9 Governmental Authorization. Dentalserv.com has
--------------------------
obtained each federal, state, county, local or foreign
governmental consent, license, permit, grant, or other
authorization of a Governmental Entity (i) pursuant to which
Dentalserv.com currently operates or holds any interest in any of
its properties or (ii) that is required for the operation of
Dentalserv.com's business or the holding of any such interest
((i) and (ii) herein collectively called "Dentalserv.com
--------------
Authorizations"), and all of such Dentalserv.com Authorizations
- --------------
are in full force and effect, except where the failure to obtain
or have any of such Dentalserv.com Authorizations or where the
failure of such Dentalserv.com Authorizations to be in full force
and effect could not reasonably be expected to have a Material
Adverse Effect on Dentalserv.com.
2.10 Title to Property. Dentalserv.com has good and valid
-----------------
title to all of its properties, interests in properties and
assets, real and personal, reflected in Dentalserv.com Balance
Sheet.
2.11 Intellectual Property. Dentalserv.com owns, or is
---------------------
licensed or otherwise possesses legally enforceable and unencumbered
rights to use, all patents, trademarks, trade names, service marks,
domain names, copyrights, and any applications therefor, maskworks,
schematics, trade secrets, computer software programs (in both
source code, except in circumstances where Dentalserv.com only
possesses a license to the object code form, and object
7
code form), and tangible or intangible proprietary information or
material ("Intellectual Property") that are used in the business
---------------------
of Dentalserv.com ("Dentalserv.com Intellectual Property").
------------------------------------
2.12 Taxes. Dentalserv.com properly completed and timely
-----
filed all Tax Returns (as defined below) required to be filed by
them and have paid all Taxes (as defined below) required to be
paid, whether or not shown on any Tax Return. All unpaid Taxes of
Dentalserv.com and its subsidiaries for periods through December
30, 2006, are reflected in Dentalserv.com Balance Sheet.
"Tax" or "Taxes" shall mean all taxes, charges, fees,
duties, levies, penalties or other assessments imposed by any
federal, state, local or foreign governmental authority,
including income, gross receipts, excise, property, sales, gain,
use, license, custom duty, unemployment, capital stock, transfer,
franchise, payroll, withholding, social security, minimum
estimated, profit, gift severance, value added, disability,
premium, recapture, credit, occupation, service, leasing,
employment, stamp and other taxes, and shall include interest,
penalties or addition attributable thereto or attributable to any
failure to comply with any requirement Tax Returns.
"Tax Return" shall mean any return, declaration, report,
claim for refund, or information return or statement relating to
Taxes, including any such document prepared on a consolidated,
combined or unitary basis and also including any schedule or
attachment thereto and including any amendment thereof.
2.13 Labor Matters. Dentalserv.com is not a party to any
-------------
collective bargaining agreement or other labor union contract
applicable to persons employed by Dentalserv.com nor does
Dentalserv.com know of any activities or proceedings of any labor
union to organize any such employees.
2.14 Compliance With Laws. To Dentalserv.com's knowledge,
--------------------
Dentalserv.com has complied with, are not in violation of, and
have not received any notices of violation with respect to, any
federal, state, local or foreign statute, law or regulation with
respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures
to comply as could not be reasonably expected to have a Material
Adverse Effect on Dentalserv.com.
2.15 Minute Books. The minute books of Dentalserv.com made
------------
available to MedPro contain in all material respects a complete
and accurate summary of all meetings of directors and
stockholders or actions by written consent of Dentalserv.com
during the past three years and through the date of this
Agreement, and reflect all transactions referred to in such
minutes accurately in all material respects.
2.16 Brokers' and Finders' Fees. Dentalserv.com has not
--------------------------
incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions
or investment bankers' fees or any similar charges in connection
with this Agreement or any transaction contemplated hereby except
as disclosed on Schedule 2.16.
2.17 Vote Required. The affirmative vote of
-------------
Dentalserv.com's stockholders holding a majority of the outstanding
shares of Dentalserv.com Common Stock is the only vote of the
8
holders of any of Dentalserv.com's capital stock necessary to
approve this Agreement and the transactions contemplated hereby.
2.18 Board Approval. The Board of Directors of
--------------
Dentalserv.com has (i) approved this Agreement and the Merger,
(ii) determined that this Agreement and the Merger are advisable
and in the best interests of the stockholders of Dentalserv.com
and are on terms that are fair to such stockholders and (iii)
intends to recommend that the stockholders of Dentalserv.com
approve this Agreement and consummation of the Merger.
2.19 Over-the-Counter Bulletin Board Quotation.
-----------------------------------------
Dentalserv.com Common Stock is quoted on the Over-the-Counter
Bulletin Board ("OTC BB"). There is no action or proceeding
------
pending or, to Dentalserv.com's knowledge, threatened against
Dentalserv.com by Nasdaq or NASD, Inc. ("NASD") with respect to
----
any intention by such entities to prohibit or terminate the
quotation of Dentalserv.com Common Stock on the OTC BB.
2.20 Representations Complete. None of the
------------------------
representations or warranties made by Dentalserv.com herein or in
any Schedule hereto, including the Dentalserv.com Disclosure
Schedule, or certificate furnished by Dentalserv.com pursuant to
this Agreement, when all such documents are read together in
their entirety, contains or will contain at the Effective Time
any untrue statement of a material fact, or omits or will omit at
the Effective Time to state any material fact necessary in order
to make the statements contained herein or therein, in the light
of the circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MEDPRO
----------------------------------------
Except as disclosed in that section of the document dated as
of the date of this Agreement and delivered by MedPro to
Dentalserv.com prior to the execution and delivery of this
Agreement (the "MedPro Disclosure Schedule") corresponding to the
--------------------------
Section of this Agreement to which any of the following representations
and warranties specifically relate or as disclosed in another section
of the MedPro Disclosure Schedule if it is reasonably applicable to
MedPro on the face of the disclosure that it is applicable to another
Section of this Agreement, MedPro represents and warrants to
Dentalserv.com as follows:
3.1 Organization, Standing and Power. MedPro is a
--------------------------------
corporation duly organized, validly existing and in good
standing, and no certificates of dissolutions have been filed
under the laws of its jurisdiction of organization. MedPro and
its subsidiaries have the corporate power to own its properties
and to carry on its business as now being conducted and as
proposed to be conducted and is duly qualified to do business and
is in good standing in each jurisdiction in which the failure to
be so qualified and in good standing would have a Material
Adverse Effect on MedPro. MedPro has delivered or made available
to Dentalserv.com a true and correct copy of the Certificate of
Incorporation (the "Certificate of Incorporation"), and the
----------------------------
Bylaws, or other charter documents, as applicable, of MedPro, as
amended to date. MedPro is not in violation of any of the
provisions of its charter or bylaws or equivalent organizational
documents. MedPro is not in violation of any of the provisions
of its Certificate of Incorporation or Bylaws or equivalent
organizational documents. Except as disclosed in Schedule 3.1 of
---------------
the MedPro Disclosure Schedule, MedPro does not directly or
- - ------------------------------
indirectly own any equity or similar interest in,
9
or any interest convertible or exchangeable or exercisable for,
any equity or similar interest in, any corporation, partnership,
joint venture or other business association or entity. Schedule 3.1
------------
of the MedPro Disclosure Schedule lists, and MedPro has delivered to
- ---------------------------------
Dentalserv.com copies of, the charters of each committee of
MedPro's Board of Directors and any code of conduct or similar
policy adopted by MedPro.
3.2 Capital Structure. The authorized capital stock of
-----------------
MedPro consists of 25,000,000 shares of common stock, $.01 par
value, of which 22,820,529 shares of MedPro Common Stock were
issued and outstanding as of the close of business on the date
hereof and 5,000,000 shares of preferred stock, $.01 par value,
none of which were issued and outstanding as of the close of
business on the date hereof. MedPro has (a) convertible notes
outstanding which MedPro expects to be converted in accordance
with their terms, into 476,013.50 shares of MedPro Common Stock
before the Effective Time; and (b) agreements to convert debt and
other obligations of MedPro into 1,582,820.50 shares of MedPro
Common Stock before the Effective Time. There are no other
outstanding shares of capital stock or voting securities and no
outstanding commitments to issue any shares of capital stock or
voting securities after the date hereof. All outstanding shares
of MedPro Common Stock are duly authorized, validly issued, fully
paid and non-assessable and are free of any liens or encumbrances
other than any liens or encumbrances created by or imposed upon
the holders thereof, and are not subject to preemptive rights or
rights of first refusal created by statute, the Certificate of
Incorporation or Bylaws of MedPro or any agreement to which
MedPro is a party or by which it is bound.
3.3 Authority. MedPro has all requisite corporate power
---------
and authority to enter into this Agreement and to consummate the
transactions contemplated hereby, subject only to the adoption of
this Agreement by MedPro's stockholders holding a majority of the
outstanding shares of MedPro Common Stock. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby has been duly authorized by all necessary corporate
action on the part of MedPro, subject only to the adoption of this
Agreement by MedPro's stockholders holding a majority of the outstanding
shares of MedPro Common Stock. This Agreement has been duly executed and
delivered by MedPro and constitutes the valid and binding obligation of
MedPro enforceable against MedPro in accordance with its terms, except
as enforceability may be limited by bankruptcy and other laws affecting
the rights and remedies of creditors generally and general principles
of equity. The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated hereby will
not, conflict with, or result in any violation of, or default under
(with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any
obligation or loss of any benefit under (i) any provision of the
Certificate of Incorporation or Bylaws of MedPro or any of its
subsidiaries, as amended, or (ii) any material mortgage, indenture,
lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to MedPro or any of its
subsidiaries or their properties or assets, except where such
conflict, violation, default, termination, cancellation or
acceleration with respect to the foregoing provisions of subsection
(ii) above could not have had and could not reasonably be expected
to have a Material Adverse Effect on MedPro. No consent, approval,
order or authorization of, or registration, declaration or filing
with, any Governmental Entity, is required by or with respect to
MedPro or any of its subsidiaries in connection with the execution
and delivery of this Agreement by MedPro or the consummation by MedPro
of the transactions contemplated hereby, except for (i) the filing of the
10
Certificate of Merger as provided in Section 1.2; (ii) any filings
-----------
as may be required under applicable state securities laws and the
securities laws of any foreign country; (v) any filings required
with the OTC BB with respect to the shares of MedPro Common Stock
issuable upon exchange of Dentalserv.com Common Stock in the
Merger; and (vi) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would
not have a Material Adverse Effect on MedPro and would not
prevent or materially alter or delay any of the transactions
contemplated by this Agreement.
3.4 Financial Statements. The financial statements of
--------------------
MedPro provided to Dentalserv.com, including the notes thereto
(the "MedPro Financial Statements") were complete and correct in
---------------------------
all material respects as of their respective dates, complied as
to form in all material respects with applicable accounting
requirements, and have been prepared in accordance with GAAP
applied on a basis consistent throughout the periods indicated
and consistent with each other. The MedPro Financial Statements
fairly present the consolidated financial condition and operating
results of MedPro and its subsidiaries at the dates and during
the periods indicated therein (subject, in the case of unaudited
statements, to normal, recurring year-end adjustments).
3.5 Absence of Certain Changes. Since June 30, 2007
--------------------------
(the "MedPro Balance Sheet Date"), MedPro has conducted its
-------------------------
business in the ordinary course consistent with past practice and
there has not occurred: (i) any change, event or condition
(whether or not covered by insurance) that has resulted in, or is
reasonably likely to result in, or to the best of MedPro's
knowledge any event beyond MedPro's control that is reasonably
likely to result in, a Material Adverse Effect to MedPro; (ii)
any acquisition, sale or transfer of any material asset of MedPro
or any of its subsidiaries other than in the ordinary course of
business and consistent with past practice; (iii) any change in
accounting methods or practices (including any change in
depreciation or amortization policies or rates) by MedPro or any
revaluation by MedPro of any of its or any of its subsidiaries'
assets; (iv) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the shares of
MedPro, or any direct or indirect redemption, purchase or other
acquisition by MedPro of any of its shares of capital stock; (v)
any material contract entered into by MedPro or any of its
subsidiaries, other than in the ordinary course of business, or
any amendment or termination of, or default under, any material
contract to which MedPro or any of its subsidiaries is a party or
by which it is bound; (vi) any amendment or change to MedPro's
Certificate of Incorporation or Bylaws except as required by the
transactions contemplated hereby; or (vii) any increase in or
modification of the compensation or benefits payable, or to
become payable, by MedPro to any of its directors or employees,
other than pursuant to scheduled annual performance reviews,
provided that any resulting modifications are in the ordinary
course of business and consistent with MedPro's past practices.
MedPro has not agreed since June 30, 2007 to do any of the things
described in the preceding clauses (i) through (vii) and is not
currently involved in any negotiations to take any of the actions
described in the preceding clauses (i) through (vii) (other than
negotiations with Dentalserv.com and its representatives
regarding the transactions contemplated by this Agreement).
3.6 Absence of Undisclosed Liabilities. MedPro has no
----------------------------------
material obligations or liabilities of any nature (matured or
unmatured, fixed or contingent) other than (i) the Balance Sheet
set forth on Schedule 3.6 of the MedPro Disclosure Schedule,
----------------------------------------------
dated as of December 31, 2006 (the "MedPro Balance Sheet"), (ii)
--------------------
those incurred in the ordinary course of business and
not required to be set forth in the MedPro Balance Sheet
under GAAP, (iii) those incurred in the
11
ordinary course of business since the MedPro Balance Sheet date
and not reasonably likely to have a Material Adverse Effect on
MedPro, and (iv) those incurred in connection with this Agreement.
3.7 Litigation. There is no private or governmental
----------
action, suit, proceeding, claim, arbitration, audit or
investigation pending before any agency, court or tribunal,
foreign or domestic, or, to the knowledge of MedPro or any of its
subsidiaries, threatened against MedPro or any of its
subsidiaries or any of their respective properties or any of
their respective officers or directors (in their capacities as
such) that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on MedPro. There is no
injunction, judgment, decree, order or regulatory restriction
imposed upon MedPro or any of its subsidiaries or any of their
respective assets or business, or, to the knowledge of MedPro and
its subsidiaries, any of their respective directors or officers
(in their capacities as such), that would prevent, enjoin, alter
or materially delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a
Material Adverse Effect on MedPro. Schedule 3.7 of the MedPro
--------------------------
Disclosure Schedule lists all actions, suits, proceedings,
- - -------------------
claims, arbitrations, audits and investigations pending before
any agency, court or tribunal that involve MedPro or any of its
subsidiaries.
3.8 Restrictions on Business Activities. There is no
-----------------------------------
agreement, judgment, injunction, order or decree binding upon
MedPro or any of its subsidiaries which has or reasonably could
be expected to have the effect of prohibiting or materially
impairing any business practice of MedPro or any of its
subsidiaries, any acquisition of property by MedPro or any of its
subsidiaries or the conduct of business by MedPro or any of its
subsidiaries.
3.9 Taxes.
-----
(a) MedPro and any consolidated, combined, unitary
or aggregate group for Tax purposes of which MedPro is or
has been a member, have properly completed and timely filed
all Tax Returns required to be filed by them and have paid
all Taxes required to be paid, whether or not shown on any
Tax Return. All unpaid Taxes of MedPro for periods through
December 31, 2006, are reflected in the MedPro Balance
Sheet. MedPro has no liability for unpaid Taxes accruing
after December 31, 2006, other than Taxes arising in the
ordinary course of its business subsequent to December 31,
2006.
(b) There is (i) no claim for Taxes that is a lien
against the property of MedPro or is being asserted against
MedPro other than liens for Taxes not yet due and payable;
(ii) no audit of any Tax Return of MedPro that is being
conducted by a Tax authority that is currently pending or
threatened, and MedPro has not been notified of any proposed
Tax claims or assessments against MedPro; (iii) no extension
of the statute of limitations on the assessment of any Taxes
that has been granted by MedPro and that is currently in
effect; and (iv) no agreement, contract or arrangement to
which MedPro is a party that may result in the payment of
any amount that would not be deductible by reason of
Sections 280G, 162 or 404 of the Code. MedPro has not been
or will not be required to include any material adjustment
in Taxable income for any Tax period (or portion thereof)
pursuant to Section 481 or 263A of the Code or any comparable
12
provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior
to the Merger.
(c) There are no Tax sharing or Tax allocation
agreements to which MedPro is a party or to which it is
bound. MedPro has not filed any disclosures under
Section 6662 or comparable provisions of state, local or
foreign law to prevent the imposition of penalties with
respect to any Tax reporting position taken on any Tax
Return. MedPro has never been a member of a consolidated,
combined or unitary group of which MedPro was not the
ultimate MedPro corporation. MedPro has in its possession
receipts for any Taxes paid to foreign Tax authorities.
(d) MedPro has withheld (and paid over to the
appropriate governmental authorities) with respect to either
its employees or any third party all Taxes required to be
withheld, including, but not limited to, FICA and FUTA.
(e) MedPro subsidiaries has never been a United
States real property holding corporation within the meaning
of Section 897 of the Code.
3.10 Labor Matters. MedPro is not a party to any
-------------
collective bargaining agreement or other labor union contract
applicable to persons employed by MedPro nor does MedPro know of
any activities or proceedings of any labor union to organize any
such employees.
3.11 Intellectual Property. MedPro owns, or is licensed
---------------------
or otherwise possesses legally enforceable and unencumbered
rights to use, all patents, trademarks, trade names, service
marks, domain names, copyrights, and any applications therefor,
maskworks, schematics, trade secrets, computer software programs
(in both source code, except in circumstances where MedPro only
possesses a license to the object code form, and object code
form), and tangible or intangible proprietary information or
material ("Intellectual Property") that are used in the business
---------------------
of MedPro ("MedPro Intellectual Property"). MedPro owns and
----------------------------
possesses source code for all software owned by MedPro and owns
or has valid licenses and possesses source code for all products
owned, distributed and presently supported by MedPro.
3.12 Interested Party Transactions. Except as disclosed in
-----------------------------
Schedule 3.12 of the MedPro Disclosure Schedule, MedPro is not
- -----------------------------------------------
indebted to any director or officer of MedPro (except for amounts
due as normal salaries and bonuses and in reimbursement of
ordinary expenses), and no such person is indebted to MedPro.
3.13 Compliance With Laws. MedPro has complied with, is
--------------------
not in violation of, and has not received any notices of
violation with respect to, any federal, state, local or foreign
statute, law or regulation with respect to the conduct of its
business, or the ownership or operation of its business, except
for such violations or failures to comply as would not be
reasonably expected to have a Material Adverse Effect on MedPro.
3.14 Broker's and Finders' Fees. MedPro has not incurred,
--------------------------
nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or investment
bankers' fees or any similar charges in connection with this
Agreement or any transaction contemplated hereby other than
payments to SC Capital Partners.
13
3.15 Minute Books. The minute books of MedPro made
------------
available to Dentalserv.com contain in all material respects a
complete and accurate summary of all meetings of directors and
stockholders or actions by written consent of MedPro during the
past three years and through the date of this Agreement, and
reflect all transactions referred to in such minutes accurately
in all material respects.
3.16 Vote Required. The affirmative vote of MedPro's
-------------
stockholders holding a majority of the outstanding shares of
MedPro Common Stock is the only vote of the holders of any of
MedPro's capital stock necessary to approve this Agreement and
the transactions contemplated hereby.
3.17 Board Approval. The Board of Directors of MedPro has
--------------
(i) approved this Agreement and the Merger, (ii) determined that
this Agreement and the Merger are advisable and in the best
interests of the stockholders of MedPro and are on terms that are
fair to such stockholders and (iii) intends to recommend that the
stockholders of MedPro approve this Agreement and consummation of
the Merger.
3.18 Representations Complete. None of the representations
------------------------
or warranties made by MedPro herein or in any Schedule hereto,
including the MedPro Disclosure Schedule, or certificate
furnished by MedPro pursuant to this Agreement, when all such
documents are read together in their entirety, contains or will
contain at the Effective Time any untrue statement of a material
fact, or omits or will omit at the Effective Time to state any
material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which
made, not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
-----------------------------------
4.1 Conduct of Business. During the period from the date
-------------------
of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, each of
MedPro and Dentalserv.com agrees (except to the extent expressly
contemplated by this Agreement or as consented to in writing by
the other party), to carry on its and its subsidiaries' business
in the ordinary course in substantially the same manner as
heretofore conducted, to pay and to cause its subsidiaries to pay
debts and Taxes when due, subject to good faith disputes over
such debts or taxes, to pay or perform other obligations when
due, and to use all reasonable efforts consistent with past
practice and policies to preserve intact its and its
subsidiaries' present business organizations, use its reasonable
best efforts consistent with past practice to keep available the
services of its and its subsidiaries' present officers and key
employees and use its reasonable best efforts consistent with
past practice to preserve its and its subsidiaries' relationships
with customers, suppliers, distributors, licensors, licensees,
and others having business dealings with it or its subsidiaries,
to the end that its and its subsidiaries' goodwill and ongoing
businesses shall be unimpaired at the Effective Time. Each of
MedPro and Dentalserv.com agrees to promptly notify the other of
any material event or occurrence not in the ordinary course of
its or its subsidiaries' business, and of any event that would
have a Material Adverse Effect on MedPro or Dentalserv.com.
14
4.2 Restrictions on Conduct of Business. During the period
-----------------------------------
from the date of this Agreement and continuing until the earlier
of the termination of this Agreement or the Effective Time,
except as expressly contemplated by this Agreement, neither
MedPro nor Dentalserv.com shall do, cause or permit any of the
following, or allow, cause or permit any of its subsidiaries to
do, cause or permit any of the following, without the prior
written consent of the other:
(a) Charter Documents. Cause or permit any amendments
-----------------
to its Certificate of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock. Declare or
-----------------------------------
pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of
its capital stock, or split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or repurchase
or otherwise acquire, directly or indirectly, any shares of
its capital stock except from former employees, directors
and consultants in accordance with agreements providing for
the repurchase of shares in connection with any termination
of service to it or its subsidiaries;
(c) Stock Option Agreements, Etc. Take any action to
----------------------------
accelerate, amend or change the period of exercisability or
vesting of options or other rights granted under its stock
option agreements or authorize cash payments in exchange for
any options or other rights granted under any of such
agreements, except changes that would allow accelerated
vesting if holders of Dentalserv.com rights or options are
terminated without cause within 12 months after the
Effective Time;
(d) Material Contracts. Enter into any contract or
------------------
commitment, or violate, amend or otherwise modify or waive
any of the terms of any of its contracts, other than in the
ordinary course of business consistent with past practice;
(e) Issuance of Securities. Except as set forth on
----------------------
Schedule 4.2(e) and with respect to the private placement
offering of up to $13,000,000.00 of Dentalserv.com Preferred
Stock and warrants to purchase Dentalserv.com Common Stock,
or the issuance of MedPro Common Stock in connection with
the agency agreement between MedPro and SGPF, LLC, issue,
deliver or sell or authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of,
any shares of its capital stock or securities convertible
into, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible
securities, other than the issuance of shares of its common
stock pursuant to the conversion of preferred stock, or
exercise of stock options, warrants or other rights therefor
outstanding as of the date of this Agreement;
(f) Dispositions. Sell, lease, license or otherwise
------------
dispose of or encumber any of its properties or assets which
are material, individually or in the aggregate, to its and
its subsidiaries' business, taken as a whole, except in the
ordinary course of business consistent with past practice;
15
(g) Indebtedness. Except in its ordinary course of
------------
business, incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt
securities or guarantee any debt securities of others in
excess of $500,000.00 in the aggregate;
(h) Payment of Obligations. Pay, discharge or satisfy
---------------------
in an amount in excess of $50,000.00 in any one case, any
claim, liability or obligation (absolute, accrued, asserted
or unasserted, contingent or otherwise) arising other than
in the ordinary course of business, other than the payment,
discharge or satisfaction of liabilities reflected or
reserved against in the MedPro Financial Statements or
Dentalserv.com Financial Statements, as applicable;
(i) Capital Expenditures. Make any capital
--------------------
expenditures, capital additions or capital improvements
except in the ordinary course of business and consistent
with past practice that do not exceed $100,000.00
individually or in the aggregate;
(j) Acquisitions. Except with respect to the issuance
------------
of MedPro Common Stock in connection with the agency
agreement between MedPro and SGPF, LLC, acquire by merging
or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or
other business organization or division thereof, or
otherwise acquire any assets which are material,
individually or in the aggregate, to its and its
subsidiaries' business, taken as a whole, or acquire any
equity securities of any corporation, partnership,
association or business organization;
(k) Taxes. Other than in the ordinary course of
-----
business, make or change any material election in respect of
Taxes, adopt or change any accounting method in respect of
Taxes, file any material Tax Return or any amendment to a
material Tax Return, enter into any closing agreement,
settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(l) Revaluation. Revalue any of its assets,
-----------
including without limitation writing down the value of
inventory or writing off notes or accounts receivable other
than in the ordinary course of business;
(m) Accounting Policies and Procedures. Make any
----------------------------------
change to its accounting methods, principles, policies,
procedures or practices, except as may be required by GAAP,
Regulation S-X promulgated by the SEC or applicable
statutory accounting principles;
(n) Other. Take or agree in writing or otherwise to
-----
take, any of the actions described in Sections 4.2(a)
---------------
through (m) above, or any action which would make any of its
-----------
representations or warranties contained in this Agreement
untrue or incorrect or prevent it from performing or cause
it not to perform its covenants hereunder.
16
ARTICLE V
ADDITIONAL AGREEMENTS
---------------------
5.1 Effectiveness of the Merger. Dentalserv.com shall
---------------------------
promptly after the date hereof take all action necessary in
accordance with Nevada Law and its Certificate of Incorporation
and Bylaws to approve the Merger within 45 days of the date of
this Agreement.
5.2 Access to Information.
---------------------
(a) Except as prohibited by applicable law, each of
MedPro and Dentalserv.com shall afford the other and its
accountants, counsel and other representatives, reasonable
access during normal business hours during the period prior
to the Effective Time to (i) all of such party's and its
subsidiaries' properties, books, contracts, commitments and
records, and (ii) all other information concerning the
business, properties and personnel of such party and its
subsidiaries as the other party may reasonably request. Each
of MedPro and Dentalserv.com agree to provide to the other
and its accountants, counsel and other representatives
copies of internal financial statements promptly upon
request.
(b) Subject to compliance with applicable law, from
the date hereof until the Effective Time, each of MedPro and
Dentalserv.com shall confer on a regular and frequent basis
with one or more representatives of the other party to
report operational matters of materiality and the general
status of ongoing operations.
(c) No information or knowledge obtained in any
investigation pursuant to this Section 5.2 shall affect or
-----------
be deemed to modify any representation or warranty contained
herein or the conditions to the obligations of the parties
to consummate the Merger.
5.3 Confidential Information; Non-Solicitation or Negotiation.
---------------------------------------------------------
(a) Confidential Information. Except in connection
------------------------
with any dispute between the parties and subject to any
obligation to comply with (i) any applicable law, (ii) any
rule or regulation of any governmental authority or
securities exchange, or (iii) any subpoena or other legal
process to make information available to the persons
entitled thereto, whether or not the transactions
contemplated herein shall be concluded, all information
obtained by any party about any other, and all of the
terms and conditions of this Agreement, shall be kept in
confidence by each party, and each party shall cause its
stockholders, directors, officers, managers, employees,
agents and attorneys to hold such information confidential.
Such confidentiality shall be maintained to the same degree
as such party maintains its own confidential information and
shall be maintained until such time, if any, as any such
data or information either is, or becomes, published or a
matter of public knowledge; provided, however, that the
foregoing shall not apply to any information received by
a party from a source not known by such party to be bound
by a confidentiality agreement with, or other contractual,
legal or fiduciary obligation of confidentiality to, the
other party, nor to any information obtained by a party
which is generally known to others engaged in the trade or
business of such party. In the event a
17
party to this Agreement becomes legally compelled to
disclose any such information, it shall promptly provide the
others with written notice of such requirement so that the other
parties to this Agreement may seek a protective order or other
remedy. If this Agreement shall be terminated for any reason, the
parties shall return or cause to be returned to the others all
written data, information, files, records and copies of
documents, worksheets and other materials obtained by such
parties in connection with this Agreement.
(b) No Solicitation or Negotiation. Unless and until
------------------------------
this Agreement is terminated, MedPro shall not cause, suffer
or permit its directors, officers, stockholders, employees,
representatives, agents, investment bankers, advisors,
accountants or attorneys to initiate or solicit, directly or
indirectly, any inquiries or the making of any offer or
proposal that constitutes or could be reasonably expected to
lead to an a proposal or offer (other than by
Dentalserv.com) for a stock purchase, asset acquisition,
merger, consolidation or other business combination
involving MedPro or any proposal to acquire in any manner a
direct or indirect substantial equity interest in, or all or
any substantial part of the assets of MedPro (an
"Alternative Proposal") from any person and/or entity, or
engage in negotiations or discussions relating thereto or
accept any Alternative Proposal, or make or authorize any
statement, recommendation or solicitation in support of any
Alternative Proposal. MedPro shall notify Dentalserv.com
orally and in writing of the receipt of any such inquiries,
offers or proposals (including the terms and conditions of
any such offer or proposal, the identity of the person
and/or entity making it and a copy of any written
Alternative Proposal), as promptly as practicable and in any
event within 48 hours after the receipt thereof, and shall
keep Dentalserv.com informed of the status and details of
any such inquiry, offer or proposal. MedPro shall
immediately terminate any existing solicitation, activity,
discussion or negotiation with any person and/or entity
hereafter conducted by any officer, employee, director,
stockholder or other representative thereof with respect to
the foregoing.
5.4 Public Disclosure. Unless otherwise permitted by this
-----------------
Agreement, MedPro and Dentalserv.com shall consult with each
other before issuing any press release or otherwise making any
public statement or making any other public (or non-confidential)
disclosure (whether or not in response to an inquiry) regarding
the terms of this Agreement and the transactions contemplated
hereby, and neither shall issue any such press release or make
any such statement or disclosure without the prior approval of
the other (which approval shall not be unreasonably withheld),
except as may be required by the SEC or by obligations pursuant
to any listing agreement with any national securities exchange or
with the NASD, in which case the party proposing to issue such
press release or make such public statement or disclosure shall
use its commercially reasonable efforts to consult with the other
party before issuing such press release or making such public
statement or disclosure.
5.5 Consents.
--------
Each of MedPro and Dentalserv.com shall promptly apply for
or otherwise seek, and use its reasonable best efforts to obtain,
all consents and approvals required to be obtained by it for the
consummation of the Merger, including those required under HSR.
The parties hereto will consult and cooperate with one another,
and consider in good faith the views of one another, in connection
with any analyses, appearances, presentations, memoranda, briefs, arguments,
18
opinions and proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to HSR or any
other federal or state antitrust or fair trade law.
5.6 Legal Requirements. Each of MedPro and Dentalserv.com
------------------
will, and will cause their respective subsidiaries to, take all
reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on them with respect to the
consummation of the transactions contemplated by this Agreement
and will promptly cooperate with and furnish information to any
party hereto necessary in connection with any such requirements
imposed upon such other party in connection with the consummation
of the transactions contemplated by this Agreement and will take
all reasonable actions necessary to obtain (and will cooperate
with the other parties hereto in obtaining) any consent,
approval, order or authorization of, or any registration,
declaration or filing with, any Governmental Entity or other
person, required to be obtained or made in connection with the
taking of any action contemplated by this Agreement.
5.7 Blue Sky Laws. MedPro shall use its reasonable best
-------------
efforts to comply with the securities and blue sky laws of all
jurisdictions which are applicable to the issuance of the MedPro
Common Stock in connection with the Merger. Dentalserv.com shall
use its reasonable best efforts to assist MedPro as may be
necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable in connection with the
issuance of MedPro Common Stock in connection with the Merger.
5.8 Form 8-K. At least five (5) days prior to Closing,
--------
Dentalserv.com shall prepare a draft Form 8-K announcing the
Closing, together with, or incorporating by reference, the
financial statements prepared by Dentalserv.com and its
accountant, and such other information that may be required to be
disclosed with respect to the Merger in any report or form to be
filed with the SEC ("Merger Form 8-K"), which shall be in a form
---------------
reasonably acceptable to MedPro. Prior to Closing, MedPro and
Dentalserv.com will prepare the press release announcing the
consummation of the Merger hereunder ("Press Release").
-------------
Simultaneously with the Closing, MedPro shall file and distribute
the Press Release. Within four (4) business days after the
Closing, the Surviving Corporation shall file the Merger Form 8-K
with the SEC.
5.9 Indemnification.
---------------
(a) After the Effective Time, the Surviving
Corporation will fulfill and honor in all respects (i) the
obligations of Dentalserv.com pursuant to the
indemnification provisions of Dentalserv.com's Articles of
Incorporation and Bylaws or any indemnification agreement
with Dentalserv.com officers and directors to which
Dentalserv.com is a party, and (ii) the obligations of
MedPro pursuant to the indemnification provisions of
MedPro's Certificate of Incorporation and Bylaws or any
indemnification agreement with MedPro officers and directors
to which MedPro is a party, in each case in effect on the
date hereof; provided that such indemnification shall be
subject to any limitation imposed from time to time under
applicable law. All such indemnification agreements are
forth on Schedule 5.9 of the Dentalserv.com Disclosure
---------------------------------------------
Schedule or Schedule 5.9 of the MedPro Disclosure Schedule,
-------- ----------------------------------------------
as applicable. Without limitation of the foregoing, in the
event any person so indemnified (an "Indemnified Party") is
-----------------
or becomes involved in any capacity in any action,
proceeding or investigation in connection with any matter
relating to this Agreement or the transactions contemplated
19
hereby occurring on or prior to the Effective Time,
Dentalserv.com or MedPro (as the case may be) shall pay as
incurred such Indemnified Party's reasonable legal and other
expenses (including the cost of any investigation and
preparation) incurred in connection therewith to the fullest
extent permitted by the Law . Any Indemnified Party wishing
to claim indemnification under this Section 5.9, upon
-----------
learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify Dentalserv.com, MedPro,
or the Surviving Corporation (as the case may be, the
"Indemnifying Party") of such claim.
(b) To the extent there is any claim, action, suit,
proceeding or investigation (whether arising before or after
the Effective Time) against an Indemnified Party that arises
out of or pertains to any action or omission in his or her
capacity as director, officer, employee, fiduciary or agent
of either Dentalserv.com or MedPro occurring before the
Effective Time, or arises out of or pertains to the
transactions contemplated by this Agreement for a period
lasting until the expiration of five years after the
Effective Time (whether arising before or after the
Effective Time), in each case for which such Indemnified
Party is indemnified under this Section 5.9, such
-----------
Indemnified Party shall be entitled to be represented by
counsel, which counsel shall be selected by the Indemnifying
Party (provided that if use of such counsel would be
expected under applicable standards of professional conduct
to give rise to a conflict between the position of the
Indemnified Person and of the Indemnifying Party, the
Indemnified Party shall be entitled instead to be
represented by counsel selected by the Indemnified Party and
reasonably acceptable to the Indemnifying Party) and
following the Effective Time, the the Indemnifying Party
shall pay the reasonable fees and expenses of such counsel,
promptly after statements therefor are received and the
Indemnifying Party will cooperate in the defense of any such
matter; provided, however, that the Indemnifying Party shall
not be liable for any settlement effected without its
written consent (which consent shall not be unreasonably
withheld); and provided, further, that, in the event that
any claim or claims for indemnification are asserted or made
prior to the expiration of such five year period, all rights
to indemnification in respect to any such claim or claims
shall continue until the disposition of any and all such
claims. The Indemnified Parties as a group may retain only
one law firm (in addition to local counsel) to represent
them with respect to any single action unless there is,
under applicable standards of professional conduct, a
conflict on any significant issue between the position of
any two or more Indemnified Parties.
(c) The provisions of this Section 5.9 are intended
-----------
to be for the benefit of, and shall be enforceable by, each
Indemnified Party, his or her heirs and representatives.
5.10 Tax Treatment. For U.S. federal income tax purposes,
-------------
it is intended that the Merger qualify as a reorganization within
the meaning of the Code, and the parties hereto intend that this
Agreement shall constitute a "plan of reorganization" within the
meaning of Section 368 of the Code and Treasury Regulations
Sections 1.368-2(g) and 1.368-3(a). the Surviving Corporation
will report the Merger on its income tax returns in a manner
consistent with treatment of the Merger as a Code Section 368(a)
reorganization. Neither MedPro, Dentalserv.com nor any of there
respective affiliates has taken any action, nor will they take
any action, that could reasonably be expected to prevent or
impede the Merger from qualifying as a reorganization under
Section 368 of the Code.
20
5.11 Best Efforts and Further Assurances. Each of the
-----------------------------------
parties to this Agreement shall use its best efforts to
effectuate the transactions contemplated hereby and to fulfill
and cause to be fulfilled the conditions to closing under this
Agreement. Each party hereto, at the reasonable request of
another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may
be necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated
hereby.
ARTICLE VI
CONDITIONS TO THE MERGER
------------------------
6.1 Conditions to Obligations of Each Party to Effect the
-----------------------------------------------------
Merger. The respective obligations of each party to this
- - ------
Agreement to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, by
agreement of all the parties hereto:
(a) Stockholder Approval. This Agreement and the
--------------------
Merger shall have been approved and adopted by the requisite
vote of the stockholders of Dentalserv.com under Nevada Law
and by the requisite vote of the stockholders of MedPro
under Delaware Law.
(b) No Injunctions or Restraints; Illegality. No
----------------------------------------
temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall
be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking
any of the foregoing be pending; nor shall there be any
action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal.
In the event an injunction or other order shall have been
issued, each party agrees to use its reasonable best efforts
to have such injunction or other order lifted.
(c) Governmental Approvals. MedPro, Dentalserv.com
----------------------
and their respective subsidiaries shall have timely obtained
from each Governmental Entity all approvals, waivers and
consents, if any, necessary for consummation of or in
connection with the Merger and the several transactions
contemplated hereby, including such approvals, waivers and
consents as may be required under the Securities Act, under
state Blue Sky laws, and under HSR.
6.2 Additional Conditions to Obligations of
---------------------------------------
Dentalserv.com. The obligations of Dentalserv.com to consummate
- --------------
and effect this Agreement and the transactions contemplated
hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which
may be waived, in writing, by Dentalserv.com:
(a) Representations, Warranties and Covenants. (i)
-----------------------------------------
The representations and warranties of MedPro in this Agreement
shall be true and correct in all material respects (except for
such representations and warranties that are qualified by their terms
21
by a reference to materiality which representations and
warranties as so qualified shall be true and correct in
all respects) both when made and on and as of the Effective
Time as though such representations and warranties were
made on and as of such time (provided that those
representations and warranties which address matters only
as of a particular date shall be true and correct as of
such date) and (ii) MedPro shall have performed and complied
in all material respects with all covenants, obligations and
conditions of this Agreement required to be performed and
complied with by them as of the Effective Time.
(b) Certificate of MedPro. Dentalserv.com shall have
---------------------
been provided with a certificate executed on behalf of
MedPro by its President and Chief Financial Officer
certifying that the conditions set forth in Section 6.2(a)
shall have been fulfilled.
(c) Third Party Consents. Dentalserv.com shall have
--------------------
been furnished with evidence satisfactory to it of the
consent or approval of those persons whose consent or
approval shall be required in connection with the Merger
under the contracts of MedPro set forth on Schedule 6.2(c)
of the MedPro Disclosure Schedule.
(d) Injunctions or Restraints on Conduct of Business.
------------------------------------------------
No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint
provision limiting or restricting MedPro's conduct or
operation of the business of MedPro and its subsidiaries,
following the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission
or other Governmental Entity, domestic or foreign, seeking
the foregoing be pending.
(e) No Material Adverse Changes. There shall not have
---------------------------
occurred any Material Adverse Effect on MedPro, or any
change that has a Material Adverse Effect on MedPro.
6.3 Additional Conditions to the Obligations of
-------------------------------------------
MedPro. The obligations of MedPro to consummate and effect
------
this Agreement and the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of
which may be waived, in writing, by MedPro:
(a) Representations, Warranties and Covenants. (i)
-----------------------------------------
The representations and warranties of Dentalserv.com in this
Agreement shall be true and correct in all material respects
(except for such representations and warranties that are
qualified by their terms by a reference to materiality,
which representations and warranties as so qualified shall
be true and correct in all respects) both when made and on
and as of the Effective Time as though such representations
and warranties were made on and as of such time (provided
that those representations and warranties which address
matters only as of a particular date shall be true and
correct as of such date) and (ii) Dentalserv.com shall have
performed and complied in all material respects with all
covenants, obligations and conditions of this Agreement
required to be performed and complied with by it as of the
Effective Time.
22
(b) Certificate of Dentalserv.com. MedPro shall have
-----------------------------
been provided with a certificate executed on behalf of
Dentalserv.com by its President and Chief Financial Officer
certifying that the conditions set forth in Section 6.3(a)
shall have been fulfilled.
(c) Injunctions or Restraints on Conduct of Business.
------------------------------------------------
No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint
provision limiting or restricting Dentalserv.com's conduct
or operation of the business of Dentalserv.com following the
Merger shall be in effect, nor shall any proceeding brought
by an administrative agency or commission or other
Governmental Entity, domestic or foreign, seeking the
foregoing be pending.
(d) No Material Adverse Changes. There shall not have
---------------------------
occurred any Material Adverse Effect on Dentalserv.com, or
any change that has a Material Adverse Effect on
Dentalserv.com.
(e) Officers and Directors of Dentalserv.com.
----------------------------------------
Dentalserv.com shall have obtained and delivered to MedPro
copies of the resignations of those persons listed on
Schedule 6.3(e) from their positions as officers and
---------------
directors of Dentalserv.com, and shall have taken all
necessary action for the appointment of the persons listed
on Schedule 6.2(e) to the positions set forth opposite their
---------------
names, all effective at and as of the Closing. Immediately
prior to the effectiveness of the resignations of the
directors of Dentalserv.com, the directors of Dentalserv.com
shall have appointed persons designated by MedPro to fill
vacancies on Dentalserv.com's board of directors, including,
if applicable, vacancies created by the resignations
described herein.
(f) Stock Quotation. Dentalserv.com Common Stock at
---------------
Closing shall be quoted on the OTC BB, and there will be no
action or proceeding pending or threatened against
Dentalserv.com by the NASD to prohibit or terminate the
quotation of Dentalserv.com Common Stock on the OTC BB.
(g) SEC Compliance. Immediately prior to the Closing,
--------------
Dentalserv.com shall be in compliance with the reporting
requirements under the Exchange Act, and shall have timely
filed all Exchange Act reports for the twelve month period
preceding the Closing.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
7.1 Termination. At any time prior to the Effective Time,
-----------
whether before or after approval of the matters presented in
connection with the Merger by the stockholders of Dentalserv.com,
this Agreement may be terminated:
(a) by mutual consent of MedPro and Dentalserv.com;
(b) by either MedPro or Dentalserv.com, if, without
fault of the terminating party, the Closing shall not have
occurred on or before December 31, 2007, or such later date
as may be agreed upon in writing by the parties hereto (the
"Final Date");
----------
23
(c) by MedPro, if Dentalserv.com breaches any of its
representations, warranties or obligations hereunder to an
extent that would cause the condition set forth in
Section 6.3(a) not to be satisfied and such breach shall not
--------------
have been cured within ten (10) business days of receipt by
Dentalserv.com of written notice of such breach (and MedPro
has not willfully breached any of its covenants hereunder,
which breach is not cured);
(d) by Dentalserv.com, if MedPro breaches any of its
representations, warranties or obligations hereunder to an
extent that would cause the condition set forth in
Section 6.2(a) not to be satisfied and such breach shall not
--------------
have been cured within ten (10) business days of receipt by
MedPro of written notice of such breach (and Dentalserv.com
has not willfully breached any of its covenants hereunder,
which breach is not cured); or
(e) by either MedPro or Dentalserv.com if (i) any
permanent injunction or other order of a court or other
competent authority preventing the consummation of the
Merger shall have become final and nonappealable or (ii) any
required approval of the stockholders of MedPro or
Dentalserv.com shall not have been obtained by reason of the
failure to obtain the required vote upon a vote held at a
duly held meeting of stockholders or at any adjournment
thereof (provided that the right to terminate this Agreement
under this subsection (ii) shall not be available to MedPro
or Dentalserv.com where the failure to obtain such
stockholder approval shall have been caused by the action or
failure to act of MedPro or Dentalserv.com and such action
or failure constitutes a breach by MedPro or Dentalserv.com
of this Agreement).
7.2 Effect of Termination. In the event of termination of
---------------------
this Agreement as provided in Section 7.1, this Agreement shall
-----------
forthwith become void and there shall be no liability or
obligation on the part of MedPro or Dentalserv.com or their
respective officers, directors, stockholders or affiliates,
except to the extent that such termination results from the
breach by a party hereto of any of its representations,
warranties or covenants set forth in this Agreement; provided
that, the provisions of Section 5.3 (Confidentiality),
-----------
Section 7.3 (Expenses and Termination Fees), this Section 7.2 and
- ----------- -----------
Section 8.1 (Non-Survival at Effective Time) shall remain in full
- -----------
force and effect and survive any termination of this Agreement.
Nothing herein shall relieve any party from liability in
connection with a breach by such party of the representations,
warranties or covenants of such party to this Agreement.
7.3 Expenses and Termination Fees.
-----------------------------
(a) Subject to subsections (b) and (c) of this
Section 7.3, whether or not the Merger is consummated, all
-----------
costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby
(including, without limitation, the fees and expenses of its
advisers, accountants and legal counsel) shall be paid by
the party incurring such expense.
(b) If MedPro terminates this Agreement pursuant to
Section 7.1(c) then Dentalserv.com shall promptly reimburse
--------------
MedPro for all of the out-of-pocket costs and expenses incurred
by MedPro in connection with this Agreement and the transactions
24
contemplated hereby (including, without limitation, the fees and
expenses of its advisors, accountants and legal counsel).
(c) If Dentalserv.com terminates this Agreement
pursuant to Section 7.1(d) MedPro shall promptly reimburse
--------------
Dentalserv.com for all of the out-of-pocket costs and
expenses incurred by Dentalserv.com in connection with this
Agreement and the transactions contemplated hereby
(including, without limitation, the fees and expenses of its
advisors, accountants and legal counsel).
7.4 Amendment. The Boards of Directors of the parties
---------
hereto may cause this Agreement to be amended at any time by
execution of an instrument in writing signed on behalf of each of
the parties hereto; provided that an amendment made subsequent to
adoption of the Agreement by the stockholders of MedPro shall not
(i) alter or change the amount or kind of consideration to be
received on conversion of MedPro Common Stock, (ii) alter or
change any term of the Articles of Incorporation of
Dentalserv.com to be effected by the Merger, or (iii) alter or
change any of the terms and conditions of the Agreement if such
alteration or change would materially adversely affect the
holders of MedPro Common Stock.
7.5 Extension; Waiver. At any time prior to the Effective
-----------------
Time any party hereto may, to the extent legally allowed, (i)
extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant
hereto and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
------------------
8.1 Non-Survival at Effective Time. The representations,
------------------------------
warranties and agreements set forth in this Agreement shall
terminate at the Effective Time, except that the agreements set
forth in Article I, Section 5.3 (Confidentiality), 5.8 (Form 8-K),
----------- ---
5.9 (Indemnification), 5.11 (Best Efforts and Further
- --- ----
Assurances), 7.3 (Expenses and Termination Fees), 7.4
--- ---
(Amendment), and this Article VIII shall survive the Effective Time.
------------
8.2 Notices. All notices and other communications
-------
hereunder shall be in writing and shall be deemed given if
delivered personally or by commercial delivery service, or mailed
by registered or certified mail (return receipt requested) or
sent via facsimile (with confirmation of receipt) to the parties
at the following address (or at such other address for a party as
shall be specified by like notice):
(a) if to MedPro, to:
MedPro Safety Products, Inc.
817 Winchester Road
25
Lexington, KY 40505
Attention: Chief Executive Officer
Facsimile No.: (859) 225-5347
Telephone No.: (859) 225-5375
with a copy (which shall not constitute notice to
MedPro) to:
Frost Brown Todd LLC
250 West Main, Suite 2700
Lexington, Kentucky
Attention: Paul E. Sullivan, Esq.
Facsimile No.: (859) 231-0011
Telephone No.: (859) 231-0000
(b) if to Dentalserv.com, to:
Dentalserv.com
20 W. 55th Street
5th Floor
New York, NY 10010
Tel. No.:(212) 849-8248
Fax No.: (212) 867-1416
with a copy (which shall not constitute notice to
Dentalserv.com) to:
Law Office of Eugene Michael Kennedy
517 SW First Avenue
Ft. Lauderdale, FL 33301
Attn: Eugene Michael Kennedy, Esq.
Tel. No.: (954) 524-4155
Fax No.: (954) 525-4169
8.3 Interpretation. When a reference is made in this
--------------
Agreement to Exhibits or Schedules, such reference shall be to an
Exhibit or Schedule to this Agreement unless otherwise indicated.
The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without
limitation." The phrase "made available" in this Agreement shall
mean that the information referred to has been made available if
requested by the party to whom such information is to be made
available. The phrases "the date of this Agreement", "the date
hereof", and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to November 7,
2007. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
26
8.4 Counterparts. This Agreement may be executed in one or
------------
more counterparts, including by facsimile, all of which shall be
considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the
parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
8.5 Entire Agreement; Nonassignability; Parties in
----------------------------------------------
Interest. This Agreement and the documents and instruments and
- --------
other agreements specifically referred to herein or delivered
pursuant hereto, including the Exhibits, the Schedules, including
Dentalserv.com Disclosure Schedule and the MedPro Disclosure
Schedule (a) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
8.6 Severability. If any provision of this Agreement, or
------------
the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the
remainder of this Agreement will continue in full force and
effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement
with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of
such void or unenforceable provision.
8.7 Remedies Cumulative. Except as otherwise provided
-------------------
herein, any and all remedies herein expressly conferred upon a
party will be deemed cumulative with and not exclusive of any
other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not
preclude the exercise of any other remedy.
8.8 Governing Law. This Agreement shall be governed by
-------------
and construed in accordance with the laws of the State of
Delaware, without regard to the laws that might otherwise govern
under applicable principles of conflicts of law. Each of the
parties hereto irrevocably consents to the exclusive jurisdiction
of any court located within the State of New York in connection
with any matter based upon or arising out of this Agreement or
the matters contemplated herein, agrees that process may be
served upon them in any manner authorized by the laws of the
State of New York for such persons and waives and covenants not
to assert or plead any objection which they might otherwise have
to such jurisdiction and such process.
8.9 Rules of Construction. The parties hereto agree that
---------------------
they have been represented by counsel during the negotiation,
preparation and execution of this Agreement and, therefore, waive
the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such
agreement or document.
[SIGNATURE PAGE FOLLOWS]
27
Merger Agreement Signature Page
IN WITNESS WHEREOF, MedPro and Dentalserv.com have caused
this Agreement and Plan of Merger to be executed and delivered by
their respective officers thereunto duly authorized, all as of
the date first written above.
DENTALSERV.COM
By:__________________________
_____________________________
MEDPRO SAFETY PRODUCTS, INC.
By:__________________________
28
Exhibit A
---------
CERTIFICATE OF MERGER
Of
MedPro Safety Products, Inc.
(a Delaware corporation)
with and into
DENTALSERV.COM
(a Nevada corporation)
Under Section 78.416 of the Private Corporations law, Nevada Revised Statutes
The undersigned corporation, Dentalserv.com, hereby certifies that:
FIRST: The name and state of incorporation of each
of the constituent corporations is: MedPro Safety Products, Inc.,
a Delaware corporation (the "Disappearing Corporation"), and
------------------------
Dentalserv.com, a Nevada corporation (the "Surviving Corporation").
---------------------
SECOND: An agreement of merger has been approved,
adopted, certified, executed and acknowledged by the Disappearing
Corporation and by the Surviving Corporation in accordance with
the provisions of the Private Corporations law, Nevada Revised
Statues.
THIRD: The name of the Surviving Corporation is
Dentalserv.com.
FOURTH: The Amended and Restated Articles of
Incorporation, in the form of attached Exhibit A, shall be the
---------
Articles of Incorporation of the Surviving Corporation, which
shall change its name to MedPro Safety Products, Inc. upon the
effectiveness of this Certificate.
FIFTH: The executed agreement of merger is on file at
the principal place of business of the Surviving Corporation at:
Dentalserv.com
20 W. 55th Street
5th Floor
New York, NY 10010
SIXTH: A copy of the agreement of merger will be
furnished by the Surviving Corporation on request, and without
cost, to any stockholder of the Disappearing Corporation or the
Surviving Corporation.
SEVENTH: This Certificate of Merger will be effective
at 5:00 p.m. Eastern Time on _________, 2007.
29
IN WITNESS WHEREOF, the undersigned has executed and
subscribed to this Certificate of Merger on behalf of
Dentalserv.com as its authorized officer and hereby affirms,
under penalties of perjury, that this Certificate of Merger is
the act and deed of such corporation and that the facts stated
herein are true.
DATED: December ___, 2007
Dentalserv.com
_____________________________
a Nevada corporation
By:___________________________
Dr. Lawrence Chimerine,
Chief Executive Officer
__________________________________________________________________
30
Exhibit B
---------
EXHIBIT A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
DENTALSERV.COM
DENTALSERV.COM, a Nevada corporation (the "Corporation"), does
hereby certify that:
FIRST: The original articles of incorporation of the
Corporation were filed with the Secretary of State of the Nevada
on December 15, 1999 (the "Original Articles of Incorporation").
SECOND: That the Board of Directors of the Corporation, by
unanimous written consent dated as of August 13, 2007, adopted
resolutions setting forth proposed amendments to the Original
Articles of Incorporation, declaring such amendments to be
advisable and calling for the submission of such amendments to
the stockholders of the Corporation for consideration thereof.
THIRD: That thereafter, pursuant to Section 78.320 of the
Private Corporations law, Nevada Revised Statutes, written
consents approving the amendments set forth above were signed by
holders of outstanding voting stock having not less than the
minimum number of votes that would be necessary to authorize or
take such action at a meeting on such date at which all shares
entitled to vote thereon were present and voted.
FOURTH: That said amendments were duly adopted in accordance
with the provisions of Sections 78.1955, 78.2055, 78.315 & 78.320
of the Private Corporations law, Nevada Revised Statutes.
FIFTH: That the capital of the Corporation shall not be reduced
under or by reason of said amendments.
SIXTH: The Original Articles of Incorporation of the Corporation
are hereby amended and restated to read in full as follows:
ARTICLE I NAME
The name of this corporation is MedPro Safety Products, Inc.
ARTICLE II PURPOSES
The purpose, object and nature of the business for which this
corporation is organized are:
31
(a) to engage in any lawful activity; and
(b) to carry on such business as may be necessary, convenient,
or desirable to accomplish the above purposes, and to do all
other things incidental thereto which are not forbidden by
law or by these Articles of Incorporation.
ARTICLE III DURATION
The corporation will have perpetual existence.
ARTICLE IV POWERS
The powers of the corporation will be those powers granted by
78.060 and 78.070 of the Nevada Revised Statutes under which this
corporation is formed. In addition, the corporation will have
the following specific powers:
(a) To elect or appoint officers and agents of the corporation
and fix their compensation;
(b) To act as an agent for any individual, association,
partnership, corporation, or other legal entity;
(c) To receive, acquire, hold, exercise rights arising out of
the ownership or possession thereof, sell, or otherwise
dispose of, shares or other interests in, or obligations of,
individuals, associations, partnerships, corporations, or
governments;
(d) To receive, acquire, hold, pledge, transfer, or otherwise
dispose of shares purchased, directly or indirectly, out of
earned surplus;
(e) To make gifts or contributions for the public welfare or for
charitable, scientific or educational purposes.
ARTICLE V AUTHORIZED CAPITAL STOCK
(a) The total number of shares which the Corporation shall have
authority to issue is One Hundred Million (100,000,000),
consisting of Ninety Million (90,000,000) shares of Common Stock,
par value $0.001 per share, (hereafter called the "Common
Stock"), and Ten Million (10,000,000) shares of Preferred Stock,
par value $0.01 per share, (hereinafter called the "Preferred
Stock")
(b) Each four (4) shares of Common Stock outstanding at 5:00
p.m. on August 10, 2007, shall be deemed to be one (1) share of
Common Stock of the Corporation, par value $0.001 per share.
(c) Shares of Preferred Stock may be issued from time to time in
one or more series as may be established from time to time by
resolution of the Board of Directors of the Corporation
(hereinafter the "Board"), each of which series shall consist of
such number of shares and have such distinctive designations or
title as shall be fixed by resolution of the Board prior to the
issuance of any shares of such series. Each such class or series
of Preferred Stock shall have such voting powers, full or
limited, or no voting powers, and such preferences and relative,
32
participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be
stated in such resolution of the Board providing for the
issuances of such series of Preferred Stock.
ARTICLE VI DIRECTORS
Section 1. Size of Board. The number of directors of this
corporation may consist of from one (1) to nine (9) directors, as
determined, from time to time, by the then existing Board of
Directors. Their qualifications, terms of office, manner of
election, time and place of meeting, and powers and duties will
be such as are prescribed by statute and in the bylaws of the
corporation.
Section 2. Powers of Board. In furtherance and not in
limitation of the powers conferred by the laws of the State of
Nevada, the Board of Directors is expressly authorized and
empowered:
(a) To make, alter, amend and repeal the bylaws subject to the
power of the shareholders to alter or repeal the bylaws made
by the Board of Directors;
(b) Subject to the applicable provisions of the bylaws then in
effect, to determine, from time to time, whether and to what
extent, and at what times and places, and under what
conditions and regulations, the account and books of the
corporation, or any of them, will be open to shareholder
inspection. No shareholder will have any right to inspect
any of the accounts, books or documents of the corporation,
except as permitted by law, unless and until authorized to
do so by resolution of the Board of Directors or of the
shareholders of the corporation;
(c) To issue stock of the corporation for consideration of any
tangible or intangible property or benefit to the
corporation including, but not limited to, cash, promissory
notes, services performed, or for any other assets of value
in accordance with the action of the Board of Directors
without vote or consent of the shareholders and the judgment
of the Board of Directors as to value received and in return
therefore will be conclusive and said stock when issued will
be fully paid and non-assessable;
(d) To authorize and issue, without shareholder consent,
obligations of the corporation, secured and unsecured, under
such terms and conditions as the Board, in its sole
discretion, may determine, and to pledge or mortgage, as
security therefore, any real or personal property of the
corporation, including after acquired property;
(e) To determine whether any and if so what part of the earned
surplus of the corporation will be paid in dividends to the
shareholders, and to direct and determine other use and
disposition of such earned surplus;
(f) To fix, from time to time, the amount of the profits of the
corporation to be reserved as working capital or for any
other lawful purpose;
(g) To establish bonus, profit-sharing, stock option or other types
of incentive compensation plans for the employees, including
officers and directors, of the corporation and to fix the
33
amount of profits to be shared and distributed, and
to determine the persons to participate in any such plans
and the amount of their respective participations;
(h) To designate, by resolution or resolutions passed by a
majority of the whole Board, one or more committees, each
consisting of two or more directors, which to the extent
permitted by law and authorized by the resolution of the
bylaws will have and may exercise the powers of the Board;
(i) To provide for the reasonable compensation of its own
members by bylaws, and to fix the terms and conditions upon
which such compensation will be paid;
(j) In addition to the powers and authority herein before, or by
statute, expressly conferred upon it, the Board of Directors
may exercise all such powers and do all such acts and things
as may be exercised or done by the corporation, subject,
nevertheless, to the provisions of the laws of the State of
Nevada, of these Articles of Incorporation, and of the
bylaws of the corporation.
Section 3. Interested Directors. No contract or transaction
between this corporation and any of its directors, or between
this corporation and any other corporation, firm, association, or
other legal entity will be invalidated by reason of the fact that
the director of the corporation has a direct or indirect
interest, pecuniary or otherwise, in such corporation, firm or
association, or legal entity, or because the interested director
was present at the meeting of the Board of Directors which acted
upon or in reference to such contract or transaction, or because
he participated in such action, provided that (1) the interest of
each such director will have been disclosed to or known by the
Board and a disinterested majority of the Board will have
nonetheless ratified and approved such contract or transaction
(such interested director or directors may be counted in
determining whether a quorum is present for the meeting at which
such ratification or approval is given); or (2) the conditions of
N.R.S. 78.144 are met.
ARTICLE VII LIMITATION OF LIABILITY OF OFFICERS OR DIRECTORS
The personal liability of a director or officer of the
corporation to the corporation or the shareholders for damages
for breach of fiduciary duty as a director or officer will be
limited to acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law.
ARTICLE VIII INDEMNIFICATION
Each director and each officer of the corporation may be
indemnified by the corporation as follows:
(a) The corporation may indemnify any person who was or is a
party, or is threatened to be made a party, to any
threatened, pending or completed action or suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of
the corporation), by reason of the fact that he is or was a
director, officer, employee or agent of the corporation or
is or was serving at the request of the corporation as a
director, officer, employee, or agent of the corporation,
partnership, joint venture, trust or other enterprise,
against expenses (including attorney's fees), judgments,
fines and amounts paid in settlement, actually and
reasonably incurred by him in connection
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with the action, suit or proceeding, if he acted in good faith and
in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation and with respect to
any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any
action, suit or proceeding, by judgment, order, settlement,
conviction or upon plea of nolo contendere or its equivalent
does not itself create a presumption that the person did not
act in good faith and in a manner in which he reasonably
believed to be in or not opposed to the best interests of
the corporation, and that, with respect to any criminal
action or proceeding, he had reasonable cause to believe
that his conduct was lawful.
(b) The corporation may indemnify any person who was or is a
party, or is threatened to be made a party, to any
threatened, pending or completed action or suit by or in the
right of the corporation, to procure a judgment in its favor
by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer,
employee or agent of the corporation, partnership, joint
venture, trust or other enterprise, against expenses
including amounts paid in settlement and attorney's fees
actually and reasonably incurred by him in connection with
the defense or settlement of the action or suit, if he acted
in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interest of the
corporation. Indemnification may not be made for any claim,
issue or matter as to which such a person has been adjudged
by a court of competent jurisdiction, after exhaustion of
all appeals there from, to be liable to the corporation or
for amounts paid in settlement to the corporation, unless
and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction
determines upon application that in view of all the
circumstances of the case the person is fairly and
reasonably entitled to indemnity for such expenses as the
court deems proper.
(c) To the extent that a director, officer or employee or agent
of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding
referred to in subsections (a) and (b) of this Article, or
in defense of any claim, issue or matter therein, he must be
indemnified by the corporation against expenses, including
attorney's fees, actually and reasonable incurred by him in
connection with the defense.
(d) Any indemnification under subsection (a) and (b) unless
ordered by a court or advanced pursuant to subsection (e),
must be made by the corporation only as authorized in the
specific case upon determination that indemnification of the
director, officer, employee or agent is proper in the
circumstances. The determination must be made:
By the stockholders;
(i) By the Board of Directors by majority vote of a quorum
consisting of directors who were not parties to the
act, suit or proceeding;
(ii) If a majority vote of a quorum consisting of directors
who were not parties to the act, suit or proceeding so
orders, by independent legal counsel in a written
opinion; or
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(iii) If a quorum consisting of directors who were not
parties to the act, suit or proceeding cannot be
obtained, by independent legal counsel in a written
opinion.
(e) Expenses of officers and directors incurred in defending a
civil or criminal action, suit or proceeding must be paid by
the corporation as they are incurred and in advance of the
final disposition of the action, suit or proceeding, upon
receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined
by a court of competent jurisdiction that he is not entitled
to be indemnified by the corporation. The provisions of
this subsection do not affect any rights to advancement of
expenses to which corporate personnel other than directors
or officers may be entitled under any contract or otherwise
by law.
(f) The indemnification and advancement of expenses authorized
in or ordered by a court pursuant to this section:
(i) Does not exclude any other rights to which a person
seeking indemnification or advancement of expenses may
be entitled under the certificate or Articles of
Incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise,
for either an action in his official capacity or an
action in another capacity while holding his office,
except that indemnification, unless ordered by a court
pursuant to subsection (b) or for the advancement of
expenses made pursuant to subsection (e) may not be
made to or on behalf of any director or officer if a
final adjudication established that his acts or
omissions involved intentional misconduct, fraud or a
knowing violation of the law and was material to the
cause of action.
(ii) Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of
the heirs, executors and administrators of such a
person.
ARTICLE IX PLACE OF MEETING; CORPORATE RECORD BOOKS
Subject to the laws of the State of Nevada, the shareholders and
the directors will have the power to hold their meeting, and the
directors will have the power to have an office or offices and to
maintain the books of the corporation outside the State of
Nevada, at such place or places as may from time to time be
designated in the bylaws or by appropriate resolution.
ARTICLE X AMENDMENT OF ARTICLES
The provision of these articles of incorporation may be amended,
altered or repealed from time to time to the extent and manner
prescribed by the laws of the State of Nevada, and additional
provisions authorized by such laws as are then in force maybe
added. All rights herein conferred on the directors, officers
and shareholders are granted subject to reservation.
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Dentalserv.com
_______________________________________________________________
a Nevada corporation
By:____________________________________________________________
Name:
Title:
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