Under the Jumpstart Our Business Startups (JOBS) Act of 2012 and recently finalized rules by the Securities Exchange Commission (SEC), small companies and modest investors have unprecedented access to initial public offerings of securities. Sun Dental Labs, a Saint Petersburg, Florida-based company led by CEO Derek Diasti, became one of the first companies to take advantage of the new regulations by going public on December 2, 2015. The move allows for dentists who use Sun Dental Labs, along with ordinary investors, to gain a stake in the company and the changing lab industry.
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Raising capital to pay for expansion plans can be a major hurdle for smaller companies that aren’t publicly traded on the stock exchanges. But a new investor option is making the path less formidable for smaller businesses with big dreams, including one in the Tampa Bay, Florida, area. Saint Petersburg-based Sun Dental Labs is taking advantage of new rules created by the Jumpstart Our Business Startups (JOBS) Act to finance $20 million in new equipment and geographic expansion, including growth into the Latin American market.
While anyone can invest (here's the link), the move by Sun Dental Labs offers dentists the unusual opportunity to gain a stake in the dental lab market—perhaps with the lab they partner with already. It's possible because of revised rules adopted by the Securities and Exchange Commission (SEC) that went into effect over the summer. Under the revised rules, companies can sell up to $50 million of securities in a 12-month period and allow everyday citizens to be the investors.
“We are excited about this because it gives us easier access to capital without having to be listed on the trading markets,” says Derek Diasti, CEO of Sun Dental Labs. “Anyone can invest in this company, so this democratizes investing. You don’t have to be a millionaire to get involved.”
The new rules were a long time in coming. They were mandated as part of the JOBS Act passed by Congress in 2012. But the SEC took more than two years to craft the details, as regulators tried to balance giving businesses an effective capital-raising strategy while still providing strong investor protections.
The rules update and expand what was known as Regulation A under the Securities Act of 1933. The rules allow for two tiers of securities offerings:
- Tier 1. This lets companies offer and sell up to $20 million in securities over a 12-month period to accredited investors (high-net-worth individuals, banks, and large corporations) and non-accredited investors (those of more modest means). Similar to the original Regulation A, Tier 1 does not require audited financial statements, does not limit the amount that can be invested by a non-accredited investor, and does not require ongoing reporting. Issuers are required to register securities with each state in which they sell securities.
- Tier 2. This increases to $50 million the amount of securities that companies can offer and sell. Tier 2 offerings preempt state registration requirements, but the companies must file audited financial statements with the SEC. Once an offering is complete, ongoing reporting requirements include annual reports, semiannual reports, and current event reports. Limitations are placed on how much non-accredited investors can invest.
Sun Dental Labs is one of the first companies in the nation to receive SEC approval to move forward with a Tier 2 securities offering under the change. Diasti sees the SEC rule change as the perfect opportunity for the company, which manufactures and distributes custom dental devices, such as crowns, bridges, partials, dentures, implants, and orthodontic devices.
In addition to Florida, Sun Dental Labs has facilities in the United Kingdom, Sweden, France, the Netherlands, Germany and China.
“Our goal is to be in the forefront of the movement as dentistry goes digital in the coming decade,” Diasti says. “Right now, 95% of dentists use the traditional method for creating an impression of a patient’s teeth when the patient needs a crown or bridge or other dental device.”
The digital dentistry movement makes significant changes to the traditional crown and bridge workflow. Instead of a patient biting into an gooey impression substance, digital impressions are done using a wand that contains sensors. Traditional impression materials can be uncomfortable (leading to gagging with some patients), and they provide less accurate information than new digital impression methods. Sun Dental Labs is one of many industry companies who have moved forward with the digital workflow.
“We’ve developed a digital workflow that lets the dentist scan the mouth to get an impression, which will provide a more accurate fit, is more comfortable for the patient, and results in a quicker turnaround,” Diasti says.
Sun Dental Labs anticipates that the dental-device market will continue to grow, and the company plans to grow with it. That’s where the sale of securities under the new SEC rules comes in. Sun Dental’s initial goal is to raise $20 million. However, the company plans to eventually pursue a Tier 2 offering so that it can raise as much as $50 million.
“Our plan is to purchase additional manufacturing equipment and technology, and acquire a dental lab facility in Latin America,” Diasti says.
In addition, the capital raised would be used for such purposes as to pay off a portion of the company’s bank line of credit, make strategic acquisitions, and hire additional personnel.
Diasti says the new SEC rules came at an opportune time for Sun Dental. “In the next 10 years, no one will go to a dentist unless that dentist’s office is digital,” Diasti says. “The industry is changing and we plan to be a big part of that.”
Source: Sun Dental Labs press release, 2 December 2015
