Filed
Pursuant to Rule 424(b)(3)
Registration
No. 333-144745
PROSPECTUS
11,808,032
Shares
REMEDENT,
INC.
Common
Stock
This
combined Prospectus relates to the sale or other disposition of 4,032,287 shares
of common stock, $.001 par value, by the Selling Security Holders listed under
“Selling Security Holders” starting on page 15 or their
transferees. This Prospectus also covers the sale or other
disposition of 7,775,745 shares of our common stock by the Selling Security
Holders or their transferees upon the exercise of outstanding
warrants. We will receive gross proceeds of $12,187,133 if all of the
warrants are exercised for cash by the Selling Security Holders. We
will not receive any proceeds from the sale or other disposition of any common
stock by the Selling Security Holders or their transferees.
Our
common stock trades on the Over-The-Counter Bulletin Board, under the symbol
“REMI.” On May 7, 2009, the last reported sale price for our common stock was
$0.70. There is no public market for the warrants.
The
Selling Security Holders may, from time to time, sell, transfer or otherwise
dispose of any or all of their shares of common stock on any stock exchange,
market or trading facility on which the shares are traded or in private
transactions. These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale or at
negotiated prices. See “Plan of Distribution.”
________________
INVESTING IN OUR COMMON STOCK
INVOLVES A HIGH DEGREE OF RISK. SEE “RISK
FACTORS” BEGINNING ON PAGE 4 OF THIS
PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE
COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL
OFFENSE.
________________
This
Prospectus is a combined prospectus under Rule 429 of the Securities Act of
1933, as amended (the “Act”), that relates to those of our securities that
previously have been registered under the Act on registration statements, or
post-effective amendments thereto, as applicable (File Nos.: 333-127193 and
333-144745).
The
information in this Prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission becomes effective. This Prospectus
is not an offer to sell these securities and we are not soliciting an offer to
buy these securities in any state where the offer or sale is not permitted or
would be unlawful prior to registration or qualification under the securities
laws of any such state.
The
date of this Prospectus is May 14, 2009.
TABLE
OF CONTENTS
|
Page
|
|
|
PROSPECTUS
SUMMARY
|
1
|
Our
Business
|
1
|
Offering
Summary
|
2
|
Summary
of Financial Information
|
2
|
DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
|
3
|
RISK
FACTORS
|
4
|
Risks
Relating To Our Business
|
4
|
Risks
Relating To Our Common Stock
|
12
|
USE
OF PROCEEDS
|
14
|
DETERMINATION
OF OFFERING PRICE
|
14
|
SELLING
SECURITY HOLDERS
|
15
|
PLAN
OF DISTRIBUTION
|
19
|
DESCRIPTION
OF SECURITIES
|
21
|
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
|
21
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
|
22
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
26
|
DESCRIPTION
OF BUSINESS
|
37
|
DESCRIPTION
OF PROPERTY
|
45
|
LEGAL
PROCEEDINGS
|
45
|
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
|
45
|
EXECUTIVE
COMPENSATION
|
47
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
49
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
52
|
DISCLOSURE
OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
|
56
|
LEGAL
MATTERS
|
56
|
EXPERTS
|
56
|
TRANSFER
AGENT AND REGISTRAR
|
56
|
WHERE
YOU CAN FIND MORE INFORMATION
|
56
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
F-1
|
You should rely only on the
information contained in this Prospectus. We have
not authorized anyone to provide you
with different information. We are not
making an offer of these securities
in any state where the offer is not
permitted. You should not
assume that the information provided by this
Prospectus is accurate as of any date
other than the date on the front cover
page of this
Prospectus.
PROSPECTUS
SUMMARY
You should read the following
summary together with the more detailed
information and the financial
statements appearing elsewhere in this Prospectus
of Remedent, Inc. (the “Company,”
“we,” “us,” “our). This Prospectus contains
forward-looking statements that
involve risks and uncertainties. Our actual
results could differ materially from
those anticipated in these forward-looking
statements as a result of certain
factors, including those set forth under
“Risk Factors” and elsewhere in this
Prospectus.
Our
Business
We are
one of the leading providers of cosmetic dentistry products in Europe, including
a full line of professional dental products. We manufacture many of
our products in our facility in Deurle, Belgium as well as outsourced
manufacturing in China, and distribute our products using both our own internal
sales force and third party distributors. As a result of this
approach, we have established dealers in 35 countries encompassing, Europe,
Asia, Latin America, the Pacific Rim and the Middle East.
We were
originally incorporated under the laws of Arizona in September 1996 under the
name Remedent USA, Inc. In October 1998, we were acquired by Resort
World Enterprises, Inc., a Nevada corporation in a share exchange, and
immediately changed our name to Remedent USA, Inc. and later to Remedent,
Inc. We have the following wholly owned subsidiaries: (1)
Remedent N.V., a Belgium corporation (“Remedent NV”); (2) Remedent Professional
Holdings, Inc., a California corporation; (3) Remedent Professional, Inc., a
California corporation (a subsidiary of Remedent Professional Holdings, Inc.),
and Glamtech-USA, Inc., a Delaware corporation (“Glamtech”). Further,
we have a 50% ownership interest in Remedent OTC BV, a Belgium corporation
(“Remedent OTC”), and thereby have a partial ownership interest in the following
wholly owned subsidiaries of Sylphar Holding BV, a Dutch holding company and
subsidiary of Remedent OTC: (i) Sylphar N.V., a Belgium corporation; (ii)
Sylphar USA, Inc., a Nevada corporation; and (iii); Remedent Asia Pte Ltd, a
Singapore company.
Some of
the more significant developments in our business over the past year include the
following:
|
•
|
Completed
a restructuring in the form of a management-led buyout of 50% of our
over-the-counter (“OTC”) retail business. The buyout was led by
Mr. Robin List, our former director and Chief Executive Officer, with
financing provided by a non-affiliated foreign investment
fund. The sale was consistent with our strategic plan to
separate the OTC business from our professional business. With
the restructuring and additional cash received from the sale of the OTC
business, we intend to focus primarily on our full line of professional
dental products for the professional market and our GlamSmile veneer
product lines.
|
|
•
|
Entered
into a Distribution, License and Manufacturing Agreement with Den-Mat
Holdings, LLC, a Delaware limited liability company (“Den-Mat”) whereby
Den-Mat agreed to be the sole and exclusive distributor to market, license
and sell certain products relating to our GlamSmile tray technology, our
GlamSmile veneer products and other related veneer products throughout the
world, with the exception of Australia, Austria, Belgium, Brazil, France
(including Dom-Tom), Germany, Italy, New Zealand, Oman, Poland, Qatar,
Saudi Arabia, Singapore, Switzerland, Thailand, and United Arab Emirates,
and the China Market (collectively, the “Den-Mat
Transaction”).
|
|
•
|
In
connection with the Den-Mat Transaction, we purchased all of the
outstanding capital stock of Glamtech from the two shareholders of
Glamtech, in exchange for the rescission of the previously existing
distribution agreements with Glamtech, certain limited royalty payments
allocated to sales of the specified veneer products in the United States,
Canada and the United Kingdom during the term of the agreement with
Den-Mat, and an aggregate of one million (1,000,000) restricted shares of
our common stock. The primary assets of Glamtech were those
certain distribution agreements which granted Glamtech the exclusive right
to distribute the relevant veneer products in the United States, Canada
and the United Kingdom.
|
|
•
|
Entered
into an OEM Agreement with SensAble Technologies, Inc., a corporation
under the laws of Delaware (“SensAble”) whereby we will integrate SensAble
products and technology into our systems and have the exclusive right to
distribute certain SensAble products throughout the
world.
|
Our
principal executive offices are located at Xavier de Cocklaan 42, 9831 Deurle,
Belgium. Our telephone number is 011-32-9-321-7080. Our
website is at http://www.remedent.be.
Offering
Summary
Common
Stock covered hereby (the “Offering”)
|
|
11,808,032
|
Common
Stock outstanding after the Offering
(1)
|
|
27,771,714
|
Use
of Proceeds
|
|
We
will not receive any proceeds from the Offering. Proceeds we
may receive from the exercise of warrants will be used for general working
capital purposes.
|
Risk
Factors
|
|
The
securities covered hereby involve a high degree of risk and immediate
substantial dilution. See “Risk Factors.”
|
Over-The-Counter
Bulletin Board Symbol
|
|
REMI
|
|
(1)
|
Assumes
the cash exercise of warrants to acquire 7,775,745
shares.
|
Summary
of Financial Information
The
following table sets forth certain summary financial data. The
summarized financial data for the three months ended December 31, 2008 and 2007
and for the years ended March 31, 2008 and March 31, 2007 have been derived
from our unaudited and audited consolidated financial statements respectively,
which are included elsewhere in this Prospectus.
You
should read the following information with the more detailed information
contained in “Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” and our financial statements and accompanying notes
included elsewhere in this Prospectus.
Consolidated
Statements of Operations Data
|
|
For the three months ended
|
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Net
sales
|
|
$
|
4,842,628
|
|
|
$
|
2,132,950
|
|
Gross
profit
|
|
|
1,933,097
|
|
|
|
861,520
|
|
Income
(loss) from operations
|
|
|
(467,230
|
)
|
|
|
(1,089,202
|
)
|
Net
income (loss)
|
|
$
|
2,484,710
|
|
|
$
|
(1,096,750
|
)
|
Income
(loss) per share
|
|
|
|
|
|
|
|
|
Basic
and fully diluted
|
|
$
|
0.13
|
|
|
$
|
(0.06
|
)
|
Weighted
average shares outstanding
|
|
|
|
|
|
|
|
|
Basic
and fully diluted
|
|
|
19,332,760
|
|
|
|
18,602,115
|
|
Consolidated
Balance Sheet Data
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Cash
and cash equivalents
|
|
$
|
2,569,888
|
|
|
$
|
1,728,281
|
|
Total
assets
|
|
$
|
10,545,030
|
|
|
$
|
7,445,519
|
|
Total
current liabilities
|
|
$
|
3,426,207
|
|
|
$
|
3,637,598
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
10,545,030
|
|
|
$
|
7,445.519
|
|
Consolidated
Statements of Operations Data
|
|
For the years ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
|
(Audited)
|
|
|
(Audited)
|
|
Net
sales
|
|
$
|
7,482,261
|
|
|
$
|
6,676,365
|
|
Gross
profit
|
|
|
3,506,484
|
|
|
|
3,333,649
|
|
Income
(loss) from operations
|
|
|
(3,071,130
|
)
|
|
|
(1,394,988
|
)
|
Net
income (loss)
|
|
$
|
(3,115,513
|
)
|
|
$
|
(1,496,049
|
)
|
Income
(loss) per share
|
|
|
|
|
|
|
|
|
Basic
and fully diluted
|
|
$
|
(0.17
|
)
|
|
$
|
(0.12
|
)
|
Weighted
average shares outstanding
|
|
|
|
|
|
|
|
|
Basic
and fully diluted
|
|
|
17,823,012
|
|
|
|
12,971,795
|
|
Consolidated
Balance Sheet Data
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
|
(Audited)
|
|
|
(Audited)
|
|
Cash
and cash equivalents
|
|
$
|
1,728,281
|
|
|
$
|
126,966
|
|
Total
assets
|
|
$
|
7,445,519
|
|
|
$
|
4,377,966
|
|
Total
current liabilities
|
|
|
3,637,598
|
|
|
|
3,489,530
|
|
Total
liabilities and stockholders’ equity (deficit)
|
|
$
|
7,445,519
|
|
|
$
|
4,377,966
|
|
DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
In
addition to historical information, this Prospectus contains “forward-looking”
statements, including statements regarding the growth of product lines, optimism
regarding the business, expanding sales and other statements. Words
such as expects, anticipates, intends, plans, believes, sees, estimates and
variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of
future performance and involve certain risks and uncertainties that are
difficult to predict. Actual results could vary materially from the
description contained herein due to many factors including continued market
acceptance of our products. In addition, actual results could vary
materially based on changes or slower growth in the oral care and cosmetic
dentistry products market; the potential inability to realize expected benefits
and synergies; domestic and international business and economic conditions;
changes in the dental industry; unexpected difficulties in penetrating the oral
care and cosmetic dentistry products market; changes in customer demand or
ordering patterns; changes in the competitive environment including pricing
pressures or technological changes; technological advances; shortages of
manufacturing capacity; future production variables impacting excess inventory
and for the reasons, among others, described within the various
sections of this Prospectus, specifically the section entitled “Risk Factors” on
page 4. We undertake no obligation to release publicly any updated
information about forward-looking statements to reflect events or circumstances
occurring after the date of this Prospectus or to reflect the occurrence of
unanticipated events.
Each
forward-looking statement should be read in context with, and with an
understanding of, the various disclosures concerning our business made elsewhere
in this Prospectus, as well as other public reports filed by us with the United
States Securities and Exchange Commission. Readers should not place
undue reliance on any forward-looking statement as a prediction of actual
results of developments.
The risks
described below are the ones we believe are most important for you to consider,
these risks are not the only ones that we face. If events anticipated
by any of the following risks actually occur, our business, operating results or
financial condition could suffer and the trading price of our common stock could
decline.
RISK
FACTORS
Investment in our common stock
involves risk. You should carefully
consider the risks we describe below
before deciding to invest. The market
price of our common stock could
decline due to any of these risks, in which
case you could lose all or part of
your investment. In assessing these risks,
you should also refer to the other
information included in this Prospectus,
including our consolidated financial
statements and the accompanying notes. You
should pay particular attention to
the fact that we are a holding company with
substantial operations in Belgium
and are subject to legal and regulatory
environments that in many respects
differ from that of the United States. Our
business, financial condition or
results of operations could be affected
materially and adversely by any of
the risks discussed below and any others not
foreseen. This discussion
contains forward-looking statements.
Risks
Relating To Our Business
We
have a history of losses and we could suffer losses in the future.
With the
exception of the most recent third quarter ending December 31, 2008, during
which we had a net income of $2,484,710 on revenues of $4,842,628, and a small
profit of $16,149 on revenue of $5,234,855 for the fiscal year ended March 31,
2004, we have had a history of substantial losses. Our losses were
$1,963,806 on revenue of $733,853 for the fiscal year ended March 31, 2002;
$1,006,374 on revenue of $1,969,144 for the fiscal year ended March 31, 2003;
$103,428 on revenues of $7,072,300 for the fiscal year ended March 31, 2005;
$3,887,302 on revenues of $7,393,948 for the year ended March 31,
2006, $1,496,049 on revenues of $6,676,365 for the fiscal year ended
March 31, 2007 and $3,115,513 on revenues of $7,482,261 for the fiscal year
ended March 31, 2008.
Although
we have experienced significant growth in our revenues since 2002, we cannot
assure you that we will attain sustainable profitability on a quarterly or
annual basis in the future. We expect to continue to incur increasing
cost of revenues, research and development expenses, sales and marketing and
general and administrative expenses commensurate with our growth in
revenue. In order to achieve and sustain profitability, we will need
to generate and sustain increased revenues.
Substantially all of our assets are
secured under a credit facility with Fortis
Bank, a bank located outside of the
United States, and in the event of default
under the credit facility we may lose
all of our assets.
On October 8, 2004, our wholly owned
subsidiary, Remedent N.V., obtained a mixed-use line of credit facility with
Fortis Bank, a Belgian bank (“Fortis Bank”), for €1,070,000 (the
“Facility”). The Facility is secured by a first lien on the assets of
Remedent N.V. The purpose of the Facility is to provide working
capital to grow our business and to finance certain accounts receivable as
necessary. Since opening the Facility in 2004, Remedent N.V. and
Fortis Bank have subsequently amended the Facility several times to increase or
decrease the line of credit. On May 3, 2005 the Facility was amended
to decrease the line of credit to €1,050,000. On March 13, 2006, the
Facility was amended to increase the mixed-use line of credit to €2,300,000,
consisting of a €1,800,000 credit line based on the eligible accounts receivable
and a € 500,000 general line of credit. The Facility was further
amended September 1, 2006, to decrease the mixed-use line of credit to
€2,050,000. The latest amendment to the Facility, dated January 3,
2008, amended and decreased the mixed-use line of credit to €2,050,000, to be
used by Remedent N.V. and/or Sylphar N.V. Each line of credit carries
its own interest rates and fees as provided in the Facility. As of
December 31, 2008 and March 31, 2008, there were $907,558 and $779,718 in
advances outstanding, respectively, under this mixed-use line of credit
facility. Although we are current in our obligations under this
Facility, in the event of a default under this Facility we may lose our
assets.
We
may not have access to capital in the future as a result of disruptions in
capital and credit markets.
Although we currently have additional
credit available under our Facility with Fortis Bank, we may not be able to
access our funds in the future. Our access to the funds under our
current credit facility with Fortis Bank is dependent on the ability of the
financial institution that is party to the facility to meet its funding
commitments. Fortis Bank may not be able to meet its funding commitments if it
experiences shortages of capital and liquidity or if it experiences excessive
volumes of borrowing requests within a short period of time. Moreover, longer
term volatility and continued disruptions in the capital and credit markets as a
result of uncertainty, changing or increased regulation of financial
institutions, reduced alternatives or failures of significant financial
institutions could affect adversely our access to the liquidity needed for our
business in the longer term. Such disruptions could require us to take measures
to conserve cash until the markets stabilize or until alternative credit
arrangements or other funding for our business needs can be arranged. The
disruptions in the capital and credit markets have also resulted in higher
interest rates on publicly issued debt securities and increased costs under
credit facilities. The continuation of these disruptions would increase our
interest expense and capital costs and could affect adversely our results of
operations and financial position including our ability to grow our business
through acquisitions.
We may not be able to secure
additional financing to meet our future capital
needs due to changes in general
economic conditions.
We anticipate needing significant
capital to introduce new products, further develop our existing products,
increase awareness of our brand names and expand our operating and management
infrastructure as we grow sales in Europe, Asia and South America and
potentially launch sales and distribution activities in the United
States. We may use capital more rapidly than currently anticipated
and incur higher operating expenses and generate lower revenue than currently
expected, and we may be required to depend on external financing to satisfy our
operating and capital needs. We may need new or additional financing
in the future to conduct our operations or expand our business. Any sustained
weakness in the general economic conditions and/or financial markets in the
United States or globally could affect adversely our ability to raise capital on
favorable terms or at all. From time to time we have relied, and may also rely
in the future, on access to financial markets as a source of liquidity to
satisfy working capital requirements and for general corporate purposes. We may
be unable to secure additional debt or equity financing on terms acceptable to
us, or at all, at the time when we need such funding. If we do raise
funds by issuing additional equity or convertible debt securities, the ownership
percentages of existing stockholders would be reduced, and the securities that
we issue may have rights, preferences or privileges senior to those of the
holders of our common stock or may be issued at a discount to the market price
of our common stock which would result in dilution to our existing
stockholders. If we raise additional funds by issuing debt, we may be
subject to debt covenants, such as the debt covenants under our secured credit
facility, which could place limitations on our operations including our ability
to declare and pay dividends. Our inability to raise additional funds
on a timely basis would make it difficult for us to achieve our business
objectives and would have a negative impact on our business, financial condition
and results of operations.
Our
results of operations may be adversely impacted by currency
fluctuations.
We currently have operations in Belgium
and distributors in Europe, the Middle East, South America and
Asia. A significant portion of our revenue is in currencies other
than United States dollars, primarily in Euros. Because our financial
statements are reported in United States dollars, fluctuations in Euros against
the United States dollar may cause us to recognize foreign currency transaction
gains and losses, which may be material to our operations and impact our
reported financial condition and results of operations. During the
years ended March 31, 2008 and March 31, 2007, we recognized cash and cash
equivalents of $(66,463) and $(170,756), respectively, from the effect of
exchange rates between the Euro and the US Dollar. During the nine months ended
December 31, 2008 we recognized an increase in cash and cash equivalents of
$218,337 (2007 – $152,245) as a result of the effect of exchange rates between
the Euro and the US Dollar.
Substantially all of our assets and
our operations are located outside of the United States,
all of our sales are
generated outside of the United States subjecting us to risks associated with
international operations.
Our operations are primarily in
Belgium and 79% of our sales for the fiscal year end March 31, 2008 were
generated from customers outside of the United States, compared to 92% of our
sales for the fiscal year ended March 31, 2007. The international
nature of our business subjects us to the laws and regulations of the
jurisdictions in which we operate and sell our products. In addition,
we are subject to risks inherent in international business activities,
including:
|
•
|
difficulties
in collecting accounts receivable and longer collection
periods,
|
|
•
|
changes
in overseas economic conditions,
|
|
•
|
fluctuations
in currency exchange rates,
|
|
•
|
potentially
weaker intellectual property
protections,
|
|
•
|
changing
and conflicting local laws and other regulatory
requirements,
|
|
•
|
political
and economic instability,
|
|
•
|
war,
acts of terrorism or other
hostilities,
|
|
•
|
potentially
adverse tax consequences,
|
|
•
|
difficulties
in staffing and managing foreign operations,
or
|
|
•
|
tariffs
or other trade regulations and
restrictions.
|
Our quarterly sales and operating
results have fluctuated and may continue to
fluctuate in future periods which may
cause the price of our common stock to
decline.
Our
quarterly sales and operating results have fluctuated and are likely to continue
to vary from quarter to quarter due to a number of factors, many of which are
not within our control. Factors that might cause quarterly
fluctuations in our sales and operating results include, but are not limited by
the following:
|
•
|
Variation
in demand for our products, including variation due to
seasonality;
|
|
•
|
Our
ability to research, develop, introduce, market and gain market acceptance
of new products and product enhancements in a timely
manner;
|
|
•
|
Our
ability to control costs;
|
|
•
|
The
size, timing, rescheduling or cancellation of orders from
distributors;
|
|
•
|
The
introduction of new products by
competitors;
|
|
•
|
Long
sales cycles and fluctuations in sales
cycles;
|
|
•
|
The
availability and reliability of components used to manufacture our
products;
|
|
•
|
Changes
in our pricing policies or those of our suppliers and competitors, as well
as increased price competition in
general;
|
|
•
|
The
risks and uncertainties associated with our international
business;
|
|
•
|
Costs
associated with any future acquisitions of technologies and
businesses;
|
|
•
|
Developments
concerning the protection of our proprietary rights;
and
|
|
•
|
General
global economic, political, international conflicts, and acts of
terrorism.
|
In
addition, our research and development expenses for the year ended March 31,
2008 were $332,958 compared to $341,764 for the year ended March 31, 2007, which
is a decrease of $8,806, or 3%, over the prior fiscal year. For the
nine months ended December 31, 2008, research and development expenses decreased
by $23,286 or 9.4% to $224,379 as compared to $247,665 for the nine months ended
December 31, 2007. The principal reason for this decrease is that the
majority of investments in relation to the development of new products took
place during 2007. The release of these new products is scheduled for
the next six months.
We are economically sensitive
to general economic conditions, including continued weakening of the economy,
therefore
the
sale of our products could be adversely affected.
Our industry is sensitive to
recessions in the general economy and future economic outlook. Our results may
be dependent on a number of factors impacting consumer spending, including
general economic
and business conditions; and
consumer confidence. The demand for our dental products may decline during
recessionary periods and at other times when disposable income is lower. A
downturn or an uncertain outlook in the economy may materially adversely
aff
e
ct our
business.
An
unsuccessful material strategic transaction or relationship could result in
operating difficulties and other harmful consequences to our
business.
We have evaluated, and expect to
continue to evaluate, a wide array of potential strategic transactions and
relationships with third parties. From time to time, we may
engage in discussions regarding potential acquisitions or joint ventures. Any of
these transactions could be material to our financial condition and results of
operations, and the failure of any of these material relationships and
transactions may have a negative financial impact on our business.
Our products may be subject to
government regulation and failure to comply with
applicable regulations could result
in fines, suspensions, seizure actions,
product recalls, injunctions and
criminal prosecutions.
Before most medical devices can be
marketed in the United States, they are required by the United States Food and
Drug Administration (“FDA”) to secure either clearance of a pre-market
notification pursuant to Section 510(k) of the Federal Food, Drug and Cosmetic
Act (“FDC Act”) (a “510(k) Clearance”) or approval of a pre-market approval
application (“PMA”). Obtaining approval of a PMA application can take
several years. In contrast, the process of obtaining 510(k) Clearance
generally requires a submission of substantially less data and generally
involves a shorter review period. As discussed more specifically
under the subsection title “Regulatory Issue,” most Class I and Class II devices
enter the market via the 510(k) Clearance procedure, while new Class III devices
ordinarily enter the market via the more rigorous PMA
procedure. Approval of a PMA application for a new medical device
usually requires, among other things, extensive clinical data on the safety and
effectiveness of the device. PMA applications may take years to be
approved after they are filed. In addition to requiring clearance or
approval for new medical devices, FDA rules also require a new 510(k) filing and
review period, prior to marketing a changed or modified version of an existing
legally marketed device, if such changes or modifications could significantly
affect the safety or effectiveness of that device. The FDA prohibits
the advertisement or promotion of any approved or cleared device for uses other
than those that are stated in the device’s approved or cleared
application.
We have received approval from the
FDA to market our RemeCure dental curing lamp in the United
States. We submitted our application for approval on FDA Form 510(k)
on October 30, 2002 and received FDA approval for this product on January 9,
2003. None of our other products have FDA approval for marketing in
the United States. However, we believe that our products, including
for example, GlamSmile, do not require a 510(k) submission because the products
fall within an exemption under the 510(k) regulation.
International sales of medical
devices are also subject to the regulatory requirements of each
country. In Europe, the regulations of the European Union require
that a device have a CE Mark, a mark that indicates conformance with European
Union laws and regulations before it can be sold in that market. The
regulatory international review process varies from country to
country. We rely upon our distributors and sales representatives in
the foreign countries in which we market our products to ensure we comply with
the regulatory laws of such countries. Failure to comply with the
laws of such country could have a material adverse effect on our operations and,
at the very least, could prevent us from continuing to sell products in such
countries.
We may not have effective internal
controls if we fail to remedy any
deficiencies we may identify in our
system of internal controls.
In preparation for the annual report
of management regarding our evaluation of our internal controls that will be
required to be included in our annual report for the year ending March 31, 2009
and the annual attestation report of our registered public accounting firm that
is required to be included in our annual report for the year ending March 31,
2010, by Section 404 of the Sarbanes-Oxley Act of 2002, we will need to assess
the adequacy of our internal control, remediate any weaknesses that may be
identified, validate that controls are functioning as documented and implement a
continuous reporting and improvement process for internal
controls. We may discover deficiencies that require us to improve our
procedures, processes and systems in order to ensure that our internal controls
are adequate and effective and that we are in compliance with the requirements
of Section 404 of the Sarbanes-Oxley Act. If the deficiencies are not
adequately addressed, or if we are unable to complete all of our testing and any
remediation in time for compliance with the requirements of Section 404 of the
Sarbanes-Oxley Act and the SEC rules under it, we would be unable to conclude
that our internal controls over financial reporting are designed and operating
effectively, which could adversely affect our investor confidence in our
internal controls over financial reporting.
The loss of or a substantial
reduction in, or change in the size or timing of,
orders from distributors could harm
our business
.
Our international sales are
principally comprised of sales through independent distributors, although we
sell products in certain European countries through direct sales
representatives. A significant amount of our sales may consist of
sales through distributors. The loss of a substantial number of our
distributors or a substantial reduction in, cancellation of or change in the
size or timing of orders from our current distributors could harm our business,
financial condition and results of operations. The loss of a key
distributor would affect our operating results due to the potential length of
time that might be required to locate and qualify a new distributor or to retain
direct sales representatives for the territory.
We
do not have long term commitments from our suppliers and
manufacturers.
We may experience shortages of
supplies and inventory because we do not have long-term agreements with our
suppliers or manufacturers. Our success is dependent on our ability
to provide our customers with our products. Although we manufacture
most of our products, we are dependent on our suppliers for component parts
which are necessary for our manufacturing operations. In addition,
certain of our present and future products and product components are (or will
be) manufactured by third party manufacturers. Since we have no
long-term contracts or other contractual assurances with these manufacturers for
continued supply, pricing or access to component parts, no assurance can be
given that such manufacturers will continue to supply us with adequate
quantities of products at acceptable levels of quality and
price. While we believe that we have good relationships with our
suppliers and our manufacturers, if we are unable to extend or secure
manufacturing services or to obtain component parts or finished products from
one or more manufacturers on a timely basis and on acceptable terms, our results
of operations could be adversely affected.
We face intense competition, and many
of our competitors have substantially
greater resources than we
do.
We operate in a highly competitive
environment. In addition, the competition in the market for teeth
whitening and cosmetic dental products and services may intensify in the future
as we enter into the United States market. There are numerous
well-established companies and smaller entrepreneurial companies based in the
United States with significant resources who are developing and marketing
products and services that will compete with our products. In
addition, many of our current and potential competitors have greater financial,
technical, operational and marketing resources. These resources may
make it difficult for us to compete with them in the development and marketing
of our products, which could harm our business.
Our success will depend on our
ability to update our technology to remain
competitive.
The dental device and supply industry
is subject to technological change. As technological changes occur in
the marketplace, we may have to modify our products in order to become or remain
competitive. While we are continuing our research and development in
new products in efforts to strengthen our competitive advantage, no assurances
can be given that we will successfully implement technological improvements to
our products on a timely basis, or at all. If we fail to anticipate
or respond in a cost-effective and timely manner to government requirements,
market trends or customer demands, or if there are any significant delays in
product development or introduction, our revenues and profit margins may decline
which could adversely affect our cash flows, liquidity and operating
results.
We depend on market acceptance of the
products of our customers. If our
products do not gain market
acceptance, our ability to compete will be
adversely
affected.
Our success will depend in large part
on our ability to successfully market our line of products and our ability to
receive all regulatory approvals. Although we intend to differentiate
our products from our competitors by targeting different channels of
distribution, no assurances can be given that we will be able to successfully
market our products or achieve consumer acceptance. Moreover, failure
to successfully develop, manufacture and commercialize our products on a timely
and cost-effective basis will have a material adverse effect on our ability to
compete in our targeted market segments. In addition, medical and
dental insurance policies generally do not cover teeth whitening or other
cosmetic dental procedures, including our products, which may have an adverse
impact upon the market acceptance of our products.
Failure to meet customers’
expectations or deliver expected performance of our
products could result in losses and
negative publicity, which will harm our
business
.
If our products fail to perform in
the manner expected by our customers, then our revenues may be delayed or lost
due to adverse customer reaction, negative publicity about us and our products,
which could adversely affect our ability to attract or retain
customers. Furthermore, disappointed customers may initiate claims
for substantial damages against us, regardless of our responsibility for such
failure.
If product liability lawsuits are
successfully brought against us, we may incur
substantial liabilities and may be
required to limit commercialization of our
products.
Although we have not been a party to
any product liability lawsuits and are currently not aware of any anticipated
product liability claims with respect to our products, the nature of our
business exposes us to product liability lawsuits arising out of the
commercialization of our products. In the future, an individual may
bring a liability claim against us if one of our products causes, or merely
appears to have caused, an injury. If we cannot successfully defend
ourselves against the product liability claim, we may incur substantial
liabilities. Regardless of merit or eventual outcome, liability
claims may result in:
|
•
|
decreased
demand for our products;
|
|
•
|
injury
to our reputation;
|
|
•
|
costs
of related litigation;
|
|
•
|
substantial
monetary awards to customers;
|
|
•
|
the
inability to commercialize our
products.
|
We
may have difficulty managing our growth.
We have been experiencing significant
growth in the scope of our operations and the number of our
employees. This growth has placed significant demands on our
management as well as our financial and operational resources. In
order to achieve our business objectives, we anticipate that we will need to
continue to grow. If this growth occurs, it will continue to place
additional significant demands on our management and our financial and
operational resources, and will require that we continue to develop and improve
our operational, financial and other internal controls. We have been
distributing our products primarily in Europe and we have recently launched
sales and distribution in the United States, this expansion could further
increase the challenges involved in implementing appropriate operational and
financial systems, expanding manufacturing capacity and scaling up production,
expanding our sales and marketing infrastructure and capabilities and providing
adequate training and supervision to maintain high quality
standards. The main challenge associated with our growth has been,
and we believe will continue to be, our ability to recruit and integrate skilled
sales, manufacturing and management personnel. Our inability to scale
our business appropriately or otherwise adapt to growth would cause our
business, financial condition and results of operations to suffer.
It may be difficult to enforce a
United States judgment against us, our
officers and directors, or to assert
United States securities laws claims in
Belgium and to serve process on
substantially all of our directors and
officers and these
experts.
A majority of our directors and our
chief executive officer are nonresidents of the United States. A
substantial portion of our assets and all or a substantial portion of the assets
of these officers and directors and experts are located outside of the United
States. As a result, it may be difficult to effect service of process
within the United States with respect to matters arising under the United States
securities laws or to enforce, in the United States courts, judgments predicated
upon civil liability under the United States securities laws. It also
may be difficult to enforce in Belgium, in original actions or in actions for
enforcement of judgment of United States courts, civil liabilities predicated
upon United States securities laws.
If we are unable to protect our
intellectual property rights or our
intellectual property rights are
inadequate, our competitive position could be
harmed or we could be required to
incur expenses to enforce our rights
.
Our future success will depend, in
part, on our ability to obtain and maintain patent protection for our products
and technology, to preserve our trade secrets and to operate without infringing
the intellectual property of others. In part, we rely on patents to
establish and maintain proprietary rights in our technology and
products. While we hold licenses to a number of issued patents and
have other patent applications pending on our products and technology, we cannot
assure you that any additional patents will be issued, that the scope of any
patent protection will be effective in helping us address our competition or
that any of our patents will be held valid if subsequently
challenged. Other companies also may independently develop similar
products, duplicate our products or design products that circumvent our
patents.
In addition, if our intellectual
property rights are inadequate, we may be exposed to third-party infringement
claims against us. Although we have not been a party to any
infringement claims and are currently not aware of any anticipated infringement
claim, we cannot predict whether third parties will assert claims of
infringement against us, or whether any future claims will prevent us from
operating our business as planned. If we are forced to defend against
third-party infringement claims, whether they are with or without merit or are
determined in our favor, we could face expensive and time-consuming
litigation. If an infringement claim is determined against us, we may
be required to pay monetary damages or ongoing royalties. In
addition, if a third party successfully asserts an infringement claim against us
and we are unable to develop suitable non-infringing alternatives or license the
infringed or similar intellectual property on reasonable terms on a timely
basis, then our business could suffer.
If we are unable to meet customer
demand or comply with quality regulations,
our sales will suffer
.
We manufacture many of our products
at our Deurle, Belgium production facilities. In order to achieve our
business objectives, we will need to significantly expand our manufacturing
capabilities to produce the systems and accessories necessary to meet
demand. We may encounter difficulties in scaling-up production of our
products, including problems involving production capacity and yields, quality
control and assurance, component supply and shortages of qualified
personnel. In addition, our manufacturing facilities are subject to
periodic inspections by foreign regulatory agencies. Our success will
depend in part upon our ability to manufacture our products in compliance with
regulatory requirements. Our business will suffer if we do not
succeed in manufacturing our products on a timely basis and with acceptable
manufacturing costs while at the same time maintaining good quality control and
complying with applicable regulatory requirements.
We are dependent on Guy De Vreese,
our Chairman and Chief
Executive Officer, and any loss of
such key personnel could result in the loss
of a significant portion of our
business.
Our success is highly dependent upon
the key business relations and expertise of Guy De Vreese, our Chairman and
Chief Executive Officer. Unlike larger companies, we rely heavily on
a small number of officers to conduct a large portion of our
business. The loss of service of our Chairman and Chief Executive
Officer along with the loss of his numerous contacts and relationships in the
industry would have a material adverse effect on our business. We do
not have an employment agreement with Guy De Vreese.
If
we cannot build and maintain strong brand loyalty our business may
suffer.
We believe that the importance of
brand recognition will increase as more companies produce competing
products. Development and awareness of our brands will depend largely
on our ability to advertise and market successfully. If we are
unsuccessful, our brands may not be able to gain widespread acceptance among
consumers. Our failure to develop our brands sufficiently would have
a material adverse effect on our business, results of operations and financial
condition.
Risks
Relating To Our Common Stock
There
is a limited public trading market for our common stock.
Our Common Stock presently trades on
the Over-the-Counter Bulletin Board under the symbol “REMI.” We cannot assure
you, however, that such market will continue or that you will be able to
liquidate your shares acquired in this offering at the price you paid or
otherwise. We also cannot assure you that any other market will be
established in the future. The price of our common stock may be
highly volatile and your liquidity may be adversely affected in the
future.
The
potential sale of the shares being offered in this Prospectus, and those offered
in a prior prospectus, may cause the market price of our common stock to drop
significantly, even if our business is doing well.
This combined Prospectus covers the
sale or other distribution of 11,808,032 shares of common stock, which includes
4,032,287 shares of common stock and 7,775,745 shares of our common stock also
held by the Selling Security Holders, or their transferees, upon the exercise of
outstanding warrants. The 11,808,032 shares covered hereby represents
approximately 165% of the outstanding shares held by
non-affiliates. (Shares held by non-affiliates are
7,141,871.) The average daily trading volume for the three month
period prior to May 7, 2009 was 9,403. The 11,808,032 shares covered
hereby represents approximately 125,577% of daily trading
volume. Sales of substantial amounts of our common stock in the
public market, or the perception that these sales may occur, could materially
adversely affect the prevailing market price of our common stock and our ability
to raise capital through an offering of our equity
securities.
Our
common stock is thinly traded, so you may be unable to sell at or near ask
prices or at all if you need to sell your shares to raise money or otherwise
desire to liquidate your shares.
There is limited market activity in our
stock and we are too small to attract the interest of many brokerage firms and
analysts. We cannot give you any assurance that a broader or more active public
trading market for our common stock will develop or be sustained. While we are
trading on the Over-The-Counter Bulletin Board, our trading volume may be
limited by the fact that many major institutional investment funds, including
mutual funds, as well as individual investors follow a policy of not investing
in Bulletin Board stocks and certain major brokerage firms restrict their
brokers from recommending Bulletin Board stocks because they are considered
speculative, volatile, thinly traded and the market price of the common stock
may not accurately reflect our underlying value. The market price of our common
stock could be subject to wide fluctuations in response to quarterly variations
in our revenues and operating expenses, announcements of new products or
services by us, significant sales of our common stock, the operating and stock
price performance of other companies that investors may deem comparable to us,
and news reports relating to trends in our markets or general economic
conditions.
The
ownership of our stock is highly concentrated in our management.
As of May 7, 2009, our present
directors and executive officers, and their respective affiliates beneficially
owned approximately 27.8% of our outstanding common stock, including underlying
options that were exercisable or which would become exercisable within 60 days
of May 7, 2009. As a result of their ownership, our directors and
executive officers and their respective affiliates collectively are able to
significantly influence all matters requiring shareholder approval, including
the election of directors and approval of significant corporate
transactions. This concentration of ownership may also have the
effect of delaying or preventing a change in control.
We
have a substantial number of shares authorized but not yet issued.
Our
Articles of Incorporation authorize the issuance of up to 50,000,000 shares of
common stock and 10,000,000 shares of preferred stock. Our Board of
Directors has the authority to issue additional shares of common stock and
preferred stock and to issue options and warrants to purchase shares of our
common stock and preferred stock without stockholder approval. Future
issuance of common stock and preferred stock could be at values substantially
below current market prices and therefore could represent further substantial
dilution to our stockholders. In addition, the Board could issue
large blocks of voting stock to fend off unwanted tender offers or hostile
takeovers without further shareholder approval.
We
have historically not paid dividends and do not intend to pay
dividends.
We have historically not paid
dividends to our stockholders and management does not anticipate paying any cash
dividends on our common stock to our stockholders for the foreseeable
future. We intend to retain future earnings, if any, for use in the
operation and expansion of our business.
Our stock may be governed by the
“penny stock rules,” which impose additional
requirements on broker-dealers who
make transactions in our stock.
SEC rules require a broker-dealer to
provide certain information to purchasers of securities traded at less than
$5.00, which are not traded on a national securities exchange. Since
our common stock is not currently traded on an exchange, our common stock is
considered a “penny stock,” and trading in our common stock is subject to the
requirements of Rules 15g-1 through 15g-9 under the Securities Exchange Act of
1934 (the “Penny Stock Rules”). The Penny Stock Rules require a
broker-dealer to deliver a standardized risk disclosure document prepared by the
SEC that provides information about penny stocks and the nature and level of
risks in the penny stock market. The broker-dealer must also give bid
and offer quotations and broker and salesperson compensation information to the
prospective investor orally or in writing before or with the confirmation of the
transaction. In addition, the Penny Stock Rules require a
broker-dealer to make a special written determination that the penny stock is a
suitable investment for the purchaser and receive the purchaser’s written
agreement to the transaction before a transaction in a penny
stock. These requirements may severely limit the liquidity of
securities in the secondary market because few broker-dealers may be likely to
undertake these compliance activities. Therefore, the disclosure
requirements under the Penny Stock Rules may have the effect of reducing trading
activity in our common stock, which may make it more difficult for investors to
sell their shares.
USE
OF PROCEEDS
We will not receive any proceeds from
the disposition of the common stock relating to this Prospectus.
Although there is no assurance that any
or all of the warrants will be exercised for cash, assuming there are no
adjustments to the exercise price for anti-dilution protection, we will receive
gross proceeds of approximately $12,187,133 in the event the holders of the
warrants exercise all of their options to purchase shares of our common stock
for cash. The warrants are exercised at the discretion of the holders
and will be exercised only if the price of the common stock justifies the
exercise prior to their expiration. Any proceeds from the cash exercise of
warrants will be used for working capital and general corporate
purposes.
SELLING
SECURITY HOLDERS
The following table identifies the
Selling Security Holders, as of May 7, 2009, and indicates certain information
known to us with respect to (i) the number of common shares beneficially owned
by the Selling Stockholder, (ii) the number of common shares that may be offered
for the Selling Stockholder’s account, and (iii) the number of common shares and
percentage of outstanding common shares to be beneficially owned by the Selling
Security Holders assuming the sale of all of the common shares covered hereby by
the Selling Security Holders. The term “beneficially owned” means
common shares owned or that may be acquired within 60 days. As of May
7, 2009, 19,995,969 shares of common stock were issued and
outstanding. As of that date, an additional 12,072,588 shares of
common stock were issuable upon the exercise of outstanding options and
warrants. Shares of common stock that are issuable upon the exercise
of outstanding options, warrants, convertible securities or other purchase
rights held by a particular Selling Security Holder, to the extent exercisable
within 60 days of the date of this Prospectus, are treated as outstanding for
purposes of computing each such Selling Security Holder’s percentage ownership
of outstanding shares, but not for any other Selling Security
Holder. The Selling Security Holders may sell some, all, or none of
our common shares. The numbers and percentages set forth below under
“Shares Beneficially Owned After Offering” assume that all of the shares covered
hereby are sold.
|
|
Shares Beneficially Owned
Prior to Offering
|
|
|
Shares to
be Offered
|
|
|
Shares Beneficially
Owned After Offering
|
|
Name of Selling Stockholder
|
|
Number
|
|
|
Percentage
|
|
|
Number
|
|
|
Number
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special
Situations Private Equity Fund LP
(1)(2)
|
|
|
5,853,049
|
|
|
|
25.63
|
%
|
|
|
5,853,049
|
|
|
|
0
|
|
|
|
0
|
%
|
Special
Situations Cayman Fund LP
(3)(2)
|
|
|
1,255,067
|
|
|
|
6.18
|
%
|
|
|
735,000
|
|
|
|
520,067
|
|
|
|
2.56
|
%
|
Special
Situations Fund III QP LP
(4)(2)
|
|
|
706,700
|
|
|
|
3.50
|
%
|
|
|
413,000
|
|
|
|
293,067
|
|
|
|
1.46
|
%
|
Lewin
Investments
(5)
|
|
|
143,082
|
|
|
|
0.71
|
%
|
|
|
143,082
|
|
|
|
0
|
|
|
|
0
|
%
|
Stephen
Walker
(6)
|
|
|
73,376
|
|
|
|
0.37
|
%
|
|
|
73,376
|
|
|
|
0
|
|
|
|
0
|
%
|
Ponte
Vedra Partners
(7)
|
|
|
40,357
|
|
|
|
0.20
|
%
|
|
|
40,357
|
|
|
|
0
|
|
|
|
0
|
%
|
Peter
Massaniso
(8)
|
|
|
40,356
|
|
|
|
0.20
|
%
|
|
|
40,356
|
|
|
|
0
|
|
|
|
0
|
%
|
Pinnacle
Asset Mngmt
(9)
|
|
|
40,357
|
|
|
|
0.20
|
%
|
|
|
40,357
|
|
|
|
0
|
|
|
|
0
|
%
|
Massaniso
& Co.
(10)
|
|
|
40,357
|
|
|
|
0.20
|
%
|
|
|
40,357
|
|
|
|
0
|
|
|
|
0
|
%
|
London
Family Trust
(11)
|
|
|
190,103
|
|
|
|
0.94
|
%
|
|
|
190,103
|
|
|
|
0
|
|
|
|
0
|
%
|
Russmir
Capital
(12)
|
|
|
41,513
|
|
|
|
0.21
|
%
|
|
|
41,513
|
|
|
|
0
|
|
|
|
0
|
%
|
Gary
Cohen
(13)
|
|
|
24,667
|
|
|
|
0.12
|
%
|
|
|
24,667
|
|
|
|
0
|
|
|
|
0
|
%
|
Edwin
Bertolas
(14)
|
|
|
22,013
|
|
|
|
0.11
|
%
|
|
|
22,013
|
|
|
|
0
|
|
|
|
0
|
%
|
John
Micek
(15)
|
|
|
64,698
|
|
|
|
0.32
|
%
|
|
|
64,698
|
|
|
|
0
|
|
|
|
0
|
%
|
Peter
Micek
(16)
|
|
|
14,005
|
|
|
|
0.07
|
%
|
|
|
14,005
|
|
|
|
0
|
|
|
|
0
|
%
|
Silicon
Prairie Partners
(17)
|
|
|
70,022
|
|
|
|
0.35
|
%
|
|
|
70,022
|
|
|
|
0
|
|
|
|
0
|
%
|
Maurice
Micek
(18)
|
|
|
28,010
|
|
|
|
0.14
|
%
|
|
|
28,010
|
|
|
|
0
|
|
|
|
0
|
%
|
James
Tierney
(19)
|
|
|
44,025
|
|
|
|
0.22
|
%
|
|
|
44,025
|
|
|
|
0
|
|
|
|
0
|
%
|
Robert
Hannah
(20)
|
|
|
19,811
|
|
|
|
0.10
|
%
|
|
|
19,811
|
|
|
|
0
|
|
|
|
0
|
%
|
Soh
Eng Yeong
(21)
|
|
|
35,690
|
|
|
|
0.18
|
%
|
|
|
35,690
|
|
|
|
0
|
|
|
|
0
|
%
|
Richard
Duane Clarkson
(22)
|
|
|
18,344
|
|
|
|
0.09
|
%
|
|
|
18,344
|
|
|
|
0
|
|
|
|
0
|
%
|
Richard
and Joanne Clarkson Trust
(23)
|
|
|
18,344
|
|
|
|
0.09
|
%
|
|
|
18,344
|
|
|
|
0
|
|
|
|
0
|
%
|
Lisa
Gordon
(24)
|
|
|
7,704
|
|
|
|
0.04
|
%
|
|
|
7,704
|
|
|
|
0
|
|
|
|
0
|
%
|
Steven
Mintz
(25)
|
|
|
19,811
|
|
|
|
0.16
|
%
|
|
|
31,811
|
|
|
|
0
|
|
|
|
0
|
%
|
Michel
Van Gerven
(26)
|
|
|
74,513
|
|
|
|
0.37
|
%
|
|
|
42,013
|
|
|
|
32,500
|
|
|
|
*
|
|
Joel
Leonard Trust
(27)
|
|
|
56,421
|
|
|
|
0.28
|
%
|
|
|
56,421
|
|
|
|
0
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MDB
Capital
(28)
|
|
|
396,686
|
|
|
|
1.95
|
%
|
|
|
396,686
|
|
|
|
0
|
|
|
|
0
|
%
|
Christopher
Marlett
(29)
|
|
|
253,443
|
|
|
|
1.25
|
%
|
|
|
253,443
|
|
|
|
0
|
|
|
|
0
|
%
|
Dyana
Marlett
(30)
|
|
|
39,288
|
|
|
|
0.20
|
%
|
|
|
39,288
|
|
|
|
0
|
|
|
|
0
|
%
|
Aaron
Grunfeld
(31)
|
|
|
24,729
|
|
|
|
0.12
|
%
|
|
|
24,729
|
|
|
|
0
|
|
|
|
0
|
%
|
Karen
Simi
(32)
|
|
|
33,334
|
|
|
|
0.17
|
%
|
|
|
33,334
|
|
|
|
0
|
|
|
|
0
|
%
|
|
|
Shares Beneficially Owned
Prior to Offering
|
|
|
Shares to
be Offered
|
|
|
Shares Beneficially
Owned After Offering
|
|
Name of Selling Stockholder
|
|
Number
|
|
|
Percentage
|
|
|
Number
|
|
|
Number
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony
Di Giandomenico
(33)
|
|
|
1,334
|
|
|
|
0.01
|
%
|
|
|
1,334
|
|
|
|
0
|
|
|
|
0
|
%
|
Greg
Bailey
(34)
|
|
|
13,080
|
|
|
|
0.07
|
%
|
|
|
13,080
|
|
|
|
0
|
|
|
|
0
|
%
|
Michael
Williams
(35)
|
|
|
50,000
|
|
|
|
0.25
|
%
|
|
|
50,000
|
|
|
|
0
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potomac
Capital Partners LP
(36)
|
|
|
828,735
|
|
|
|
4.06
|
%
|
|
|
424,365
|
|
|
|
404,370
|
|
|
|
1.98
|
%
|
Potomac
Capital International Ltd
(37)
|
|
|
506,098
|
|
|
|
2.49
|
%
|
|
|
293,976
|
|
|
|
212,122
|
|
|
|
1.05
|
%
|
Pleiades
Investment Partners-R LP
(38)
|
|
|
536,186
|
|
|
|
2.64
|
%
|
|
|
301,659
|
|
|
|
234,527
|
|
|
|
1.16
|
%
|
MicroCapital
Fund LP
(39)
|
|
|
262,500
|
|
|
|
1.30
|
%
|
|
|
262,500
|
|
|
|
0
|
|
|
|
0
|
%
|
MicroCapital
Fund Ltd.
(40)
|
|
|
112,500
|
|
|
|
0.56
|
%
|
|
|
112,500
|
|
|
|
0
|
|
|
|
0
|
%
|
Raffles
Associates, LP
(41)
|
|
|
195,000
|
|
|
|
0.97
|
%
|
|
|
195,000
|
|
|
|
0
|
|
|
|
0
|
%
|
Neal
I. Goldman
(42)
|
|
|
350,000
|
|
|
|
1.74
|
%
|
|
|
350,000
|
|
|
|
0
|
|
|
|
0
|
%
|
Lagunitas
Partners LP
(43)
|
|
|
593,400
|
|
|
|
2.88
|
%
|
|
|
593,400
|
|
|
|
0
|
|
|
|
0
|
%
|
Gruber
& McBaine International
(44)
|
|
|
136,200
|
|
|
|
0.68
|
%
|
|
|
136,200
|
|
|
|
0
|
|
|
|
0
|
%
|
Jon
D. and Linda W. Gruber Trust
(45)
|
|
|
115,200
|
|
|
|
0.57
|
%
|
|
|
115,200
|
|
|
|
0
|
|
|
|
0
|
%
|
J.
Patterson McBaine
(46)
|
|
|
115,200
|
|
|
|
0.57
|
%
|
|
|
115,200
|
|
|
|
0
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
11,808,032
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes
warrants to purchase 2,842,382 shares of common stock.
|
|
|
|
MGP
Advisors Limited (“MGP”) is the general partners of Special Situations
Fund III QP, L.P. AWM Investment Company (“AWM”) is the general partner of
MGP, the general partner of and investment advisor to Special Situations
Cayman Fund, L.P. and the investment advisor to Special Situations Fund
III QP, L.P. and Special Situations Private Equity Fund, L.P. Austin W.
Marxe and David M. Greenhouse are the principal owners of MGP and AWM.
Through their control of MGP and AWM, Messrs. Marxe and Greenhouse share
voting and investment control over the portfolio securities of each of the
funds listed above.
|
(3)
|
Includes
warrants to purchase 315,000 shares of common
stock.
|
(4)
|
Includes
warrants to purchase 177,000 shares of common
stock.
|
(5)
|
Includes
warrants to purchase 143,082 shares of common stock. Nicholas
Lewin is the manager of Lewin Investments,
LLC.
|
(6)
|
Includes
warrants to purchase 73,376 shares of common
stock.
|
(7)
|
Includes
warrants to purchase 40,357 shares of common stock. Peter A.
Massaniso is the manager of Ponte Vedra Partners
Ltd.
|
(8)
|
Includes
warrants to purchase 40,356 shares of common stock. Peter A
Massaniso is the manager of Ponte Vedra Partners Ltd., the President of
Pinnacle Asset Management Ltd. and the President of Massaniso & Co.,
Inc.
|
(9)
|
Includes
warrants to purchase 40,357 shares of common stock. Peter A.
Massaniso is the President of Pinnacle Asset Management
Ltd.
|
(10)
|
Includes
warrants to purchase 40,357 shares of common stock. Peter A.
Massaniso is the President of Massaniso & Co,
Inc.
|
(11)
|
Includes
warrants to purchase 183,437 shares of common
stock.
|
(12)
|
Includes
warrants to purchase 22,013 shares of common
stock.
|
(13)
|
Includes
warrants to purchase 19,000 shares of common
stock.
|
(14)
|
Includes
warrants to purchase 22,013 shares of common
stock.
|
(15)
|
Includes
warrants to purchase 36,688 shares of common stock held in the name of
John Micek; 6,667 shares of common stock and warrants to purchase 7,338
shares of common stock held in the name of John Micek as custodian for
Gabriel Micek, under the California Uniform Transfer to Minor Act, and
6,667 shares of common stock and warrants to purchase 7,338 shares of
common stock held in the name of John Micek as custodian for Jordan Micek
under the California Uniform Transfer to Minor Act. John Micek
is also the Managing Partner of Silicon Prairie Partners,
L.P.
|
(16)
|
Includes
warrants to purchase 7,338 shares of common
stock.
|
(17)
|
Includes
warrants to purchase 36,688 shares of common stock. John Micek
is the Managing Partner of Silicon Prairie Partners,
L.P.
|
(18)
|
Includes
warrants to purchase 14,676 shares of common
stock.
|
(19)
|
Includes
warrants to purchase 44,025 shares of common
stock.
|
(20)
|
Includes
warrants to purchase 19,811 shares of common
stock.
|
(21)
|
Includes
warrants to purchase 18,700 shares of common
stock.
|
(22)
|
Includes
warrants to purchase 18,344 shares of common
stock.
|
(23)
|
Includes
warrants to purchase 18,344 shares of common
stock.
|
(24)
|
Includes
warrants to purchase 7,704 shares of common
stock.
|
(25)
|
Includes
warrants to purchase 19,811 shares of common
stock.
|
(26)
|
Includes
warrants to purchase 22,013 shares of common
stock.
|
(27)
|
Includes
warrants to purchase 37,421 shares of common
stock.
|
(28)
|
Includes
warrants to purchase 396,686 shares of common stock. MDB
Capital was the placement agent for our private placement offering in July
2005. Christopher Marlett is a principal of MDB Capital Group
LLC and has voting and dispositive
control.
|
(29)
|
Includes
warrants to purchase 253,443 shares of common
stock. Christopher Marlett is also a principal of MDB Capital
Group LLC and has voting and dispositive control. Excludes
ownership disclosed in footnote
(25).
|
(30)
|
Includes
warrants to purchase 28,160 shares of common
stock.
|
(31)
|
Includes
warrants to purchase 24,729 shares of common
stock.
|
(32)
|
Includes
warrants to purchase 33,334 shares of common
stock.
|
(33)
|
Includes
warrants to purchase 1,334 shares of common
stock.
|
(34)
|
Includes
warrants to purchase 13,080 shares of common
stock.
|
(35)
|
Includes
warrants to purchase 50,000 shares of common
stock.
|
(36)
|
Includes
warrants to purchase 424,365 shares of common stock. Paul J.
Solit has disposition and voting control for Potomac Capital Partners
LP. Paul J. Solit is the Managing Member of Potomac Capital
Management LLC (“Management LLC”), which is the General Partner of Potomac
Capital Partners LP. Through his disposition and voting control
of Potomac Capital Partners LP and those entities discussed in footnotes
(36) and (37) below, Paul J. Solit is a significant shareholder of the
Company as disclosed in the Security Ownership of Certain Beneficial
Owners and Management Table on Page 49
below.
|
(37)
|
Includes
warrants to purchase 293,976 shares of common stock. Paul J.
Solit has disposition and voting control for Potomac Capital International
Ltd. (“Potomac International”). Mr. Solit is a director of
Potomac International and also the President and sole owner of Potomac
Capital Management Inc., which is the Investment Manager of Potomac
International. Through his disposition and voting control of
Potomac International and those entities discussed in footnotes (35) and
(37), Paul J. Solit is a significant shareholder of the Company as
disclosed in the Security Ownership of Certain Beneficial Owners and
Management Table on Page 49 below. See also, the information provided in
footnote (35) above.
|
(38)
|
Includes
warrants to purchase 301,659 shares of common stock. Paul J.
Solit has disposition and voting control for Pleiades Investment
Partners-R LP (“Pleiades”). Mr. Solit is the President and sole
owner of Potomac Capital Management Inc. (“Management Inc.”), which is the
Investment Manager of Pleiades. Through his disposition and
voting control of Pleiades and those entities discussed in footnotes (35)
and (36) above, Paul J. Solit is a significant shareholder of the Company
as disclosed in the Security Ownership of Certain Beneficial Owners and
Management Table on Page 49 below. See also, the information provided in
footnotes (35) and (36) above.
|
(39)
|
Includes
warrants to purchase 262,500 shares of common stock. Ian P.
Ellis and Chris A. Jarrous have disposition and voting control for
MicroCapital Fund LP, in their respective capacities as President and
Senior Vice President of MicroCapital, LLC, the investment manager to
MicroCapital Fund LP. Messrs. Ellis and Jarrous disclaim
beneficial ownership of any such
shares.
|
(40)
|
Includes
warrants to purchase 112,500 shares of common stock. Ian P.
Ellis and Chris A. Jarrous have disposition and voting control for
MicroCapital Fund Ltd., in their respective capacities as President and
Senior Vice President of MicroCapital, LLC, the investment manager to
MicroCapital Fund Ltd. Messrs. Ellis and Jarrous disclaim
beneficial ownership of any such
shares.
|
(41)
|
Includes
warrants to purchase 195,000 shares of common stock. Paul H.
O’Leary has disposition and voting control for Raffles Associates,
LP.
|
(42)
|
Includes
warrants to purchase 150,000 shares of common stock. Neal I.
Goldman is the President of Goldman Capital, a broker dealer, but has
represented to us that he is purchasing in his individual capacity, for
investment purposes.
|
(43)
|
Includes
warrants to purchase up to 593,400 shares of common stock held by
Lagunitas Partners LP (“Lagunitas”). Gruber & McBaine
Capital Management, LLC (“GMCM”) is a registered investment adviser and
general partner to Lagunitas. Messrs. Gruber and McBaine are
Managers, members and portfolio managers of GMCM and Mr. Swergold is a
member and portfolio manager of GMCM. GMCM and Messrs. Gruber,
McBaine and Swergold constitute a group within the meaning of Rule
13d-5(b). Through control of GMCM, Messrs. Gruber, McBaine and
Swergold share voting and disposition control over the portfolio
securities of Lagunitas and the entity discussed in footnote (43) below.
Messrs. Gruber, McBaine and Swergold are a significant shareholder of the
Company as disclosed in the Security Ownership of Certain Beneficial
Owners and Management Table on Page 49
below.
|
(44)
|
Includes
warrants to purchase 136,200 shares of common stock held by Gruber &
McBaine International (“G&M International”). Gruber & McBaine
Capital Management, LLC (“GMCM”) is a registered investment adviser and
general partner to G&M International. Messrs. Gruber and
McBaine are Managers, members and portfolio managers of GMCM and Mr.
Swergold is a member and portfolio manager of GMCM. GMCM and
Messrs. Gruber, McBaine and Swergold constitute a group within the meaning
of Rule 13d-5(b). Through control of GMCM, Messrs. Gruber,
McBaine and Swergold share voting and disposition control over the
portfolio securities of G&M International and the entity discussed in
footnote (42) above. Excludes ownership disclosed in footnote
(42). See also the information provided in footnote (42)
above.
|
(45)
|
Includes
warrants to purchase 115,200 shares of common stock. Excludes
ownership disclosed in footnotes (42) and (43). See also, the
information provided in footnote (42)
above.
|
(46)
|
Includes
warrants to purchase 115,200 shares of common stock. Excludes
ownership disclosed in footnotes (42) and (43). See also, the
information provided in footnote (42)
above.
|
PLAN
OF DISTRIBUTION
The Selling Security Holders, which as
used herein includes donees, pledgees, transferees or other
successors-in-interest holding shares of common stock or interests in shares of
common stock received after the date of this Prospectus from a Selling
Stockholder as a gift, pledge, partnership distribution or other transfer, may,
from time to time, sell, transfer or otherwise dispose of any or all of their
shares of common stock or interests in shares of common stock on any stock
exchange, market or trading facility on which the shares are traded or in
private transactions. These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale, or at
negotiated prices.
The Selling Security Holders may use
any one or more of the following methods when disposing of shares or interests
therein:
|
•
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
•
|
block
trades in which the broker-dealer will attempt to sell the shares as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
•
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
•
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
•
|
privately
negotiated transactions;
|
|
•
|
short
sales effected after the date the registration statement of which this
Prospectus is a part is declared effective by the
SEC;
|
|
•
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
|
•
|
broker-dealers
may agree with the Selling Security Holders to sell a specified number of
such shares at a stipulated price per share;
and
|
|
•
|
a
combination of any such methods of
sale.
|
The Selling Security Holders may, from
time to time, pledge or grant a security interest in some or all of the shares
of common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the
shares of common stock, from time to time, under this Prospectus, or under an
amendment to this Prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act amending the list of Selling Security Holders to include
the pledgee, transferee or other successors in interest as Selling Security
Holders under this Prospectus. The Selling Security Holders also may
transfer the shares of common stock in other circumstances, in which case the
transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this Prospectus.
In connection with the sale of our
common stock or interests therein, the Selling Security Holders may enter into
hedging transactions with broker-dealers or other financial institutions, which
may in turn engage in short sales of the common stock in the course of hedging
the positions they assume. The Selling Security Holders may also sell
shares of our common stock short and deliver these securities to close out their
short positions, or loan or pledge the common stock to broker-dealers that in
turn may sell these securities. The Selling Security Holders may also
enter into option or other transactions with broker-dealers or other financial
institutions or the creation of one or more derivative securities which require
the delivery to such broker-dealer or other financial institution of shares
offered by this Prospectus, which shares such broker-dealer or other financial
institution may resell pursuant to this Prospectus (as supplemented or amended
to reflect such transaction).
The aggregate proceeds to the Selling
Security Holders from the sale of the common stock offered by them will be the
purchase price of the common stock less discounts or commissions, if
any. Each of the Selling Security Holders reserves the right to
accept and, together with their agents from time to time, to reject, in whole or
in part, any proposed purchase of common stock to be made directly or through
agents. We will not receive any of the proceeds from this
offering. Upon any exercise of the warrants by payment of cash,
however, we will receive the exercise price of the warrants.
The Selling Security Holders also may
resell all or a portion of the shares in open market transactions in reliance
upon Rule 144 under the Securities Act of 1933, provided that they meet the
criteria and conform to the requirements of that rule.
The Selling Security Holders and any
underwriters, broker-dealers or agents that participate in the sale of the
common stock or interests therein may be "underwriters" within the meaning of
Section 2(11) of the Securities Act. Any discounts, commissions,
concessions or profit they earn on any resale of the shares may be underwriting
discounts and commissions under the Securities Act. Selling
stockholders who are "underwriters" within the meaning of Section 2(11) of the
Securities Act will be subject to the Prospectus delivery requirements of the
Securities Act.
To the extent required, the shares of
our common stock to be sold, the names of the Selling Security Holders, the
respective purchase prices and public offering prices, the names of any agents,
dealer or underwriter, any applicable commissions or discounts with respect to a
particular offer will be set forth in an accompanying Prospectus supplement or,
if appropriate, a post-effective amendment to the registration statement that
includes this Prospectus.
In order to comply with the securities
laws of some states, if applicable, the common stock may be sold in these
jurisdictions only through registered or licensed brokers or
dealers. In addition, in some states the common stock may not be sold
unless it has been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied
with.
We have advised the Selling Security
Holders that the anti-manipulation rules of Regulation M under the Exchange Act
may apply to sales of shares in the market and to the activities of the Selling
Security Holders and their affiliates. In addition, we will make
copies of this Prospectus (as it may be supplemented or amended from time to
time) available to the Selling Security Holders for the purpose of satisfying
the Prospectus delivery requirements of the Securities Act. The
Selling Security Holders may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.
We have agreed to indemnify the Selling
Security Holders against liabilities, including liabilities under the Securities
Act and state securities laws, relating to the registration of the shares
offered by this Prospectus.
We have agreed with the Selling
Security Holders to keep the registration statement of which this Prospectus
constitutes a part effective until the earlier of (1) such time as all of the
shares covered by this Prospectus have been disposed of pursuant to and in
accordance with the registration statement or (2) the date on which the shares
may be sold pursuant to Rule 144 of the Securities Act.
DESCRIPTION
OF SECURITIES BEING OFFERED
We are authorized by our Amended and
Restated Articles of Incorporation to issue 50,000,000 shares of common stock,
$0.001 par value and 10,000,000 shares of preferred stock, $0.001 par
value. As of May 7, 2009 there were 19,995,969 shares of common stock
outstanding and no shares of preferred stock outstanding. Holders of
shares of common stock have full voting rights, one vote for each share held of
record. Stockholders are entitled to receive dividends as may be
declared by the Board out of funds legally available therefore and share pro
rata in any distributions to stockholders upon
liquidation. Stockholders have no conversion, preemptive or
subscription rights. All outstanding shares of common stock are fully
paid and nonassessable, and all the shares of common stock issued by us upon the
exercise of outstanding warrants will, when issued, be fully paid and
nonassessable.
INFORMATION
WITH RESPECT TO THE REGISTRANT
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
Our common stock is quoted on the
Over-The-Counter Bulletin Board under the symbol “REMI.” As of May 7, 2009,
there were 19,995,969 shares of our common stock issued and outstanding and 200
stockholders of record, not including beneficial owners whose shares are held by
banks, brokers and other nominees. As of May 7, 2009, 12,072,588
shares of our common stock were reserved for issuance upon the exercise of
outstanding options and warrants.
The following table shows the range
of the high and low bid for our common stock as reported by the Over-The-Counter
Bulletin Board for the time periods indicated:
|
|
Bid Prices
|
|
|
|
High
|
|
|
Low
|
|
Quarter
ended June 30, 2006
|
|
$
|
2.75
|
|
|
$
|
1.80
|
|
Quarter
ended September 30, 2006
|
|
$
|
2.10
|
|
|
$
|
1.40
|
|
Quarter
ended December 31, 2006
|
|
$
|
1.80
|
|
|
$
|
0.95
|
|
Quarter
ended March 31, 2007
|
|
$
|
2.05
|
|
|
$
|
1.39
|
|
Quarter
ended June 30, 2007
|
|
$
|
1.85
|
|
|
$
|
1.40
|
|
Quarter
ended September 30, 2007
|
|
$
|
1.95
|
|
|
$
|
1.40
|
|
Quarter
ended December 31, 2007
|
|
$
|
3.15
|
|
|
$
|
1.45
|
|
Quarter
ended March 31, 2008
|
|
$
|
1.75
|
|
|
$
|
0.90
|
|
Quarter
ended June 30, 2008
|
|
$
|
1.85
|
|
|
$
|
0.73
|
|
Quarter
ended September 30, 2008
|
|
$
|
1.90
|
|
|
$
|
1.10
|
|
Quarter
ended December 31, 2008
|
|
$
|
1.25
|
|
|
$
|
0.30
|
|
Bid quotations represent interdealer
prices without adjustment for retail markup, markdown and/or commissions and may
not necessarily represent actual transactions.
Dividend
Policy
We have paid no dividends on our
common stock since our inception and may not do so in the future.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF
OPERATION
In addition to historical
information, this section contains
“forward-looking” statements,
including statements regarding the growth of
product lines, optimism regarding
the business, expanding sales and other
statements. Words such as
expects, anticipates, intends, plans, believes, sees,
estimates and variations of such
words and similar expressions are intended to
identify such forward-looking
statements. These statements are not guarantees
of future performance and involve
certain risks and uncertainties that are
difficult to
predict. Actual results could vary materially from the
description
contained
herein due to many factors including continued market acceptance of
our products. In
addition, actual results could vary materially based on
changes or slower growth in the oral
care and cosmetic dentistry products
market; the potential inability to
realize expected benefits and synergies;
domestic and international business
and economic conditions; changes in the
dental industry; unexpected
difficulties in penetrating the oral care and
cosmetic dentistry products market;
changes in customer demand or ordering
patterns; changes in the competitive
environment including pricing pressures or
technological changes; technological
advances; shortages of manufacturing
capacity; future production
variables impacting excess inventory and other risk
factors listed in the section of
this Prospectus entitled “Risk Factors” and from time to time in our Securities
and Exchange Commission
filings under “Risk Factors” and
elsewhere.
Each forward-looking statement
should be read in context with, and with an
understanding of, the various
disclosures concerning our business made
elsewhere in this Prospectus, as
well as other public reports filed by us with
the Securities and Exchange
Commission. Readers should not place undue reliance
on any forward-looking statement as
a prediction of actual results of
developments. Except as
required by applicable law or regulation, we undertake
no obligation to update or revise
any forward-looking statement contained in
this Prospectus. This
section should be read in conjunction with our
consolidated financial
statements.
The discussion and financial
statements contained herein are for the fiscal years ended March 31, 2008 and
2007 and for the three and nine month periods ended December 31, 2008 and
2007. The following discussion regarding our financial statements
should be read in conjunction with the financial statements included in this
Prospectus.
Overview
We
design, develop, manufacture and distribute cosmetic dentistry
products. Leveraging our knowledge of regulatory requirements
regarding dental products and management’s experience in the needs of the
professional dental community, we have developed a line of professional veneers
as well as a family of teeth whitening products for both professional and
“Over-The-Counter” (“OTC”) use, that are distributed in Europe, Asia and the
United States. We manufacture many of our products in our facility in
Deurle, Belgium as well as outsourced manufacturing in China. We
distribute our products using both our own internal sales force and through the
use of third party distributors. We have established dealers in 35
countries encompassing, Europe, Asia, Latin America, the Pacific Rim and the
Middle East.
In the
fall of 2006, we launched a proprietary veneer technology product line called
GlamSmile™. GlamSmile veneers are ultra thin claddings made from a
mixture of a hybrid composite and porcelain materials which are attached to the
front of the patient’s teeth. Because GlamSmile veneers are so thin,
the dentist does not need to remove healthy tooth structure leaving the
patient’s healthy tooth structure intact, which results in several important
benefits: (i) no local anesthesia is required to prepare the teeth; (ii) reduced
(if any) tooth sensitivity post-procedure; and (iii) the process is
reversible. In addition, in March 31, 2006, a variation of our
MetaTray® product named iWhite® was introduced to our global retail distribution
network. We introduced MetaTray in August 2005, our next generation
of products targeted for the professional dentist market. MetaTray is
a completely self-contained whitening system that can be administered by
dentists.
As a
result of the recent restructuring of our OTC business, we intend to
focus primarily on our full line of professional dental products for the
professional market and its Glamsmile veneer product lines and continue to share
an ownership interest in the OTC business.
For the
quarter ending December 31, 2008, 96.48% of our revenue has been generated by
our Belgian subsidiaries (Remedent N.V. and Sylphar N.V.); 1.15% by our
U.S. entities and 2.37% by our Asian subsidiary.
Den-Mat
Transaction
As
previously disclosed on Form 10-Q for period ended September 30, 2008 filed with
the Securities and Exchange Commission on November 19, 2008, on
August 24, 2008, we entered into a Distribution, License and Manufacturing
Agreement with our wholly owned subsidiary, Remedent N.V., and Den-Mat Holdings,
LLC, a Delaware limited liability company (“Den-Mat”), whereby we appointed
Den-Mat to be the sole and exclusive distributor to market, license and sell
certain products relating to our GlamSmile tray technology, including, but not
limited to, our GlamSmile veneer products and other related veneer products (the
“Products”), throughout the world, with the exception of Australia, Austria,
Belgium, Brazil, France (including Dom-Tom), Germany, Italy, New Zealand, Oman,
Poland, Qatar, Saudi Arabia, Singapore, Switzerland, Thailand, and United Arab
Emirates and the China Market.
Further,
as a condition to the Den-Mat transaction, on August 24, 2008, we entered into a
Rescission Agreement with Glamtech-USA, Inc., a Delaware corporation
(“Glamtech”). We had previously granted Glamtech the exclusive right
to distribute our GlamSmile veneer products in the United States and Canada
pursuant to an Exclusive Distribution Agreement, dated April 10, 2008, and in
the United Kingdom pursuant to an Exclusive Distribution Agreement dated May
2008. Concurrently, we entered into a Stock Purchase Agreement (the
“Stock Purchase Agreement”) with each of the two Glamtech shareholders (for the
purchase of all of Glamtech’s outstanding common stock in exchange for: (i) at
the election of the Glamtech shareholders at any time within 6 months, to
receive either, but not both, (a) an aggregate of one million (1,000,000)
restricted shares of our common stock (the “Shares”), or (b) five (5) year
warrants (the “Warrants”), valued by our Board of Directors at $1.48 per
warrant, to purchase an aggregate of one million two hundred and forty-seven
thousand two hundred and sixteen (1,247,216) restricted shares of our common
stock at a exercise price of $1.30 per share (the “Warrant Shares”); and
together with either the Shares or the Warrants, (ii) certain limited royalty
payments allocated to sales in the United States, Canada, and the United Kingdom
of the Products during the term of our Distribution Agreement with
Den-Mat. As of December 31, 2008, the Shares were issued at the
election of the Glamtech Shareholders.
Restructuring
Plan
On
December 11, 2008, we completed a restructuring in the form of
a management-led buyout of 50% of our OTC retail
business. The buyout was led by Mr. List, our former director and
Chief Executive Officer, with financing provided by Concordia Fund, B.V, a
non-affiliated foreign investment fund (“Concordia”). Prior to the
sale, our Board approved a restructuring plan and strategy for transferring our
OTC business through a series of transactions involving subsidiary formations,
contributions of subsidiary(ies) interests and sales of stock interests through
subsidiary transactions, with particular emphasis focused on current OTC
business operations conducted through our subsidiaries, both internationally and
within the domestic U.S. (the “Plan”).
To
effectuate the restructuring Plan we entered into the following series of
related agreements:
|
·
|
On
December 10, 2008, Remedent, Inc. entered into a Contribution Agreement
with Sylphar USA, Inc., a newly incorporated Nevada corporation and wholly
owned subsidiary of the Remedent, Inc. (“Sylphar USA”), pursuant to which
Remedent, Inc. made a capital contribution of certain assets and
liabilities relating to the OTC business which was valued at $460,568 to
Sylphar USA in exchange for 460,568 shares of common stock, par value
$1.00, of Sylphar USA.
|
|
·
|
On
December 10, 2008, Remedent, Inc. entered into a Share Purchase Agreement
with Remedent, N.V., a wholly owned subsidiary of Remedent, Inc. formed
under the laws of Belgium (“Remedent N.V.”), pursuant to which Remedent,
Inc. purchased a 99% ownership interest in Sylphar, N.V., a subsidiary of
Remedent, Inc. formed under the laws of Belgium, from Remedent
N.V. As a result of such Purchase Agreement, Sylphar N.V.
became a wholly owned subsidiary of Remedent, Inc. As
consideration for the 99 shares (“Sylphar Shares”), Remedent, Inc. agreed
to pay Remedent N.V. €1,881,000, which was based on the valuations
provided by an independent assessor, by executing an unsecured
non-interest bearing promissory note (the “Promissory Note”) on behalf of
Remedent N.V. for the principal amount of €1,000,160 (the
“Debt”) and having the remainder balance of €880,840 reflected on the
existing intercompany account between Remedent N.V. and Remedent,
Inc. In December 2008, we received €1,000,160 from Concordia
which was used to repay the Debt. As previously
agreed upon by Remedent N.V. and Remedent, Inc., the remaining balance
of €880,840 is reflected on the existing
intercompany account between Remedent N.V. and Remedent,
Inc.
|
|
·
|
Then
pursuant to a Deed of Contribution, Remedent, Inc. transferred all of its
ownership interest in its OTC operating subsidiaries, consisting of
Sylphar USA, Remedent Asia PTE, Sylphar N.V. (“OTC Subsidiaries”), into
Remedent OTC B.V., a Dutch holding company and a wholly owned subsidiary
of Remedent, Inc. (“Remedent OTC”) in exchange for €1,000,160 and an
allocation and administer the balance of the aggregate value of the OTC
Subsidiaries and the consideration as share premium in the books of
Remedent, Inc.
|
|
·
|
Subsequent
to the contribution of the OTC Subsidiaries to Remedent OTC, Remedent,
Inc. sold fifty percent (50%) of its interest in Remedent OTC to Robin
List, its former Chief Executive Officer, President and
Director, in exchange for 723,000 restricted shares of common stock of
Remedent, Inc. held by Mr. List (“Exchanged Shares”), pursuant to a Share
Purchase Agreement on December 10, 2008. The Exchanged Shares
were returned to treasury. The Exchanged Shares were valued at
$1.15 per share, based on the average of the 52 week high and low bid, for
an aggregate value of $831,450. As a result, Mr. List and
Remedent, Inc. equally own 50% of Remedent OTC with Remedent, Inc.
currently controlling Remedent OTC through its board representations
pursuant to the terms of a certain Voting Agreement entered into by
Remedent, Inc. and Mr. List concurrently with the Share Purchase
Agreement. The Voting Agreement provided that, Remedent, Inc.
would initially have 2 board representation and Mr. List would will have 1
board representation. However upon the occurrence of a
“Triggering Event” (as defined in the Voting Agreement), Remedent, Inc.
will have 1 board representation and Mr. List will have 2 board
representations.
|
|
·
|
On
December 11, 2008, Remedent, Inc. entered into an Investment and
Shareholders’ Agreement with Remedent OTC, Concordia Fund V.C., a
non-affiliated Dutch private equity fund (“Concordia”), Mr. List, Sylphar
Holding, B.V., a Dutch holding company and wholly owned subsidiary of
Remedent OTC (“Sylphar Holding”) and the OTC Subsidiaries pursuant to
which Concordia agreed to purchase shares of Sylphar Holding from Remedent
OTC representing a 12.5% ownership interest in Sylphar Holding for
€1,000,000 and invest an additional €1,000,000 in Sylphar Holding for an
additional 12.5% ownership interest in Sylphar Holding, representing an
aggregate ownership interest of 25% in Sylphar
Holding. Furthermore, Concordia was granted a call option
exercisable from January 1, 2009 until December 31, 2010, unless otherwise
extended to September 30, 2011 pursuant to the terms of such agreement, to
purchase an additional 24% ownership interest in Sylphar Holding for
€2,000,000 or any pro rata portion thereof. The shares of
Sylphar Holding are subject to certain drag along rights in the event
there is an offer to purchase such shares. It was further
agreed upon that the €1,000,000 received from Concordia would be used to
pay off the Debt. Such funds from Concordia were received and
used to pay off the Debt in December 2008. Subsequently all of the OTC
Subsidiaries were transferred and are currently held and
operated by Sylphar Holding.
|
We
believe that the total consideration for the sale of OTC business is
approximately €4,654,736, which consists of (1) €1,000,000 in cash,
(2) €654,736 based on the exchange rate as of January 12,
2008 for the 723,000 restricted previously held by Mr. List (valued at $1.15 per
share for an aggregate value of $831,450), and (3) €3,000,000 which
is the estimated value of the ownership interest of 50 % of the shares of
Remedent OTC held by us.
As a
result of the series of transactions related to the sale, we now own 50% of
Remedent OTC with Mr. List owning the other 50%, and maintain control of
Remedent OTC as a result of our current control of the board. In
addition, we now own an interest in Sylphar Holding
through Remedent OTC’s 75% ownership interest in Sylphar Holding, which interest
is subject to dilution of up to 24% upon exercise of a call option held by
Concordia, who currently owns the remaining 25%. As a result of the
sale, all of the OTC business previously directly operated by us is
now operated and held by Sylphar Holding. Although Mr. List resigned
as our director and Chief Executive Officer, Mr. List remains involved in the
key management of the OTC business.
The sale
is consistent with our strategic plan to separate the OTC business from our
professional business. With the restructuring and additional cash
received from the sale of the OTC business, we intend to focus solely on our
full line of professional dental products for the professional market and our
Glamsmile veneer product lines. In addition, although we do not
operate the OTC business directly, as a result of our 50% ownership interest in
Remedent OTC, we continue to share an ownership interest in the OTC
business.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis
for Presentation
Our financial statements have been
prepared on an accrual basis of accounting, in conformity with accounting
principles generally accepted in the United States of America. These
principles contemplate the realization of assets and liquidation of liabilities
in the normal course of business. The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States of America requires us to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those
estimates.
Revenue
Recognition
We recognize revenue from product sales
when persuasive evidence of a sale exists: that is, a product is shipped under
an agreement with a customer; risk of loss and title has passed to the customer;
the fee is fixed or determinable; and collection of the resulting receivable is
reasonably assured. Sales allowances are estimated based upon
historical experience of sales returns.
Impairment
of Long-Lived Assets
Long-lived assets consist primarily of
property and equipment and patents. The recoverability of long-lived
assets is evaluated by an analysis of operating results and consideration of
other significant events or changes in the business environment. If
impairment exists, the carrying amount of the long-lived assets is reduced to
its estimated fair value, less any costs associated with the final
settlement. As of March 31, 2008, we believed there was no impairment
of our long-lived assets.
Pervasiveness
of Estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, we
evaluate estimates and judgments, including those related to revenue, bad debts,
inventories, fixed assets, intangible assets, stock based compensation, income
taxes, and contingencies. Estimates are based on historical
experience and on various other assumptions that we believe reasonable in the
circumstances. The results form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results could differ from those
estimates.
Accounts
Receivable and Allowance for Doubtful Accounts
We sell professional dental equipment
to various companies, primarily to distributors located in Western
Europe. The terms of sales vary by customer, however, generally are
2% 10 days, net 30 days. Accounts receivable is reported at net
realizable value and net of allowance for doubtful accounts. We use
the allowance method to account for uncollectible accounts
receivable. Our estimate is based on historical collection experience
and a review of the current status of trade accounts receivable.
Research
and Development Costs
We expense research and development
costs as incurred.
Inventories
We purchase certain of our products in
components that require assembly prior to shipment to customers. All
other products are purchased as finished goods ready to ship to
customers.
We write down inventories for estimated
obsolescence to estimated market value based upon assumptions about future
demand and market conditions. If actual market conditions are less
favorable than those projected, then additional inventory write-downs may be
required.
Patents
Patents consist of the costs incurred
to purchase patent rights and are reported net of accumulated
amortization. Patents are amortized using the straight-line method
over a period based on their contractual lives.
Conversion
of Foreign Currencies
The reporting currency for our
consolidated financial statements is the U.S. dollar. The functional currency
for our European subsidiaries, Remedent N.V. and Sylphar N.V. is the Euro. The
functional currency for Remedent Professional, Inc. is the U.S. dollar. The
functional currency for Remedent Asia Pte Ltd is the Singapore dollar. We
translate foreign currency statements to the reporting currency in accordance
with FASB 52. The assets and liabilities whose functional currency is other that
the U.S. dollar are included in the consolidation by translating the assets and
liabilities at the exchange rates applicable at the end of the reporting period.
The statements of income are translated at the average exchange rates during the
applicable period. Translation gains or losses are accumulated as a separate
component of stockholders’ equity.
Stock
Based Compensation
In December 2004, the Financial
Accounting Standards Board issued SFAS No. 123R, “Share-Based Payment.”
Subsequently, the Securities and Exchange Commission (“SEC”) provided for a
phase-in implementation process for SFAS No. 123R, which required adoption of
the new accounting standard no later than January 1, 2006. SFAS No. 123R
requires accounting for stock options using a fair-value-based method as
described in such statement and recognize the resulting compensation expense in
our financial statements. Prior to April 1, 2006, we accounted for employee
stock options using the intrinsic value method under APB No. 25, “Accounting for
Stock Issued to Employees” and related Interpretations, which generally results
in no employee stock option expense. We adopted SFAS No. 123R on April 1, 2006
and do not plan to restate financial statements for prior periods. We plan to
continue to use the Black-Scholes option valuation model in estimating the fair
value of the stock option awards issued under SFAS No. 123R. The adoption of
SFAS No. 123R has a material impact on our results of operations. For the year
ended March 31, 2008, equity compensation in the form of stock options and
grants of restricted stock totaled $189,696. For the year ended March 31, 2007,
equity compensation in the form of stock options totaled $221,959.
Adoption
of New Accounting Policy and Recent Accounting Pronouncements
Adoption
of New Accounting Policy
In February 2007, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 159, "
The Fair Value Option for Financial
Assets and Financial Liabilities
". This Statement permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected will be reported in earnings. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007. We adopted the provisions of SFAS No. 159 on
April 1, 2008. The adoption of SFAS No. 159 did not have a material impact on
our financial reporting.
New
Accounting Pronouncements
In March 2008, the FASB issued SFAS No.
161, “
Disclosures about
Derivative
Instruments
and Hedging Activities”
. This statement changes the disclosure
requirements for derivative instruments and hedging activities. Entities are
required to provide enhanced disclosures about (a) how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged items
are accounted for under SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. This statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008 (our fiscal year beginning April 1, 2009), with early application
encouraged. This statement encourages, but does not require, comparative
disclosures for earlier periods at initial adoption. Management is in the
process of evaluating the impact the future application of this pronouncement
may have on its consolidated financial statements.
In December 2007, the FASB issued SFAS
No. 141 (Revised 2007) “
Business
Combinations
”. SFAS 141
(Revised) establishes principles and requirements for how the acquirer of a
business recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree. The statement also provides guidance for recognizing and measuring the
goodwill acquired in the business combination and determines what information to
disclose to enable users of the financial statements to evaluate the nature and
financial effects of the business combination. The guidance will become
effective for our fiscal year beginning April 1, 2009. Management is in the
process of evaluating the impact SFAS 141 (Revised) will have on our financial
statements upon adoption.
In February 2008, the FASB released
FSP No. FAS 157-2. FSP No. FAS 157-2 defers the effective date of SFAS 157,
"
Fair Value
Measurements
", for one year for nonfinancial assets and nonfinancial
liabilities that are recognized or disclosed at fair value in the financial
statements on a nonrecurring basis. It does not defer recognition and disclosure
requirements for financial assets and financial liabilities, or for nonfinancial
assets and nonfinancial liabilities that are remeasured at least
annually.
In December 2007, the FASB issued SFAS
No. 160 “
Noncontrolling
Interests in
Consolidated Financial Statements —
an amendment of ARB No. 51
”. SFAS 160 establishes accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. The guidance will become effective for our
fiscal year beginning April 1, 2009. Management is in the process of evaluating
the impact SFAS 160 will have on our financial statements upon
adoption.
In April 2008, the FASB issued FSP No.
142-3,
Determination of the
Useful Life of Intangible Assets
(“FSP FAS 142-3”), which amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB
Statement No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). The intent
of FSP FAS 142-3 is to improve the consistency between the useful life of a
recognized intangible asset under SFAS 142 and the period of expected cash flows
used to measure the fair value of the asset under SFAS 141(R) and other U.S.
generally accepted accounting principles. FSP FAS 142-3 requires an entity to
disclose information for a recognized intangible asset that enables users of the
financial statements to assess the extent to which the expected future cash
flows associated with the asset are affected by the entity’s intent and/or
ability to renew or extend the arrangement. FSP FAS 142-3 is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. We do not expect the adoption of
FSP FAS 142-3 to have a material impact on our financial position or results of
operations.
In May 2008, the FASB issued FASB Staff
Position No. APB 14-1,
Accounting for Convertible Debt
Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash
Settlement)
(“FSP No. APB 14-1”). FSP No. APB 14-1 applies to convertible
debt instruments that, by their stated terms, may be settled in cash (or other
assets) upon conversion, including partial cash settlement, unless the embedded
conversion option is required to be separately accounted for as a derivative
under SFAS 133. FSP No. APB 14-1 specifies that issuers of convertible debt
instruments should separately account for the liability and equity components in
a manner that will reflect the entity’s nonconvertible debt borrowing rate when
interest cost is recognized in subsequent periods. FSP No. APB 14-1 is effective
for financial statements issued for fiscal years beginning after December 15,
2008, and interim periods within those fiscal years. FSP No. APB 14-1 will be
applied retrospectively to all periods presented. The cumulative effect of the
change in accounting principle on periods prior to those presented will be
recognized as of the beginning of the first period presented. An offsetting
adjustment will be made to the opening balance of retained earnings for that
period, presented separately. The adoption of APB 14-1 is not expected to have a
material impact upon our financial position or results of
operations.
In February 2007, the Financial
Accounting Standards Board (FASB) issued SFAS No. 159, “The Fair Value Option
for Financial Assets and Financial Liabilities — Including an Amendment of FASB
Statement No. 115”. This statement permits entities to choose to measure many
financial instruments and certain other items at fair value. Most of the
provisions of SFAS No. 159 apply only to entities that elect the fair value
option. However, the amendment to SFAS No. 115 “Accounting for Certain
Investments in Debt and Equity Securities” applies to all entities with
available-for-sale and trading securities. SFAS No. 159 is effective for our
fiscal year beginning April 1, 2008. The adoption of this statement is not
expected to have a material effect on our financial statements.
In September 2006, FASB issued SFAS No.
157, “Fair Value Measurements” (“SFAS 157”). The objective of SFAS 157 is to
increase consistency and comparability in fair value measurements and to expand
disclosures about fair value measurements. SFAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
SFAS 157 applies under other accounting pronouncements that require or permit
fair value measurements and does not require any new fair value measurements.
The provisions of SFAS 157 are effective for fair value measurements made in our
fiscal years beginning April 1, 2008. We have not determined the effect, if any,
that the adoption of SFAS 157 will have on our consolidated financial position
or results of operations.
In September 2006, the FASB issued SFAS
Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans”. This new standard will require employers to fully
recognize the obligations associated with single-employer defined benefit
pension, retiree healthcare and other postretirement plans in their financial
statements. We adopted SFAS No. 158 on April 1, 2007, resulting in no financial
statement impact since currently do not sponsor the defined benefit pension or
postretirement plans within the scope of the standard.
RESULTS
OF OPERATIONS
For
the Fiscal Years Ending March 31, 2008 and 2007
Comparative details of results of
operations for the years ended March 31, 2008 and 2007 as a percentage of sales
are as follows:
|
|
2008
|
|
|
2007
|
|
NET
SALES
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
COST
OF SALES
|
|
|
53.14
|
%
|
|
|
50.07
|
%
|
GROSS
PROFIT
|
|
|
46.86
|
%
|
|
|
49.93
|
%
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
4.45
|
%
|
|
|
5.12
|
%
|
Sales
and marketing
|
|
|
25.21
|
%
|
|
|
13.31
|
%
|
General
and administrative
|
|
|
54.22
|
%
|
|
|
49.26
|
%
|
Depreciation
and amortization
|
|
|
4.03
|
%
|
|
|
3.14
|
%
|
TOTAL
OPERATING EXPENSES
|
|
|
87.91
|
%
|
|
|
70.83
|
%
|
INCOME
(LOSS) FROM OPERATIONS
|
|
|
(41.05
|
)%
|
|
|
(20.89
|
)%
|
Other
income (expense)
|
|
|
(0.23
|
)%
|
|
|
(1.51
|
)%
|
INCOME
(LOSS) BEFORE INCOME TAXES
|
|
|
(41.27
|
)%
|
|
|
(22.41
|
)%
|
Income
tax benefit (expense)
|
|
|
(0.36
|
%
|
|
|
0.00
|
)%
|
NET
INCOME (LOSS)
|
|
|
(41.64
|
)%
|
|
|
(22.41
|
)%
|
Net
Sales
Net sales increased by approximately
12% to $7,482,261 in the year ended March 31, 2008 as compared to $6,676,365 in
the year ended March 31, 2007. The increase in sales was due to the increased
sales of OTC products, more specifically the iWhite and Remesense product lines
as well as increased sales of GlamSmile veneers.
Net sales of the veneer product,
GlamSmile, increased for the twelve months ended March 31, 2008 by $1,158,007,
or 3,224.57 % to $1,193,919, compared to $35,912 for the twelve months ended
March 31, 2007.
Cost
of Sales
Cost of sales increased approximately
19 % to $3,975,777 in the year ended March 31, 2008 as compared to $3,342,716 in
the year ended March 31, 2007. The increase in cost of sales is attributable to
the increase in sales in the current fiscal year as well as due to the mix in
the product range, some products have higher margins than others, which is
reflected in the increased cost of sales.
We have completed negotiations with new
suppliers of raw materials, to reduce the dependence on some existing key
suppliers and as a result have obtained more advantageous raw material pricing
for comparable and improved quality. We closely monitor and are continuously
looking for new strategies to optimize and improve our cost
efficiencies.
Gross
Profit
Our gross profit increased by $172,835
or 5%, to $3,506,484 for the fiscal year ended March 31, 2008 as compared to
$3,333,649 for the year ended March 31, 2007 as a result of increased sales.
However, our gross profit as a percentage of sales decreased by 3% from 50% to
47% comparing the year ended March 31, 2007 to the year ended March 31, 2008.
The decrease in gross profit is the result of the increase in cost of sales as
discussed above.
Operating
Expenses
Research and Development
. Our
research and development expenses decreased $8,806 to $332,958 for the year
ended March 31, 2008 as compared to $341,764 for the year ended March 31, 2007,
a decrease of 3%. Our current levels of research and development expenditures
are reflective of an average year. In 2008 we were able to bring some products
to the production phase and as a result were able to begin investing in new
projects.
Sales and marketing costs
. Our
sales and marketing costs increased $997,579 or 112%, to $1,886,389 for the year
ended March 31, 2008 as compared to $888,810 for the year ended March 31, 2007.
The increase is largely due to the set up of a US office to support our veneer
product in the US market.
General and administrative
costs
. Our general and administrative costs for the year ended March 31,
2008 and 2007 were $4,057,007 and $3,288,723, respectively, representing an
increase of $768,284 or 23%. The increase in general and administrative costs as
compared to the prior year is the result of our investments made to increase
customer support concurrent with the launch of our GlamSmile veneers product
line in both Europe and the US.
Depreciation and amortization
.
Our depreciation and amortization increased $91,920 or 44%, to $301,260 for the
year ended March 31, 2008 as compared to $209,340 for the year ended March 31,
2007. The increase is mostly due to the investment in a semi-automatic
production machine for the production of our foam strips, which will allow us to
significantly increase our production capacity. This investment allowed us to
streamline and improve production significantly with resultant increases in
capacity and quality as well as decreased costs. Secondly, initial investments
have been made to update and modernize our Dental Lab, thereby bringing it to a
higher professional Level. With the investments we have made to date, our lab is
now ready to support the first cases of veneers and provide a higher level of
support for the sales team. Additionally, investments are being made in software
and related hardware to bring the design of veneers to the next level which will
allow the dentist to modify the design of the final product.
Net interest expense
was
$138,168 for the year ended March 31, 2008 as compared to $176,344 for the year
ended March 31, 2007, a decrease of $38,176 or 22%. Interest expense has
decreased primarily because of decreased utilization of our available bank
credit line.
For
the Three and Nine Month Periods Ending December 31, 2008 and 2007
The following table presents our
consolidated statements of loss, as a percentage of sales, for the periods
indicated.
|
|
For
the three months ended
December
31,
|
|
|
For
the nine months ended
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
SALES
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
COST
OF SALES
|
|
|
60.08
|
%
|
|
|
58.20
|
%
|
|
|
44.13
|
%
|
|
|
58.23
|
%
|
GROSS
PROFIT
|
|
|
39.92
|
%
|
|
|
41.80
|
%
|
|
|
55.87
|
%
|
|
|
41.77
|
%
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
1.07
|
%
|
|
|
8.07
|
%
|
|
|
1.99
|
%
|
|
|
5.56
|
%
|
Sales
and marketing
|
|
|
18.84
|
%
|
|
|
28.65
|
%
|
|
|
21.55
|
%
|
|
|
22.38
|
%
|
General
and administrative
|
|
|
26.19
|
%
|
|
|
50.98
|
%
|
|
|
32.65
|
%
|
|
|
64.91
|
%
|
Depreciation
and amortization
|
|
|
3.46
|
%
|
|
|
3.76
|
%
|
|
|
3.93
|
%
|
|
|
4.85
|
%
|
TOTAL
OPERATING EXPENSES
|
|
|
49.57
|
%
|
|
|
91.46
|
%
|
|
|
60.12
|
%
|
|
|
97.70
|
%
|
LOSS
FROM OPERATIONS
|
|
|
(9.65
|
)%
|
|
|
(49.66
|
)%
|
|
|
(4.25
|
)%
|
|
|
(55.93
|
)%
|
Other
income (expense)
|
|
|
60.96
|
%
|
|
|
(0.35
|
)%
|
|
|
(12.40
|
)%
|
|
|
0.65
|
%
|
INCOME
(LOSS) BEFORE INCOME TAXES
|
|
|
51.31
|
%
|
|
|
(50.01
|
)%
|
|
|
(16.65
|
)%
|
|
|
(55.28
|
)%
|
NET
INCOME (LOSS)
|
|
|
51.31
|
%
|
|
|
(50.01
|
)%
|
|
|
(16.65
|
)%
|
|
|
(55.28
|
)%
|
Net
Sales
Net sales
increased for the three months ended December 31, 2008 by $2,709,678 or 127%, to
$4,842,628 as compared to $2,132,950 for the three months ended December 31,
2007. For the three months ended December 31, 2008, the increase in sales is
primarily due to the increased sales of the GlamSmile Product
Group.
For the nine months ended December 31,
2008, sales increased by $6,795,287 or 152.6% to $11,249,186 as compared to
$4,453,899 for the nine months ended December 31, 2007 primarily for the reasons
discussed above for the three month period.
Cost
of Sales
Cost of
sales increased for the three months ended December 31, 2008 by $1,638,101, or
128.8% to $2,909,531 as compared to $1,271,430 for the three months ended
December 31, 2007. However cost of sales, as a percentage of net sales, was
approximately 60% in each of the three months ended December 31, 2007 and
December 31, 2008. Cost of sales has increased because of increased sales of
higher margin products and improved cost efficiencies.
We have
re-organized our production process and have increased our in-house
manufacturing resulting in lower costs than our previously outsourced third
party manufacturing. We continue to closely monitor and look for new strategies
to optimize and improve our current processes in order to decrease our
costs.
For the
nine months ended December 31, 2008, cost of sales increased by $2,340,902 or
89.2% from $2,623,506 for the nine months ended December 31, 2007 to $4,964,408
for the nine months ended December 31, 2008. This increase is directly
associated with increased sales. However, cost of sales as a percentage of net
sales has decreased from 58.23% for the nine month period ended December 31,
2007 to 44.13% for the nine month period ended December 31, 2008 primarily for
the same reasons discussed above for the three month period.
Gross
Profit
Our gross
profit increased by $1,071,577 or 124.4%, to $1,933,097 for the three month
period ended December 31, 2008 as compared to $861,520 for the three month
period ended December 31, 2007. Our gross profit as a percentage of sales was
approximately 40% in each of the three months ended December 31, 2008 and 2007.
The increase in gross profit is the result of the increased sales of higher
margin products and the decrease in cost of sales as discussed
above.
Our gross
profit increased by $4,454,385 or 243%, to $6,284,778 for the nine month period
ended December 31, 2008 as compared to $1,830,393 for the nine month period
ended December 31, 2007. Our gross profit as a percentage of sales increased
from 42% in the nine months ended December 31, 2007 to 56% for the nine months
ended December 31, 2008.
Research and
Development
.
Research
and development expenses decreased by $120,102 or 69.8%, to $52,006 for the
three months ended December 31, 2008 as compared to $172,108 for the three
months ended December 31, 2007.
For the
nine months ended December 31, 2008, research and development expenses decreased
by $23,286 or 9.4% to $224,379 as compared to $247,665 for the nine months ended
December 31, 2007. The principal reason for this decrease is that the majority
of investments in relation to the development of new products took place during
2007. The release of these new products is scheduled for the next six
months.
Sales
and Marketing Costs
Sales and marketing costs increased by
$301,278, or 49.3%, to $912,422 for the three months ended December 31, 2008 as
compared to $611,144 for the three months ended December 31, 2007. The increase
is largely due to increased provisions for commissions in relation to our sales
people and increased marketing costs to promote our products in new acquired
markets in different countries.
For the
nine months ended December 31, 2008, sales and marketing costs increased by
$1,426,991 or 143.1% to $2,423,928 as compared to $996,937 for the nine months
ended December 31, 2007. The principal reasons for increased sales and marketing
costs are as discussed above.
General
and Administrative Costs
General
and administrative costs for the three months ended December 31, 2008 and 2007
were $1,268,500 and $1,087,313, respectively, representing an increase of
$181,187 or 16.7%. The increase in general and administrative costs as compared
to the prior year is the result of our investments made to increase customer
support concurrent with the launch of our GlamSmile veneers product line in both
Europe and the US.
For the
nine months ended December 31, 2008, general and administrative costs increased
by $781,372, or 27%, to $3,672,536 as compared to $2,891,164 for the nine months
ended December 31, 2007. The foregoing increase is the result of three month
increase discussed above.
Depreciation
and Amortization
Our depreciation and amortization
expense increased from $80,157 to $167,399 for the three months ended December
31, 2008 compared to the three months ended December 31, 2007, an increase of
108.8%. The increase is mostly due to the investment in a semi-automatic
production machine for the production of our foam strips, which will allow us to
significantly increase our production capacity. This investment allowed us to
streamline and improve production significantly with resultant increases in
capacity and quality as well as decreased costs. Secondly, investments are being
made in software and related hardware to bring the design of veneers to the next
level which will allow the dentist to modify the design of the final product,
gaining substantial time in the production process.
For the
nine months ended December 31, 2008, depreciation and amortization costs
increased $225,830 or 104.6% to $441,771 as compared to $215,941 for the nine
months ended December 31, 2007. The foregoing increase is the result of three
month increase discussed above.
Net
Interest and Other Expenses
Net
interest expense increased by $152,071 to $168,659 from $16,588 during the three
months ended December 31, 2008 over the comparable three months ended December
31, 2007. The increase is mainly the result of our increased utilization of our
bank credit facility.
For the
nine months ended December 31, 2008, interest expense increased by $178,373 to
$250,175 as compared to $71,802 for the nine months ended December 31, 2007. The
main reason is the increased use of our available bank credit facility which
occurred primarily because of investments made in light of the new agreement
with Den-Mat which was finalized effective August 24, 2008. The investments are
in order to support increasing demand for our veneer product and are
specifically related to inventory and a new production facility.
During
the three months ended December 31, 2008 we granted 3,738,379 warrants to
purchase our common stock to Den-Mat. We valued the warrants at $4,323,207,
using the Black Scholes option pricing model using the following assumptions: no
dividend yield; expected volatility rate of 131%; risk free interest rate of
3.07% and an average life of 5 years resulting in a value of $1.28 per option
granted. This was a non-cash expense.
Liquidity and Capital
Resources
Cash
and Cash Equivalents
Our
balance sheet at March 31, 2008 reflects cash and cash equivalents of $1,728,281
as compared to $126,966 as of March 31, 2007, an increase of $1,601,315. Net
cash used by operations was $2,445,011 for the year ended March 31, 2008 as
compared to net cash used by operations of $659,307 for the year ended March 31,
2007, an increase year to year of $1,785,704 in cash used by operations. The
increase in net cash used by operations was primarily attributable to the net
loss, offset by the total change in non-cash assets and liabilities of $224,915
in 2008 as opposed to $381,550 in 2007.
Our
balance sheet at December 31, 2008 reflects cash and cash equivalents of
$2,569,888 as compared to $1,728,281 as of March 31, 2008, an increase of
$841,607. Cash has increased significantly in the period ended December 31, 2008
largely as a result of cash received from Concordia in the amount of
$2,782,000.
For the remainder of fiscal year 2009,
we believe that, with our current cash and amounts to be received from our cash
receivables, and we have sufficient working capital to satisfy our working
capital requirements. We currently have a mixed-use line of credit of
€2,050,000. As of December 31, 2008, we had in the aggregate $907,558 in
advances outstanding under this mixed-use line of credit facility. As it may be
required, we intend to draw from our credit facility.
In addition, from time to time we may
be required to raise capital to continue our current operations, reduce advances
outstanding on our credit facilities, and to fund future growth.
Operations
The increase in cash used by operations
for the year ended March 31, 2008 is attributable primarily to the increase in
net loss from $1,496,049 in fiscal 2007 to $3,115,513 in fiscal 2008, an
increase of $1,619,464. Also, cash used in operations was affected significantly
by changes in accounts receivables and inventories. During the year ended March
31, 2007 accounts receivable and inventory provided $870,014 and $476,814 in
cash. While during the year ended March 31, 2008 both accounts receivable and
inventory used $406,567 in operating cash as a result of increases in inventory
and accounts receivable as of March 31, 2008.
Net cash
used by operations decreased by $274,264 resulting in net cash being used by
operations of $1,876,003 for the nine months ended December 31, 2008 as compared
to net cash used by operations of $2,150,267 for the nine months ended December
31, 2007. The decrease in net cash used by operations for the nine months ended
December 31, 2008 as compared to the nine months ended December 31, 2007 is
attributable to several factors. Net loss of $1,873,152 when offset by two
significant non-cash items (1) the $4,323,207 value of the Den-Mat warrants; and
(2) the $2,830,953 gain on the disposition of Sylphar, becomes a use of cash of
$380,898. The use of cash is further increased by an increase of (1) accounts
receivable of $709,732 (versus a provision of cash for 2007 of $137,273); (2)
inventories of $575,894 (versus a provision of cash of $4,043 for 2007); and (3)
prepaids of $558,352 (versus a provision of cash for 2007 of $352,607.
Management has attributed the increased use of cash for accounts receivable,
inventories and prepaids primarily somewhat to the slowdown in the general
economy but primarily due to increased sales.
As of
February 2009, there has been no indication of a trend of increased doubtful
accounts or slower payments. As a result, at this time, we do not anticipate
increased reserves.
Investing
Activities
Net cash used by investing activities
was $885,550 for the year ended March 31, 2008 as compared to net cash used by
investing activities of $315,104 for the year ended March 31, 2007. Cash used in
investing activities in the year ended March 31, 2008 was for equipment
purchases attributable to the investment in our production facility (new
electric cabling, upgraded compressors and related costs), investments made to
full file ISO 9001 and 13485 Medical Device Certificate demands (air conditioned
warehouse capability, chemical resistant floor in production facility and
related costs), initial investments in a basic Dental Lab, additional
investments for molding and office equipment and construction works in our
Belgium HQ as a result of our increased staffing in Belgium.
Net cash
used in investing activities totaled $455,694 for the nine months ended December
31, 2008 as compared to net cash used in investing activities of $852,193 for
the nine months ended December 31, 2007. Cash used in investing activities in
the nine months ended December 31, 2008 was mainly for equipment to be used in
the production process of veneers, additional hardware equipment in relation to
support our GlamSmile product line in combination with our new designed
software, enabling the dentist to interfere in the production process,
investments made for moldings concerning the GlamSmile product group and
moldings for new OTC products.
Financing
Activities
Net cash provided by financing
activities totaled $4,998,339 for the year ended March 31, 2008 as compared to
net cash provided by financing activities of $939,988 for the year ended March
31, 2007. The increase in net cash provided from financing activities in the
year ended March 31, 2008 is primarily attributable to the net cash proceeds
received by us from a Private Placement, which took place at the end of the
quarter ended June 30, 2007, which was offset by a $750,558 repayment of our
existing Credit Line. On October 8, 2004, our wholly owned subsidiary, Remedent
N.V., obtained a mixed-use line of credit facility with Fortis Bank, a Belgian
bank, for €1,070,000 (the “Facility”). The Facility was secured by a first lien
on the assets of Remedent N.V. The purpose of the Facility is to provide working
capital to grow our business and to finance certain accounts receivable as
necessary. Since opening the Facility in 2004, Remedent N.V. and Fortis Bank
have subsequently amended the Facility several times to increase or decrease the
line of credit. On May 3, 2005 the Facility was amended to decrease the line of
credit to €1,050,000. On March 13, 2006 the Facility was amended to increase the
mixed-use line of credit to €2,300,000, consisting of a €1,800,000 credit line
based on the eligible accounts receivable and a €500,000 general line of credit.
The latest amendment to the Facility, dated January 3, 2008, amended and
decreased the mixed-use line of credit to €2,050,000, to be used by Remedent NV
and/or Sylphar NV. Each line of credit carries its own interest rates and fees
as provided in the Facility. As of March 31, 2008 and March 31, 2007, Remedent
N.V. and Sylphar N.V. had combined, in aggregate, $779,718 and $1,530,276
advances outstanding, respectively, under this mixed-use line of credit
facility.
Net cash
provided by financing activities totaled $2,954,967 for the nine months ended
December 31, 2008 as compared to net cash provided in financing activities of
$5,044,277 for the nine months ended December 31, 2007. Net cash provided from
financing activities in the nine month period ended December 31, 2007 was higher
than in the nine months ended December 31, 2008 primarily because of the
$2,782,000 in net cash received on the sale of Sylphar N.V. and an increase in
the use of our line of credit of $127,840. There have been no recent change to
our line of credit.
During the years ended March 31, 2008
and March 31, 2007, we recognized an increase/(decrease) in cash and cash
equivalents of $(66,463) and $(170,756), respectively, from the effect of
exchange rates between the Euro and the US Dollar.
During
the nine months ended December 31, 2008 we recognized an increase in cash and
cash equivalents of $218,337 (2007 – $152,245) as a result of the effect of
exchange rates between the Euro and the US Dollar.
Off-Balance Sheet
Arrangements
At December 31, 2008, we did not have
any transactions, obligations or relationships that could be considered
off-balance sheet arrangements.
DESCRIPTION
OF BUSINESS
Introduction
We are
one of the leading manufacturers of cosmetic dentistry products in Europe.
Leveraging our knowledge of regulatory requirements regarding dental products
and management’s experience in the needs of the professional dental community,
we design, develop, manufacture and distribute our cosmetic dentistry products,
including a full line of professional dental products that are distributed in
Europe, Asia and the United States. We manufacture many of our products at our
facility in Deurle, Belgium as well as outsourced manufacturing in China. We
distribute our products using both our own internal sales force and through the
use of third party distributors.
Development
of Business
We were
originally incorporated under the laws of Arizona in September 1996 under the
name Remedent USA, Inc. In October 1998, we were acquired by Resort World
Enterprises, Inc., a Nevada corporation in a share exchange, and we immediately
changed our name to Remedent USA, Inc. and later to Remedent, Inc. Until
recently, we targeted our dental products to the professional dental market and
the over-the-counter (OTC) retail business. In the latter part of 2008, our
Board of Directors approved a strategic plan to separate our OTC business from
our professional business, which would allow us to focus on the development,
marketing and distribution of our products for the professional dental market.
In December 2008, we completed a restructuring in the form of a management-led
buyout of 50% of our OTC retail business. The buyout was led by Mr. Robin List,
our former director and Chief Executive Officer, with financing provided by a
non-affiliated foreign investment fund. In connection with the strategic plan,
we effected our OTC restructuring through a series of transactions involving
subsidiary formations, contributions of subsidiary(ies) interests and sales of
stock interests through subsidiary transactions.
As a
result of the series of transactions related to the sale, we now own 50% of our
subsidiary, Remedent OTC, with Mr. List owning the other 50%, and maintain
control of Remedent OTC as a result of our current control of the board. In
addition, we now own an interest in Sylphar Holding, which owns and holds the
OTC operating subsidiaries, through Remedent OTC’s 75% ownership interest in
Sylphar Holding, which interest is subject to dilution of up to 24% upon
exercise of a call option held by Concordia, who currently owns the remaining
25%. As a result of the sale, all of the OTC business previously directly
operated by us is now operated and held by Sylphar Holding.
We
currently have the following wholly owned subsidiaries: (1) Remedent N.V., a
Belgium corporation; (2) Remedent Professional Holdings, Inc., a California
corporation; (3) Remedent Professional, Inc., a California corporation (a
subsidiary of Remedent Professional Holdings, Inc.), and Glamtech-USA, Inc., a
Delaware corporation. In addition, we have a 50% ownership interest in Remedent
OTC BV, a Belgium corporation (“Remedent OTC”), and thereby have a partial
ownership interest in the following wholly owned subsidiaries of Sylphar Holding
BV, a Dutch holding company and subsidiary of Remedent OTC: (i) Sylphar N.V., a
Belgium corporation; (ii) Sylphar USA, Inc., a Nevada corporation; and (iii)
Remedent Asia Pte Ltd, a Singapore company.
We have been a manufacturer and
distributor of cosmetic dentistry products, including a full line of
professional dental and retail OTC tooth whitening products which are
distributed in Europe, and recently in Asia and the United States. We distribute
our products using both our own internal sales force and through the use of
third party distributors.
Until recently, our products were
generally classified into the following categories: professional dental products
and OTC tooth whitening products. Our OTC division included products targeted
for retail such as iWhite, Cleverwhite and Remesense. However as a result of the
recent restructuring and sale, all of our prior OTC operations, including the
marketing and distribution of the OTC products are being conducted by Sylphar
Holding and its wholly owned subsidiaries.
Prior to
the launch of our Glamsmile products, the following were our professional
products for our professional dental segment.
Remewhite in Office Whitening
System
. One of our first dental products that we developed for the
professional dental community was the RemeCure™ plasma curing light (described
below). Leveraging on our early success with the RemeCure light, we introduced
the RemeWhite™ In Office Whitening System. Based upon the initial RemeCure
light, a new light, called the RemeCure CL-15, was developed featuring new
enhancements to the hardware and software enabling this light to be fully
automated thereby eliminating the need for the dentist to hold the light during
whitening treatments. In addition, a proprietary gel was formulated to be used
with the system as well as a time saving method to apply the gel.
Remewhite Home Maintenance
Kit
. In 2004, the RemeWhite Home Maintenance Kit was introduced and sold
by dentists to their patients, featuring 16 pre-filled trays with a level of
whitening agent safe for home use yet stronger than most Over-The-Counter
products.
Metatray
. In August 2005, we
introduced MetaTray®, our next generation of products targeted for the
professional dentist market. MetaTray is a completely self-contained whitening
system that can be administered by dentists that:
|
•
|
Does
not require chair time.
|
|
•
|
Incorporates
all the benefits of heat and light for activating
gel.
|
|
•
|
Introduces
a proprietary gel delivery system that eliminates dripping and running
while enhancing protection for surrounding gums and
tissue.
|
The MetaTray kit consists of a
proprietary, reusable mouthpiece that has embedded in the mouthpiece both a
heating element and an electroluminescent mesh that are powered by a
rechargeable 9 volt power source providing heat and light similar to that which
is delivered to the teeth by conventional dental lights. The system also
introduced a proprietary foam strip that is unique in the manner in which it
releases peroxide to the tooth surface without dripping or running. The MetaTray
kit is easy to handle, to store, and to discard. It works by a gradual release.
As the mouth is producing more saliva – the saliva is absorbed by the foam and
is pushing the peroxide out of the foam in a chemical reaction. This also
prolongs the release of peroxide allowing for a more gradual treatment thus
minimizing irritation to the gums and surrounding tissue. Most importantly,
since the MetaTray kit can be used at home by the patient, foam strips with the
appropriate concentration of peroxide can be provided by the dentist thereby
generating a continuing revenue stream for the dentist while achieving high
levels of patient satisfaction.
RemeCure.
The RemeCure plasma
curing light uses plasma arc technology instead of LED- and laser technology
which provides high-energy power over the complete spectrum. This allowed
RemeCure plasma curing light to be used in various applications such as: (1)
curing dental composite materials in only seconds; and (2) for single
appointment, in-office whitening in less than forty minutes.
Current
Professional Dental Product and Business Strategy
In connection with our recent
restructuring, we have shifted our focus to professional products targeted for
the professional sector. Our key product in the professional oral care and
cosmetic dentistry product is GlamSmile™ veneers. In the fall of 2006, we
launched our proprietary veneer technology, GlamSmile. Cosmetic dentistry is a
rapidly growing segment of dental practices within the United States and Europe,
with increasing demand for veneers and bonding procedures. Our GlamSmile veneers
are ultra thin claddings made from a mixture of a hybrid composite and porcelain
materials which are attached to the front of the patient’s teeth. Because
GlamSmile veneers are so thin, the dentist does not need to remove healthy tooth
structure leaving the patient’s healthy tooth structure intact results in
several important benefits:
|
•
|
no
local anesthesia is required to prepare the
teeth;
|
|
•
|
reduced
(if any) tooth sensitivity post-procedure;
and
|
|
•
|
the
process is reversible.
|
At the initial doctor visit, an
impression is made of the patient’s teeth. During the second visit, the hybrid
composite veneers, which are computer generated as a single unit, are then ready
to be installed. The single-unit feature enables dentists with minimal training
to apply up to ten teeth in one 30 – 45 minute visit. This minimizes the risk of
failure and allows more dentists to offer GlamSmile veneers as part of their
dental practice.
With traditional bonding, a dentist
adheres a composite material directly on the tooth which lasts about 3 to 6
years and tends to discolor. Porcelain veneers, though a more lasting solution
(ten years or more), require a significantly more invasive procedure to install,
which is irreversible, requires a very high level of training and skill from the
dentist and can cost from $700 to $2,000 per tooth.
In the fall of 2006, we opened our
initial GlamSmile Lab in Ghent. As a temporary solution, the lab was integrated
at the same address as the office of Evelyne Jacquemyns, a dentist in Ghent who
is a related person to Guy De Vreese, our Chairman and CEO. It was agreed that
we could use the office of Ms. Jacquemyns from time to time for demonstration
purposes in relation to our GlamSmile veneers, at no cost. At current, we are in
negotiations to finalize renting a larger location at the same address of the
current dental practice, where the initial GlamSmile Lab will be moved. We
incurred $63,835 in cost related to the build out of the initial GlamSmile Lab.
Additional investments are planned to support the growth of sales of our
GlamSmile veneers.
The GlamSmile veneers were previously
only offered in Europe but pursuant to our distribution agreement with Den-Mat
during 2008, we have begin to market the GlamSmile product in the United States
and throughout the world with the exception of certain excluded territories as
further described under “Distribution.”
On June 30, 2008, we entered into an
OEM Agreement (“Agreement”) with SensAble Technologies, Inc., a corporation
under the laws of Delaware (“SensAble”) pursuant to which we intend to integrate
SensAble products and technology into our system. The Agreement provides the
Company with the exclusive right to distribute certain SensAble products
throughout the world for a period of twelve months from the date of the
Agreement. We have the option and right to extend the initial twelve month
exclusivity period for another twelve months. The term of the Agreement is for
two years and began on June 30, 2008.
Distribution
Our strategy has been to focus on
product development and marketing and to rely on our distributor network
assisted by our internally developed marketing programs for servicing our
customers in our target market.
Starting in Belgium and the
Netherlands, our products have been introduced utilizing our Distributor
Assisted Marketing programs. We implement our program by first identifying an
established dealer in each market with a well developed sales force familiar
with sales of capital equipment to the professional dentist community. Second,
we develop aggressive lead generation programs and other marketing techniques
which served as a blue print for the dealers to implement. The combination of a
well-trained dealer force and dealer-assisted marketing and lead generation
programs has proven to be far more effective than utilizing a direct sales
approach, which is much slower and more costly to establish. This process has
been repeated for both the professional dentist and retail, over the counter
markets in each country. As a result of this approach, we have been able to
establish dealers in 35 countries encompassing, Europe, Asia, Latin America, the
Pacific Rim and the Middle East.
Consistent with our strategic
dealer-assisted marketing approach, on August 24, 2008, we entered into a
distribution agreement Den-Mat (“Distribution Agreement”). Under the terms of
the Distribution Agreement, we appointed Den-Mat to be the sole and exclusive
distributor to market, license and sell certain products relating to our
GlamSmile tray technology, including, but not limited to, our GlamSmile veneer
products and other related veneer products (the “Products”), throughout the
world, with the exception of Australia, Austria, Belgium, Brazil, France
(including Dom-Tom), Germany, Italy, New Zealand, Oman, Poland, Qatar, Saudi
Arabia, Singapore, Switzerland, Thailand, and United Arab Emirates (collectively
the “Excluded Markets”) and the China Market; and
granted Den-Mat a sole and
exclusive, transferable and sublicensable right and license to use all
intellectual property related to the Products throughout specified territory, as
well as certain rights in the excluded markets and rights in future intellectual
property. Such rights include the right to manufacture the Products upon payment
of royalties for the initial three year guaranty period (“Guaranty Period”).
Upon the expiration of the Guaranty Period, as detailed in the Distribution
Agreement, the sole and exclusive distribution rights and licenses granted under
the Agreement automatically become non-exclusive distribution rights and
licenses, and all rights to use the “GlamSmile” name and mark shall cease unless
the Guaranty Period is extended by Den-Mat under the terms of the Distribution
Agreement. Upon termination of the Distribution Agreement, all of Den-Mat’s
rights in our intellectual property, including the right to manufacture the
Products will terminate.
As consideration for such distribution,
licensing and manufacturing rights, Den-Mat agreed to pay us: (i) an initial
payment of $2,425,000 (received in the period ended September 30, 2008); (ii) a
payment of $250,000 for each of the first three contract periods in the initial
Guaranty Period, subject to certain terms and conditions; (iii) certain periodic
payments as additional paid-up royalties in the aggregate amount of $500,000;
(iv) a payment of $1,000,000 promptly after Den-Mat manufactures a limited
quantity of Products at a facility owned or leased by Den-Mat; (v) a payment of
$1,000,000 promptly upon completion of certain training of Den-Mat’s personnel;
(vi) a payment of $ 1,000,000 upon the first to occur of (a) February 1, 2009 of
(b) the date thirty (30) days after den-Mat sells GlamSmile Products
incorporating twenty thousand (20,000) Units/Teeth to customers regardless of
whether Den-Mat has manufactured such Units/Teeth in a Den-Mat facility or has
purchased such Units/Teeth from us; (vii) certain milestone payments; and (viii)
certain royalty payments. Further, as consideration for Den-Mat’s obligations
under the Distribution Agreement, we agreed to, among other things: (i) issue to
Den-Mat or an entity to be designated by Den-Mat, warrants to purchase up to
3,378,379 shares of our common stock, par value $0.001 per share (the “Warrant
Shares”) at an exercise price of $1.48 per share, exercisable for a period of
five years (issued in the period ended September 30, 2008); (ii) execute and
deliver to Den-Mat a registration rights agreement covering the registration of
the Warrant Shares; and (iii) cause our Chairman of the Board, Guy De Vreese, to
execute and deliver to Den-Mat a non-competition agreement.
In connection with the distribution
agreement with Den-Mat, we purchased all of the outstanding capital stock of
Glamtech from the two shareholders of Glamtech, in exchange for the rescission
of the previously existing distribution agreements with Glamtech, certain
limited royalty payments allocated to sales of the specified veneer products in
the United States, Canada and the United Kingdom during the term of the
agreement with Den-Mat, and an aggregate of one million (1,000,000) restricted
shares of the our common stock. The primary assets of Glamtech were those
certain distribution agreements which granted Glamtech the exclusive right to
distribute the relevant veneer products in the United States, Canada and the
United Kingdom.
Locations
We lease our 26,915 square feet office
and warehouse facility in Deurle, Belgium. Our operations take place primarily
at our office space and warehouse in Deurle, Belgium.
Manufacturing
Prior to 2003, all of the
manufacturing related to our dental products were conducted through third party
manufacturers under our supervision thereby minimizing demands on capital
resources. Beginning in 2003, parts of the manufacturing and the majority of the
final assembly of our products were brought in-house, thereby improving control
over product quality while significantly reducing product costs. These efforts
were expanded significantly during the fiscal year ended March 31, 2006, in
particular with regard to the expansion of in-house manufacturing capabilities
for our gel products and foam strips. In December 2005, our manufacturing
facility became ISO 9001:2000 certified and ISO 13485:2003 certified which
includes the certification for the manufacture of medical devices.
Research
and Development
During the year ended March 31, 2008
we continued our research and development activities to improve the quality and
performance of our existing products, investigated and developed new product
opportunities and worked to obtain regulatory approvals on a country by country
basis of recently developed products. Our research and development expenses was
$332,958 for the year ended March 31, 2008 as compared to $341,764 for the year
ended March 31, 2007.
For the
nine months ended December 31, 2008, research and development expenses decreased
by $23,286 or 9.4% to $224,379 as compared to $247,665 for the nine months ended
December 31, 2007. The principal reason for this decrease is that the majority
of investments in relation to the development of new products took place during
2007. The release of these new products is scheduled for the next six
months.
Intellectual
Property
In October 2004, we acquired from the
inventor the exclusive, perpetual license to two issued United States patents
which are applicable to the MetaTray® kit. Pursuant to the terms of the license
agreement, we were granted an exclusive, worldwide, perpetual license to
manufacture, market, distribute and sell the products contemplated by the
patents subject to the payment of $65,000 as reimbursement to the patent holder
for legal and other costs associated with obtaining the patents, which was paid
in October 2004, and royalties for each unit sold subject to an annual minimum
royalty of $100,000 per year. We are amortizing the initial cost of $65,000 for
these patents over a ten year period and accordingly has recorded $27,625 of
accumulated amortization for this patent as of December 31, 2008. We will accrue
this royalty when it becomes payable to inventory therefore no provision has
been made for this obligation as of December 31, 2008.
In September 2004, we entered into an
agreement with Lident N.V. (“Lident”), a company controlled by Mr. De Vreese,
the Company’s Chairman, to obtain an option, exercisable through December 31,
2005, to license an international patent (excluding the US) and worldwide
manufacturing and distribution rights for a potential new product which Lident
had been assigned certain rights by the inventors of the products, who are
unrelated parties, prior to Mr. De Vreese association with us. The patent is an
Italian patent which relates to a single use universal applicator for dental
pastes, salves, creams, powders, liquids and other substances where manual
application could be relevant. We have filed to have the patent approved
throughout Europe. The agreement required us to advance to the inventors through
Lident a fully refundable deposit of €100,000 subject to the our due diligence
regarding the enforceability of the patent and marketability of the product,
which, if viable, would be assigned to us for additional consideration to the
inventors of €100,000 and an ongoing royalty from sales of products related to
the patent equal to 3% of net sales and, if not viable, the deposit would be
repaid in full by Lident. The consideration we had agreed to pay Lident upon the
exercise of the option is the same as the consideration Lident is obligated to
pay the original inventors. Consequently, Lident would not have profited from
the exercise of the option. Furthermore, at a meeting of our Board of Directors
on July 13, 2005, the Board accepted Lident’s offer to facilitate an assignment
of Lident’s intellectual property rights to the technology to us in exchange for
the reimbursement of Lident’s actual costs incurred relating to the intellectual
property. Consequently, when we exercises the option, all future payments, other
than the reimbursement of costs would be paid directly to the original inventors
and not to Lident. On December 12, 2005, we exercised the option and we and the
patent holder agreed to revise the assignment agreement whereby we agreed to pay
€50,000 additional compensation in the form of prepaid royalties instead of the
€100,000 previously agreed, €25,000 of which had been paid by us in September
2005 and the remaining €25,000 to be paid upon our first shipment of a product
covered by the patent. As of December 31, 2008 we have not yet received the
final product. The patent is being amortized over five (5) years and
accordingly, we have recorded $73,297 of accumulated amortization for this
patent as of December 31, 2008.
We have filed two patent applications
in the European Union, United States and Australia related to the GlamSmile
product. We also have ongoing research and development efforts to improve and
expand our current technology and to develop new dental products. We intend to
continue to apply for patents when we believe it is in our interest to do so and
as advised by patent counsel. We rely and will continue to rely on trade
secrets, know-how and other unpatented proprietary information in our business.
Certain of our key employees and consultants are required to enter into
confidentiality and/or non-competition agreements to protect our confidential
information.
Major
Customers
For the year ended March 31, 2008 we
had one customer that accounted for 16% of total revenues. For the year ended
March 31, 2007, we had two customers whose sales accounted for 35% and 10%,
respectively, of total revenues.
For the nine months ended December 31,
2008 we had five customers that accounted for 55% of total revenues. Out of
these five customers, one accounted for 60% and another accounted for 11% of
total revenues. For the nine month period ended December 31, 2007 we had five
customers that accounted for 62% of total revenues.
Competition
International markets including
Europe, Asia and Latin America have followed the United States’ lead in
expanding offerings in the areas of teeth whitening. Leading the way in both the
professional dentist segment has been United States based companies seeking to
expand their distribution. Impeding these efforts has been the inability of many
of these companies to fully understand the differences from both a distribution
and a regulatory standpoint that apply in each of the European and Asian
markets. Notwithstanding the formation of the European Union and its efforts to
standardize regulatory and business practices throughout Europe, these practices
in reality vary widely from country to country.
Competition in the professional
dentistry product lines comes primarily from the larger United States based
competitors including Brite-Smile, Rembrandt (now a subsidiary of Gillette
Company, Inc.), Discuss Dental, Inc. and Zoom. All of these companies offer
light and whitening solutions to the professional dentist community. Despite our
competition’s advantage with respect to size, resources and name recognition, we
have continued to maintain market share in this highly competitive segment for
the following reasons:
|
•
|
Better
combined pricing strategy than the competition when considering net cost
for whitening materials and initial cost of
light.
|
|
•
|
Dual
purpose light to maximize value of initial
investment.
|
|
•
|
Ease
of use from automated functionality of light, speed and gel application
method.
|
|
•
|
Superior
gel formulation which maximizes performance while minimizing
sensitivity.
|
|
•
|
Home
maintenance kit for improved patient
satisfaction.
|
Regulatory
Issues
As we market dental products which
are legally defined to be medical devices, we are considered to be a medical
device manufacturer and as such we are subject to the regulations of, among
other governmental entities, the United States Food and Drug Administration (the
“FDA”) and the corresponding agencies of the states and foreign countries in
which we sell our products. These regulations govern the introduction of new
medical devices, the observance of certain standards with respect to the
manufacture and labeling of medical devices, the maintenance of certain records
and the reporting of potential product problems and other matters. A failure to
comply with such regulations could have material adverse effects on our
business.
The Federal Food, Drug and Cosmetic
Act (“FDC Act”) regulates medical devices in the United States by classifying
them into one of three classes based on the extent of regulation believed
necessary to ensure safety and effectiveness. Class I devices are those devices
for which safety and effectiveness can reasonably be ensured through general
controls, such as device listing, adequate labeling, pre-market notification and
adherence to the Quality System Regulation (“QSR”) as well as medical device
reporting, labeling and other regulatory requirements. Some Class I medical
devices are exempt from the requirement of pre-market approval or clearance.
Class II devices are those devices for which safety and effectiveness can
reasonably be ensured through the use of special controls, such as performance
standards, post-market surveillance and patient registries, as well as adherence
to the general controls provisions applicable to Class I devices. Class III
devices are devices that generally must receive pre-market approval by the FDA
pursuant to a pre-market approval application (“PMA”) to ensure their safety and
effectiveness. Generally, Class III devices are limited to life sustaining, life
supporting or implantable devices; however, this classification can also apply
to novel technology or new intended uses or applications for existing
devices.
Before most medical devices can be
marketed in the United States, they are required by the FDA to secure either
clearance of a pre-market notification pursuant to Section 510(k) of the FDC Act
(a “510(k) Clearance”) or approval of a PMA. Obtaining approval of a PMA can
take several years. In contrast, the process of obtaining 510(k) Clearance
generally requires a submission of substantially less data and generally
involves a shorter review period. Most Class I and Class II devices enter the
market via the 510(k) Clearance procedure, while new Class III devices
ordinarily enter the market via the more rigorous PMA procedure. In general,
approval of a 510(k) Clearance may be obtained if a manufacturer or seller of
medical devices can establish that a new device is “substantially equivalent” to
a predicate device other than one that has an approved PMA. The claim for
substantial equivalence may have to be supported by various types of
information, including clinical data, indicating that the device is as safe and
effective for its intended use as its legally marketed equivalent device. The
510(k) Clearance is required to be filed and cleared by the FDA prior to
introducing a device into commercial distribution. Market clearance for a 510(k)
Notification submission may take 3 to 12 months or longer. If the FDA finds that
the device is not substantially equivalent to a predicate device, the device is
deemed a Class III device, and a manufacturer or seller is required to file a
PMA. Approval of a PMA for a new medical device usually requires, among other
things, extensive clinical data on the safety and effectiveness of the device.
PMA applications may take years to be approved after they are filed. In addition
to requiring clearance or approval for new medical devices, FDA rules also
require a new 510(k) filing and review period prior to marketing a changed or
modified version of an existing legally marketed device if such changes or
modifications could significantly affect the safety or effectiveness of that
device. The FDA prohibits the advertisement or promotion of any approved or
cleared device for uses other than those that are stated in the device’s
approved or cleared application.
We believe that the GlamSmile
products will not require a 510(k) submission because the products fall within
an exemption under the 510(k) regulation.
International sales of medical
devices are also subject to the regulatory requirements of each country. In
Europe, the regulations of the European Union require that a device have a CE
Mark, a mark that indicates conformance with European Union laws and regulations
before it can be sold in that market. The regulatory international review
process varies from country to country. We previously relied upon our
distributors and sales representatives in the foreign countries in which we
market our products to ensure we comply with the regulatory laws of such
countries; however, during the year ended March 31, 2006 we expanded our own
Research and Development personnel to enable us to provide greater assistance
and play a more proactive role in obtaining local regulatory approvals,
especially in Europe. We currently have an in-office regulatory affairs
representative who is responsible for coordinating local and international
approvals as well as our ISO:9001 and ISO:13485 (medical device).
Costs
and Effects of Compliance with Environmental Laws and Regulations
We are not in a business that
involves the use of materials in a manufacturing stage where such materials are
likely to result in the violation of any existing environmental rules and/or
regulations. Further, we do not own any real property that could lead to
liability as a landowner. Therefore, we do not anticipate that there will be any
substantial costs associated with the compliance of environmental laws and
regulations.
Employees
We currently retain 21 full-time
employees in Belgium. We currently have one employee, Mr. Stephen Ross, our
Chief Financial Officer, located in the United States. Our subsidiary, Remedent,
N.V., has an employment agreement with Mr. Philippe Van Acker, which is
currently under renegotiation due to Mr. Van Acker’s recent change in position
from Chief Financial Officer to Chief Accounting Officer. We entered into an
employment agreement with Roger Leddington on August 15, 2007, appointing Mr.
Leddington Senior Vice President and Head of U.S. Marketing. This agreement was
subsequently terminated in the beginning of May 2008, when Mr. Leddington
resigned and in connection with the Glamtech distribution agreement, accepted
the position as Glamtech’s president.
DESCRIPTION
OF PROPERTY
We lease our 26,915 square feet
office and warehouse facility in Deurle, Belgium from an unrelated party
pursuant to a nine-year lease commencing December 20, 2001 at a base rent of
€7,018 per month ($9,756 per month at December 31, 2008). In addition, we are
responsible for the payment of annual real estate taxes for the property which
totaled €4,120 ($6,515) for calendar year 2008.
The minimum aggregate rent to be paid
over the remaining lease term based upon the conversion rate for the € at
December 31, 2008 is $316,314.
LEGAL
PROCEEDINGS
To the best knowledge of management,
there are no material legal proceedings pending against us.
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors,
Executive Officers and Significant Employees
The following table sets forth the
names and ages of our current directors and executive officers, the principal
offices and positions with us held by each person and the date such person
became our director or executive officer. Our executive officers are elected
annually by the Board of Directors. Each year the stockholders elect the board
of directors. The executive officers serve terms of one year or until their
death, resignation or removal by the Board of Directors. There was no
arrangement or understanding between any executive officer or director and any
other person pursuant to which any person was elected as an executive officer or
director. There are no family relationships between any of our directors,
executive officers, director nominees or significant employees. Mr. Kolsteeg is
independent as determined by the NASDAQ rules.
Person
|
|
Age
|
|
Position
|
Guy
De Vreese
|
|
53
|
|
Chairman,
Chief Executive Officer
|
Stephen
Ross
|
|
49
|
|
Chief
Financial Officer, Director, Secretary
|
Fred
Kolsteeg
|
|
65
|
|
Director
|
Philippe
Van Acker
|
|
43
|
|
Director,
Chief Accounting Officer
|
Guy De Vreese, Chairman
. From
April 1, 2002, Mr. De Vreese has served as our Chairman of the Board. Effective
upon Mr. List’s resignation as Chief Executive Officer, on December 10, 2008 Mr.
De Vreese became our Chief Executive Officer. From June 2001 Mr. De Vreese has
also served as President of Remedent N.V. and he has served as President of
DMDS, Ltd., a European subsidiary of Dental & Medical Systems, Inc. DMDS,
Ltd. developed and marketed high-tech dental equipment. In August 1996, Mr. De
Vreese founded DMD N.V., a Belgian company that was the independent European
distributor for DMDS products and was its Chief Executive Officer until DMD
purchased its distribution rights in April 1998. Mr. De Vreese later worked as
CEO from 1996 through February 1999 for Lident, N.V., a Belgian company that
merged with DMD and specialized in digital photography and developer of imaging
software. Mr. De Vreese also served as a consultant providing services to DMDS,
Ltd. from February 1999 to June 2001. Mr. De Vreese resides in
Belgium.
Stephen Ross, Director, Chief
Financial Officer, Secretary
. Mr. Ross has served as our director since
August 2001 and as our Secretary since April 2002. He also served as our Chief
Financial Officer from August 2001 until March 2005. He was recently reappointed
as Chief Financial Officer, effective December 18, 2008. From February 1998
through January 2001, Mr. Ross was CFO of Dental & Medical Diagnostic
Systems, Inc., a company that developed and marketed high-tech dental equipment
and declared bankruptcy in July 2001. Commencing in 1996 and terminating
February 1998, Mr. Ross served as a senior management consultant with Kibel and
Green, a corporate restructuring and management firm. Prior to working for Kibel
and Green, Mr. Ross served as CFO and co-founder of a personal care company, and
as tax manager with an accounting firm. Mr. Ross resides in Los Angeles,
California.
Fred Kolsteeg, Director
. Mr.
Kolsteeg has served as a director of the Company since April 2002. Since 1996,
Mr. Kolsteeg has served as the president of WAVE Communications, a Dutch based
advertising agency. Prior to founding WAVE in 1996, he founded several other
advertising agencies such as ARA, Team and Team Saatchi. Mr. Kolsteeg has also
worked at Phillips and Intermarco Publicis. Mr. Kolsteeg resides in
Holland.
Philippe Van Acker, Director, Chief
Accounting Officer
. Mr. Van Acker was appointed as our Chief Financial
Officer as of March 30, 2005. Effective December 18, 2008, Mr. Van Acker
resigned as Chief Financial Officer and became our Chief Accounting Officer as
well as assuming a position on the Board of Directors. From July 2001 to March
30, 2005, Mr. Van Acker has served as a director of our subsidiary, Remedent
N.V. where he has also served as financial controller. From 1999 to 2001, Mr.
Van Acker served as Director of Finance for DMDS, Ltd., a European subsidiary of
Dental & Medical Diagnostic Systems, Inc., a company that developed and
marketed high-tech dental equipment. From 1992 to 1999, Mr. Van Acker held
various positions with Pfizer Medical Technology Group. Mr. Van Acker resides in
Belgium.
EXECUTIVE
COMPENSATION
Summary
Compensation
Our Board of Directors has not
established a separate compensation committee nor any other committee that acts
as such a committee. Instead, the entire Board of Directors reviews and approves
executive compensation policies and practices, reviews, salaries and bonuses for
our officers, administers our benefit plans, and considers other matters as may,
from time to time, be referred to it. We do not currently have a Compensation
Committee Charter. Our Board continues to emphasize the important link between
our performance, which ultimately benefits all shareholders, and the
compensation of our executives. Therefore, the primary goal of our executive
compensation policy is to closely align the interests of the shareholders with
the interests of the executive officers. In order to achieve this goal, we
attempt to (i) offer compensation opportunities that attract and retain
executives whose abilities and skills are critical to our long-term success and
reward them for their efforts in ensuring our success and (ii) encourage
executives to manage from the perspective of owners with an equity stake in the
Company.
The following table sets forth
information regarding all forms of compensation received by the named executive
officers during the fiscal years ended March 31, 2009 and March 31, 2008,
respectively:
Name and Principal Position
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
Awards
|
|
|
Option
Awards
|
|
|
All
Other
Compensation
|
|
|
Total
|
|
Guy
De Vreese, CEO
|
2009
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
318,490
|
(1)
|
|
$
|
318,490
|
(1)
|
Chairman,
CEO of Remedent N.V.
|
2008
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
315,442
|
(1)
|
|
$
|
315,442
|
(1)
|
Robin
List,
(2)
|
2009
|
|
$
|
231,746
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
231,746
|
|
CEO
|
2008
|
|
$
|
252,567
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
252,567
|
|
Philippe
Van Acker,
|
2009
|
|
$
|
163,120
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
48,844
|
(4)
|
|
$
|
-0-
|
|
|
$
|
211,964
|
|
CFO,
Director
(3)
|
2008
|
|
$
|
162,658
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
162,658
|
|
Stephen
Ross
|
2009
|
|
$
|
50,000
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
48,844
|
(6)
|
|
$
|
-0-
|
|
|
$
|
98,844
|
|
CFO,
Director
(5)
|
2008
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
(1)
|
These
amounts are consulting fees including a car allowance paid by Remedent
N.V. to Lausha, N.V., a company controlled by Mr. De Vreese, pursuant to
an oral consulting agreement between Lausha N.V. and Remedent
N.V. Mr. De Vreese was also appointed CEO effective December
10, 2008, upon Mr. List’s
resignation.
|
|
(2)
|
Robin
List resigned as CEO and from his position as a director of the Company,
effective December 10, 2008.
|
|
(3)
|
Philippe
Van Acker resigned from his position as CFO and was appointed as the
Company’s Chief Accounting Officer effective December 18, 2008, as well as
a member of the Board of Directors.
|
|
(4)
|
The
Company valued the 100,000 options granted to Mr. Van Acker on March 19,
2009, using the Black Scholes option pricing model using the following
assumptions: no dividend yield; expected volatility rate of
141%; risk free interest rate of 2.17% and an average life of 10 years
resulting in a value of $0.49 per option granted in the period ended March
31, 2009. The options vested immediately and accordingly a
value of $48,844 has been recorded in the period ended March 31,
2009.
|
|
(5)
|
Stephen
Ross, a director of the Company, was also appointed CFO effective December
18, 2008, upon Mr. Van Acker’s
resignation.
|
|
(6)
|
The
Company valued the 100,000 options granted to Mr. Ross on March 19, 2009,
using the Black Scholes option pricing model using the following
assumptions: no dividend yield; expected volatility rate of
141%; risk free interest rate of 2.17% and an average life of 10 years
resulting in a value of $0.49 per option granted in the period ended March
31, 2009. The options vested immediately and accordingly a
value of $48,844 has been recorded in the period ended March 31,
2009.
|
Outstanding
Equity Awards at Fiscal Year End
The
following table provides information with respect to the named executive
officers concerning unexercised stock options held by them at March 31,
2009:
Name
|
|
Number
of Securities
underlying
Unexercised
Options (Exercisable)
|
|
|
Number
of Securities
underlying
Unexercised
Options
(Unexercisable)
|
|
|
Exercise
Price
per
Share
|
|
Expiration Date
|
Guy
De Vreese
|
|
|
50,000
|
|
|
|
-0-
|
|
|
$
|
1.00
|
|
28-Mar-2012
|
Guy
De Vreese
|
|
|
100,000
|
|
|
|
-0-
|
|
|
$
|
1.75
|
|
20-Sept-2017
|
Robin
List
|
|
|
50,000
|
|
|
|
-0-
|
|
|
$
|
1.00
|
|
28-Mar-2012
|
Robin
List
|
|
|
100,000
|
|
|
|
-0-
|
|
|
$
|
1.75
|
|
20-Sept-2017
|
Philippe
Van Acker
|
|
|
75,000
|
|
|
|
-0-
|
|
|
$
|
2.46
|
|
23-Dec-2015
|
Philippe
Van Acker
|
|
|
10,000
|
|
|
|
-0-
|
|
|
$
|
1.00
|
|
28-Mar-2012
|
Philippe
Van Acker
|
|
|
50,000
|
|
|
|
-0-
|
|
|
$
|
1.75
|
|
20-Sept-2017
|
Philippe
Van Acker
|
|
|
100,000
|
|
|
|
-0-
|
|
|
$
|
0.50
|
|
19-Mar-2019
|
Stephen
Ross
|
|
|
50,000
|
|
|
|
-0-
|
|
|
$
|
1.00
|
|
28-Mar-2012
|
Stephen
Ross
|
|
|
12,500
|
|
|
|
-0-
|
|
|
$
|
2.00
|
|
4-Apr-2014
|
Stephen
Ross
|
|
|
100,000
|
|
|
|
-0-
|
|
|
$
|
0.50
|
|
19-Mar-2019
|
As of
March 31, 2009, there were no outstanding stock awards.
Director
Compensation Table
Generally, our directors do not
receive any cash compensation, but are entitled to reimbursement of their
reasonable expenses incurred in attending directors’
meetings. However, at the discretion of our Board of Directors, we
may periodically issue stock options under our stock option plan to
directors.
The following table sets forth
information regarding all forms of compensation received by all non-executive
directors of the Company during the fiscal year ended March 31,
2009:
Name
|
|
Directors
Fees
Earned
or Paid in
Cash
|
|
|
Stock
Awards
|
|
|
Option
Awards
|
|
|
All
Other
Compensation
|
|
|
Total
|
Fred
Kolsteeg
|
|
$
|
19,806
|
(1)
|
|
$
|
-0-
|
|
|
$
|
97,688
|
(2)
|
|
$
|
-0-
|
|
|
$
|
117,494
|
|
|
(1)
|
Represents
amounts paid to Mr. Kolsteeg as reimbursement of his out-of-pocket
expenses incurred in traveling to and attending Board
meetings.
|
|
(2)
|
The
Company valued the 200,000 options granted to Mr. Kolsteeg on March 19,
2009, using the Black Scholes option pricing model using the following
assumptions: no dividend yield; expected volatility rate of
141%; risk free interest rate of 2.17% and an average life of 10 years
resulting in a value of $0.49 per option granted. The options
vested immediately and accordingly a value of $97,688 has been recorded in
the period ended March 31,2009. The options granted to Mr.
Kolsteeg represent additional compensation paid to Mr. Kolsteeg as
compensation for his extra efforts and assistance with the Company’s sale
of its Over-the-Counter retail business during the fiscal year ended March
31, 2009.
|
Stock
Option Plans
As of
March 31, 2009, we had three equity compensation plans approved by our
stockholders (1) our Incentive and Nonstatutory Stock Option Plan enacted in
2001 (the “2001 Plan”), (2) our 2004 Incentive and Nonstatutory Stock Option
Plan (the “2004 Plan”); and (3) our 2007 Equity Incentive Plan (the “2007
Plan”). Our stockholders approved the 2001 Plan reserving 250,000 shares of
common stock of the Company pursuant an Information Statement on Schedule 14C
filed with the Commission on August 15, 2001. In addition, our stockholders
approved the 2004 Plan reserving 800,000 shares of common stock of the Company
pursuant to an Information Statement on Schedule 14C filed with the Commission
on May 9, 2005. Finally, our stockholders approved the 2007 Plan
reserving 1,000,000 shares of common stock of the Company pursuant to a
Definitive Proxy Statement on Schedule 14A filed with the Commission on October
2, 2007.
In
addition to the equity compensation plans approved by our stockholders, we have
issued options and warrants to individuals pursuant to individual compensation
plans not approved by our stockholders. These options and warrants
have been issued in exchange for services or goods received by us.
The
following table provides aggregate information as of March 31, 2009 with respect
to all compensation plans (including individual compensation arrangements) under
which equity securities are authorized for issuance.
Plan
Category
|
Number
of
securities
to be
issued
upon
exercise
of
of
outstanding
options,
warrants
and
right
|
|
|
Weighted-average
exercise
price of
outstanding
options
warrants
and rights
|
|
|
Number
of securities
remaining
available for
future
issuance under
equity
compensation
plans
(excluding
securities
reflected
in
column (a))
|
|
|
Equity
Compensation Plans approved by security holders
|
|
|
1,673,166
|
|
|
$
|
1.15
|
|
|
|
376,834
|
|
Equity
Compensation Plans not approved by security holders
|
|
|
447,298
|
|
|
$
|
1.66
|
|
|
|
NA
|
|
Total
|
|
|
2,120,464
|
|
|
$
|
1.26
|
|
|
|
376,834
|
|
Employment
Agreements
Our subsidiary, Remedent, N.V., has
an employment agreement with Mr. Philippe Van Acker. We entered into
an employment agreement with Roger Leddington on August 15, 2007, appointing Mr.
Leddington Senior Vice President and Head of
U.S. Marketing. This agreement was subsequently terminated
in the beginning of May 2008, when Mr. Leddington resigned and in connection
with the Glamtech distribution agreement, accepted the position as Glamtech’s
president. We do not currently have any other employment agreements
with our executive officers. However, we anticipate having employment
contracts with executive officers and key personnel as necessary, in the
future.
Long-Term
Incentive Plans-Awards in Last Fiscal Year
We do not currently have any
long-term incentive plans.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth
information regarding the beneficial ownership of our common stock as of May 7,
2009. The information in this table provides the ownership information
for:
|
a.
|
each
person known by us to be the beneficial owner of more than 5% of our
common stock;
|
|
b.
|
each
of our directors;
|
|
c.
|
each
of our executive officers; and
|
|
d.
|
our
executive officers, directors and director nominees as a
group.
|
Beneficial ownership has been
determined in accordance with Rule 13d-3 of the 1934 Exchange Act and includes
voting or investment power with respect to the shares. Unless otherwise
indicated, the persons named in the table below have sole voting and investment
power with respect to the number of shares indicated as beneficially owned by
them. Common stock beneficially owned and percentage ownership is based on
19,995,969 shares outstanding.
Beneficial owner
(1)
|
|
Shares
Beneficially
Owned
|
|
|
Percentage
Beneficially
Owned
|
|
|
|
|
|
|
|
|
Guy
De Vreese, CEO, Chairman
(2)
|
|
|
|
|
|
|
Xavier
de Cocklaan 42
|
|
|
|
|
|
|
9831
Deurle, Belgium
|
|
|
4,793,580
|
|
|
|
23.78
|
%
|
|
|
|
|
|
|
|
|
|
Robin
List, Former CEO, Former Director
(3)
|
|
|
|
|
|
|
|
|
Xavier
de Cocklaan 42
|
|
|
|
|
|
|
|
|
9831
Deurle, Belgium
|
|
|
159,827
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Philippe
Van Acker, Director
(4)
|
|
|
|
|
|
|
|
|
Xavier
de Cocklaan 42
|
|
|
|
|
|
|
|
|
9831
Deurle, Belgium
|
|
|
101,667
|
|
|
|
*
|
|
Beneficial owner
(1)
|
|
Shares
Beneficially
Owned
|
|
|
Percentage
Beneficially
Owned
|
|
|
|
|
|
|
|
|
Stephen
Ross, CFO, Secretary, Director
(5)
|
|
|
|
|
|
|
1921
Malcolm #101
|
|
|
|
|
|
|
Los
Angeles, CA 90025
|
|
|
525,777
|
|
|
|
2.6
|
%
|
|
|
|
|
|
|
|
|
|
Fred
Kolsteeg, Director
(6)
|
|
|
|
|
|
|
|
|
Managelaantje
10
|
|
|
|
|
|
|
|
|
3062
CV Rotterdam
|
|
|
|
|
|
|
|
|
The
Netherlands
|
|
|
110,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
All
Officers and Directors as a Group (5 persons)
|
|
|
5,690,851
|
|
|
|
27.78
|
%
|
|
|
|
|
|
|
|
|
|
5%
or Greater Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Austin
W. Marxe and David M. Greenhouse
(7)
|
|
|
|
|
|
|
|
|
153
East 53rd Street, 55th Floor
|
|
|
|
|
|
|
|
|
New
York, NY 10022
|
|
|
7,814,816
|
|
|
|
33.50
|
%
|
|
|
|
|
|
|
|
|
|
Paul
J. Solit
(8)
|
|
|
1,871,019
|
|
|
|
8.9
|
%
|
825
Third Avenue, 33rd Floor
|
|
|
|
|
|
|
|
|
New
York, NY 10020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lagunitas
Partners LP
(9)
|
|
|
1,384,600
|
|
|
|
6.72
|
%
|
|
|
|
|
|
|
|
|
|
Jon
D. Gruber, J. Patterson McBaine and
Eric
Swergold
(10)
|
|
|
2,240,000
|
|
|
|
10.69
|
%
|
50
Osgood Place, Penthouse
|
|
|
|
|
|
|
|
|
San
Francisco, CA 94133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Den-Mat
Holdings, LLC
(11)
|
|
|
3,378,379
|
|
|
|
14.45
|
%
|
2727
Skyway Drive
|
|
|
|
|
|
|
|
|
Santa
Maria, CA 93455
|
|
|
|
|
|
|
|
|
____________
|
(1)
|
Beneficial
ownership has been determined in accordance with Rule 13d-3 under the
Exchange Act. Pursuant to the rules of the Securities and Exchange
Commission, shares of common stock which an individual or group has a
right to acquire within 60 days pursuant to the exercise of options or
warrants are deemed to be outstanding for the purpose of computing the
percentage ownership of such individual or group, but are not deemed to be
beneficially owned and outstanding for the purpose of computing the
percentage ownership of any other person shown in the
table.
|
|
(2)
|
Guy
De Vreese holds 3,304,426 shares in his own name, which such amount
includes 50,000 shares of common stock underlying options which vested on
March 29, 2002 and have an exercise price of $1.00 per share; 100,000
shares of common stock underlying options which vested on September 17,
2007 and have an exercise price of $1.75 per share; 72,787 shares of
common stock held in the name of Lausha N.V., a Belgian company controlled
by Guy De Vreese (“Lausha”) and 9,900 shares of common stock underlying
warrants with an exercise price of $10.00 per share held in the name of
Lausha; 6,467 shares of common stock held in the name of Lident N.V., a
Belgian company controlled by Guy De Vreese; and 1,400,000 shares of
common stock held in the name of Lausha HK, a Hong Kong company controlled
by Guy De Vreese.
|
|
(3)
|
Includes
50,000 shares of common stock underlying options which vested on March 29,
2002 and have an exercise price of $1.00 per share, and 100,000 shares of
common stock underlying options which vested on September 17, 2007 and
have an exercise price of $1.75 per
share.
|
|
(4)
|
Includes
10,000 shares of common stock underlying options which vested on March 29,
2002 and have an exercise price of $1.00 per share; 75,000 shares of
common stock underlying options which vested on December 2005 and have an
exercise price of $2.46 per share; and 16,667 shares of common stock
underlying options which vested on September 17, 2007 and have an exercise
price of $1.75 per share.
|
|
(5)
|
Includes
50,000 shares of common stock underlying options which vested on March 29,
2002 and have an exercise price of $1.00 per share and 12,500 shares of
common stock underlying options which vested on April 8, 2004 and have an
exercise price of $2.00 per share.
|
|
(6)
|
Includes
5,000 shares of common stock underlying options which vested on March 29,
2002 and have an exercise price of $1.00 per share and 10,000 shares of
common stock underlying warrants held by Kolsteeg Beleggingsmaatschappij
B.V., a Dutch company of which Fred Kolsteeg is the principal, with an
exercise price of $10.00 per share.
|
|
(7)
|
Consists
of 3,010,667 shares of common stock of the Company held by Special
Situations Private Equity Fund, L.P. (“SSF Private Equity”) and warrants
to purchase 2,842,382 shares of common stock held by SSF Private Equity;
529,700 shares of common stock held by Special Situations Fund III QP,
L.P. (“SSF QP”) and warrants to purchase 177,000 shares of common stock
held by SSF QP; 940,067 shares of common stock held by Special Situations
Cayman Fund, L.P. (“SSF Cayman”) and warrants to purchase 315,000 shares
of common stock held by SSF Cayman. MGP Advisors Limited (“MGP”) is the
general partner of SSF QP. AWM Investment Company, Inc. (“AWM”) is the
general partner of MGP, the general partner of and investment adviser to
SSF Cayman and the investment adviser to SSF Private Equity. Austin W.
Marxe and David M. Greenhouse are the principal owners of MGP and AWM.
Through their control of MGP and AWM, Messrs. Marxe and Greenhouse share
voting and investment control over the portfolio securities of each of the
funds listed above.
|
|
(8)
|
Consists
of 404,370 shares of common stock and warrants to purchase 424,365 shares
of common stock held by Potomac Capital Partners LP; 212,122 shares of
common stock and warrants to purchase 293,976 shares of common stock held
by Potomac Capital International Ltd (“Potomac International”); and
234,527 shares of common stock and warrants to purchase 301,659 shares of
common stock held by Pleiades Investment Partners-R LP (“Pleiades”). Paul
J. Solit is the Managing Member of Potomac Capital Management LLC
(“Management LLC”), which is the General Partner of Potomac Capital
Partners LP. Mr. Solit is also the President and sole owner of Potomac
Capital Management Inc. (“Management Inc.”), which is the Investment
Manager of both Potomac International and Pleiades. As a director of
Potomac International and through his control of Management LLC and
Management Inc. Mr. Solit has disposition and voting control over the
securities of Potomac Capital Partners LP, Potomac International and
Pleiades.
|
|
(9)
|
Consists
of 791,200 shares of common stock and warrants to purchase 593,400 shares
of common stock. Such securities are also included and reflected in the
disclosure for Jon D. Gruber, J. Patterson McBaine and Eric Swergold per
footnote 11 below.
|
|
(10)
|
Consists
of 791,200 shares of common stock and warrants to purchase up to 593,400
shares of common stock held by Lagunitas Partners LP (“Lagunitas”);
181,600 shares of common stock and warrants to purchase up to 136,200
shares of common stock held by Gruber & McBaine International
(“G&M International”); 153,600 shares of common stock and warrants to
purchase up to 115,200 shares of common stock held by the Jon D. and Linda
W. Gruber Trust; and 153,600 shares of common stock and warrants to
purchase up to 115,200 shares of common stock held by J. Patterson
McBaine. Gruber & McBaine Capital Management, LLC (“GMCM”) is a
registered investment adviser and general partner to Lagunitas and G&M
International. Messrs. Gruber and McBaine are Managers, members and
portfolio managers of GMCM and Mr. Swergold is a member and portfolio
manager of GMCM. GMCM and Messrs. Gruber, McBaine and Swergold constitute
a group within the meaning of Rule 13d-5(b). Through control of GMCM,
Messrs. Gruber, McBaine and Swergold share voting and disposition control
over the portfolio securities of Lagunitas and G&M International. Jon
D. Gruber and Linda W. Gruber have disposition and voting control for the
securities held by the Jon D. and Linda W. Gruber Trust. J. Patterson
McBaine has disposition and voting control for the securities held in his
name.
|
|
(11)
|
Consists
of warrants to purchase 3,378,379 shares of common
stock.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
On December 10, 2008, we completed a
restructuring in the form of a management-led buyout of 50% of our
over-the-counter (“OTC”) retail business (the “Restructuring”). The
Restructuring was led by Mr. Robin List, our former director and Chief Executive
Officer, with financing provided by a non-affiliated foreign investment fund. We
sold fifty percent (50%) of our interest in a new subsidiary formed as part of
the transaction to Mr. List in exchange for 723,000 restricted shares of our
common stock held by Mr. List (“Exchanged Shares”), pursuant to a Share Purchase
Agreement on December 10, 2008. The Exchanged Shares were valued at $1.15 per
share, based on the average of the 52 week high and low bid, for an aggregate
value of $831,450. As a result, Mr. List and the Company equally own 50% of the
newly formed subsidiary, Remedent OTC, with the Company currently controlling
Remedent OTC through its board representations pursuant to the terms of a
certain Voting Agreement entered into by the Company and Mr. List concurrently
with the Share Purchase Agreement. The Voting Agreement provides that, the
Company will initially have 2 board representation and Mr. List will have 1
board representation. However upon the occurrence of a “Triggering Event” (as
defined in the Voting Agreement), the Company will have 1 board representation
and Mr. List will have 2 board representations. On December 8, 2008 a total of
723,000 restricted common shares were returned to treasury.
In
connection with our Distribution, License & Manufacturing Agreement with
Den-Mat (the “Distribution Agreement”) in August 2008 and as consideration for
Den-Mat’s obligations under the Distribution Agreement, we agreed, among other
things, to issue Den-Mat or an entity to be designated by Den-Mat, warrants to
purchase up to three million three hundred seventy-eight thousand three hundred
seventy-nine (3,378,379) shares of our common stock, par value $0.001 per share
at an exercise price of $1.48 per share. During the three months ended December
31, 2008 we granted 3,738,379 warrants to purchase our common stock to Den-Mat.
We valued the warrants at $4,323,207, using the Black Scholes option pricing
model using the following assumptions: no dividend yield; expected volatility
rate of 131%; risk free interest rate of 3.07% and an average life of 5 years
resulting in a value of $1.28 per option granted.
Further, as a condition to the
Den-Mat transaction, on August 24, 2008, we entered into a Rescission Agreement
with Glamtech (the “Rescission Agreement”). As part of the consideration for the
rescission and release under the Rescission Agreement, the Company entered into
a Stock Purchase Agreement with each of the two Glamtech shareholders (the
“Glamtech Shareholders”), for the purchase of all of Glamtech’s outstanding
common stock in exchange for: (i) at the election of the Glamtech Shareholders
at any time within 6 months, to receive either, but not both, (a) an aggregate
of one million (1,000,000) restricted shares of our common stock, or (b) five
(5) year warrants, valued by our Board of Directors at $1.48 per warrant, to
purchase an aggregate of one million two hundred and forty-seven thousand two
hundred and sixteen (1,247,216) restricted shares of the registrant’s common
stock at a exercise price of $1.30 per share. At the election of the Glamtech
Shareholders, we issued 500,000 common shares to each of the previous Glamtech
shareholders and were recorded at a fair value of $625,000.
On July 11, 2008, we issued 358,166
shares of restricted common stock to SensAble Technologies, Inc. as partial
payment of products and certain exclusivity rights pursuant to the terms of that
certain OEM Agreement dated as of June 30, 2008. The value of the shares issued
was $569,483.
In connection with our private
placement in June 2007 of $7,000,000, (the “2007 Private Offering”) we issued
warrants to purchase up to 4,200,000 shares of common stock at an exercise price
of $1.55 per share (the “Warrants”). Under the terms of the 2007 Private
Offering, the Warrants are exercisable for a period of five years and entitle
the holder to purchase one share of restricted common stock (the “Warrant
Shares”) for $1.55 per Warrant Share. We also have the right to redeem the
Warrants for $0.001 per Warrant Share covered by the Warrants if the Shares
trade on the Over-The-Counter Electronic Bulletin Board or similar market above
$5.25 per share for 20 consecutive trading days following the second anniversary
of the initial effective date of the registration statement covering the resale
of the shares and Warrant Shares, based upon the closing bid price for the
shares for each trading day provided that certain conditions are met (the
“Redemption Right”). Once the Redemption Right vests, we have the right, but not
the obligation, to redeem the Warrants for $0.001 per Warrant Share covered by
the Warrants upon 30 days written notice to the holders of the Warrants. Except
as otherwise disclosed in this Prospectus, the Selling Security Holders
purchased the securities relating to this Prospectus in this private placement.
The Company engaged Roth Capital Partners, LLC, as its exclusive agent to offer
the Shares and Warrants (the “Placement Agent”). The Placement Agent was
entitled to a fee equal to ten percent (10%) of the gross proceeds derived from
the Offering, of which the Placement Agent may, at its option, receive up to 2%
of its 10% fee in securities issued in the Offering. Further, we agreed to pay
the Placement Agent 5% of the exercise price of the Warrants promptly following
our receipt thereof. In addition, we agreed to reimburse the Placement Agent for
its out-of-pocket expenses related to the Offering, including an upfront payment
of $25,000 to cover such expenses, of which any unused amount will be netted
against the Placement Agent’s 10% fee. As of December 31, 2008, the total costs
of this private placement were $1,235,223, comprising of: commissions of
$762,505; out-of-pocket costs of $25,000; professional fees of $375,738 and
direct travel costs of $71,980; and have been recorded against share capital as
a cost of financing.
In the 2007 Private Offering, and
pursuant to the terms of the 2007 Private Offering discussed above, the
following funds controlled by significant shareholders Messrs. Austin W. Marxe
and David M. Greenhouse, purchased securities as follows: Special Situations
Private Equity Fund, L.P. (“SSF Private Equity”) purchased 1,344,000 shares of
common stock and warrants to purchase 1,008,000 shares for an aggregate purchase
price of $1,680,000; Special Situations Cayman Fund L.P. purchased 420,000
shares of common stock and 315,000 warrants to purchase common stock for an
aggregate purchase price of $525,000; and Special Situations Fund III QP L.P.
purchased 236,000 shares of common stock and 177,000 warrants to purchase common
stock for an aggregate purchase price of $295,000. Further, pursuant to the
terms of the 2005 Private Offering discussed below, SSF Private Equity purchased
1,666,667 shares of common stock and 1,666,667 warrants to purchase common stock
for an aggregate purchase price of $2,500,000.
Additionally, in the 2007 Private
Offering, significant shareholder Lagunitas Partners LP purchased 791,200 shares
of common stock and 593,400 warrants to purchase common stock for an aggregate
purchase price of $989,000. Finally, in the 2007 Private Offering, significant
shareholder Paul J. Solit, through his dispositive and voting control of the
following entities purchased securities as follows: Potomac Capital Partners LP
purchased 565,820 shares of common stock and 424,365 warrants to purchase common
stock for an aggregate purchase price of $707,275; Potomac Capital International
Ltd purchased 391,968 shares of common stock and 293,976 warrants to purchase
common stock for an aggregate purchase price of $489,960; and Pleiades
Investment Partners-R Ltd purchased 402,212 shares of common stock and 301,659
warrants to purchase common stock for an aggregate purchase price of
$502,765.
On April 10, 2007, in connection with
our engagement of Axelrod Weinberger Associates, LLC (“WAW”) as the Company’s
financial public relations firm, and in addition to the monthly retainer paid by
the Company to WAW, the Company granted to WAW or an entity to be designated by
WAW, a warrant to purchase a total of two hundred thousand (200,000) fully paid
and non-assessable shares of Company common stock at an exercise price of
$1.65.
On July 20, 2005, we completed a
private placement offering of 2,520,661 Units (the “2005 Private Offering”)
consisting of one share of common stock (the "2005 Shares") and one common stock
purchase warrant (the "2005 Warrants") at a price of $1.50 per Unit for a total
of $3,780,985 (the "Units"). The 2005 Warrants are exercisable for a period of
five years and shall entitle the holder to purchase one share of common stock
(the "2005 Warrant Shares") for $1.75 per 2005 Warrant Share. We have the right
to redeem the 2005 Warrants for $0.01 per 2005 Warrant Share covered by the 2005
Warrants after July 6, 2007 if the 2005 Shares trade on the over-the-counter
Bulletin Board above $3.50 per share for thirty consecutive trading days
provided that certain conditions are met (the "Redemption Right"). Once the
Redemption Right vests, we will have the right, but not the obligation, to
redeem the 2005 Warrants for $0.01 per 2005 Warrant Share covered by the 2005
Warrants upon thirty days written notice to the holders of the 2005 Warrants. We
engaged MDB Capital Group, LLC, as our exclusive agent to offer the Units (the
“Placement Agent”). The Placement Agent earned a fee equal to ten percent (10%)
of the gross proceeds derived from the sale of the Units, which totaled
$378,099, together with a five year warrant to purchase up to 252,067 of the
Units sold in the offering at an exercise price of $1.50 per Unit.
In the fall of 2006, we opened our
initial GlamSmile Lab in Ghent, Belgium. As a temporary solution, the lab was
integrated at the same address as the office of Evelyne Jacquemyns, a dentist in
Ghent who is a related person to Guy De Vreese, our Chairman, by virtue of
sharing the same household. We incurred $63,835 in costs related to the build
out of the initial GlamSmile Lab. It was agreed that we could use the office of
Ms Jacquemyns from time to time for demonstration purposes in relation to our
GlamSmile veneers, at no cost. During the summer of 2007, our GlamSmile Lab was
temporarily moved to another location within the same building, to be able to
facilitate our growing group of Lab technicians. We are currently negotiating to
rent a larger location., where the initial GlamSmile Lab will be moved together
with the GlamSmile Veneers Drawing team. We incurred $63,835 and $49,473 during
the years ending March 31, 2007 and March 31, 2008, in costs related to the
build out of the initial GlamSmile Lab. Additional investments are planned to
support the growth of sales of our GlamSmile veneers.
Guy De Vreese, our Chairman of the
Board and Chief Executive Officer, is the managing director of our subsidiary,
Remedent N.V. Mr. De Vreese provides his services as Remedent N.V.’s Managing
Director through two companies, Lausha, N.V. and Lident N.V. Lausha, N.V. and
Lident N.V. have oral consulting arrangements with Remedent N.V. that provide
Mr. De Vreese’s services and are both companies controlled by Mr. De Vreese. On
March 20, 2006, Lausha N.V. and Lident N.V. merged into Lausha N.V., controlled
by Mr. De Vreese. Lausha N.V. received a total of $315,442 and $281,000 as
compensation for services for the years ending March 31, 2008 and March 31,
2007, respectively. Lausha N.V. and Lident N.V. received a combined total of
$222,000 and $225,000 as compensation for these services for the years ending
March 31, 2006 and March 31, 2005, respectively.
In September 2004, we entered into an
agreement with Lident N.V., a company controlled by Mr. De Vreese, our Chairman,
to obtain an option, exercisable through December 31, 2005, to license a patent
and worldwide manufacturing and distribution rights for a potential new product
for which Lident had been assigned certain rights by the inventors of the
products, who are unrelated parties, prior to Mr. De Vreese’s association with
us. The agreement required us to advance to the inventors through Lident a fully
refundable deposit of €100,000 ($129,650) subject to our due diligence regarding
the enforceability of the patent and marketability of the product, which, if
viable, will be assigned to us for additional consideration to the inventors of
€100,000 ($129,650) and an ongoing royalty from sales of products related to the
patent equal to 3% of net sales and, if not viable, the deposit will be repaid
in full to us by Lident. The consideration we had agreed to pay Lident upon the
exercise of the option is the same as the consideration Lident is obligated to
pay the original inventors. Consequently, Lident will not profit from the
exercise of the option. Furthermore, at a meeting of our Board of Directors on
July 13, 2005, we accepted Lident’s offer to facilitate an assignment of
Lident’s intellectual property rights to the technology to us in exchange for
the reimbursement of Lident’s actual costs incurred relating to the intellectual
property. On December 12, 2005, we exercised the option and mutually agreed with
the patent holder to revise the assignment agreement whereby we agreed to pay
€50,000 additional compensation in the form of prepaid royalties instead of the
€100,000 previously agreed, €25,000 of which had been paid by us in September
2005 and the remaining €25,000 to be paid upon the first shipment of a product
covered by the patent. The patent is being amortized over five (5) years and
accordingly, we recorded $55,468 of accumulated amortization for this patent as
of March 31, 2008 and $73,297 of accumulated amortization for this patent as of
December 31, 2008. As of December 31, 2008, we have not yet received the final
product.
Since the inception of IMDS, Inc.
(“IMDS”) in April 2003, IMDS, a distributor of our products, has purchased
inventory valued at approximately $642,000 from us. All inventory was purchased
at standard pricing. One of our directors owns a minority interest in IMDS, to
which goods were sold during the years ended March 31, 2008 and 2007 totaling
$87,790 and $476,122 respectively, and the accounts receivable at year end with
this customer totaled $91,533 and $392,057 at March 31, 2008 and 2007
respectively. During the nine months ended December 31, 2008 and 2007 the goods
sold were $87,463 and $29,524 respectively. Accounts receivable with this
customer at December 31, 2008 and December 31, 2008 totaled $33,601 and $80,523
respectively.
DISCLOSURE
OF COMMISSION POSITION OF
INDEMNIFICATION FOR SECURITIES
ACT
LIABILITIES
Under the Nevada General Corporation
Law and our Amended and Restated Articles of Incorporation, our directors will
have no personal liability to us or our stockholders for damages incurred as the
result of the breach or alleged breach of fiduciary duty as a director involving
any act or omission of any such director. This provision does not apply to the
directors’ (i) acts or omissions that involve intentional misconduct, fraud or
knowing violation of law, or (ii) approval of an unlawful dividend,
distribution, stock repurchase or redemption under Section 78.300 of the Nevada
Revised Statutes. This provision would generally absolve directors of personal
liability for negligence in the performance of duties, including gross
negligence.
The effect of this provision in our
Amended and Restated Articles of Incorporation, is to eliminate our rights and
the rights of our stockholders (through stockholder’s derivative suits on our
behalf) to recover damages against a director for breach of his fiduciary duties
as a director (including breaches resulting from negligent or grossly negligent
behavior) except in the situations described in clauses (i) and (ii) above. This
provision does not limit nor eliminate our rights or any stockholder’s rights to
seek equitable relief such as an injunction or rescission in the event of a
breach of a director’s fiduciary duties. The Nevada General Corporation Law
grants corporations the right to indemnify their directors, officers, employees
and agents in accordance with applicable law. In addition, our Amended and
Restated Bylaws authorizes us to indemnify our directors and officers in cases
where our officer or director acted in good faith and in a manner reasonably
believed to be in our best interest, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful.
Insofar as indemnification for
liabilities arising under the Securities Act of 1933 (the “Act” or “Securities
Act”) may be permitted to directors, officers or persons controlling us pursuant
to the foregoing provisions, or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.
LEGAL
MATTERS
The validity of the shares of common
stock offered by the Selling Security Holders will be passed on by the law firm
of Bullivant Houser Bailey PC, Sacramento, California.
EXPERTS
PKF bedrijfsrevisoren, independent
registered public accounting firm, audited our consolidated financial statements
as of and for the years ended March 31, 2008 and March 31, 2007. We have
included our financial statements in this Prospectus and elsewhere in the
registration statement in reliance on PKF bedrijfsrevisoren reports given on
their authority as experts in accounting and auditing.
TRANSFER
AGENT AND REGISTRAR
The transfer agent and registrar for
our common stock is Interwest Transfer Co., Inc., located at 1981 East 4800
South, Suite 100, Salt Lake City, UT 84117, with the same mailing address and
telephone number (801) 272-9294.
WHERE
YOU CAN FIND MORE INFORMATION
We have filed a registration
statement on Form S-1, together with all amendments and exhibits, with the SEC.
This Prospectus, which forms a part of that registration statement, does not
contain all information included in the registration statement. Certain
information is omitted and you should refer to the registration statement and
its exhibits. With respect to references made in this Prospectus to any of our
contracts or other documents, the references are not necessarily complete and
you should refer to the exhibits attached to the registration statement for
copies of the actual contracts or documents. You may read and copy any document
that we file at the Commission’s Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Our filings and the
registration statement can also be reviewed by accessing the SEC’s website at
http://www.sec.gov.
REMEDENT,
INC. AND SUBSIDIARIES
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
|
F-2
|
|
Consolidated
Balance Sheets For Fiscal Years Ended March 31, 2008 and
2007
|
|
|
F-3
|
|
Consolidated
Statements of Operations For Fiscal Years Ended March 31, 2008 and
2007
|
|
|
F-4
|
|
Consolidated
Statement of Stockholder’s Equity (Deficit) For Fiscal Years Ended
March 31, 2008 and 2007
|
|
|
F-5
|
|
Consolidated
Statements of Cash Flows For Fiscal Years Ended March 31, 2008 and
2007
|
|
|
F-6
|
|
Consolidated
Statements of Comprehensive Loss For Fiscal Years Ended March 31, 2008 and
2007
|
|
|
F-7
|
|
Notes
to Consolidated Financial Statements
|
|
|
F-8
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of December 31, 2008 (Unaudited) and March
31, 2008
|
|
|
F-25
|
|
Condensed
Consolidated Statements of Operations for the Three Months and Nine Months
Ended December 31, 2008 and December 31, 2007 (Unaudited)
|
|
|
F-26
|
|
Condensed
Consolidated Statements of Comprehensive Income (Loss) for the Three
Months and Nine Months Ended December 31, 2008 and December 31, 2007
(Unaudited)
|
|
|
F-27
|
|
Condensed
Consolidated Statements of Cash Flows for the Nine Months Ended December
31, 2008 and December 31, 2007 (Unaudited)
|
|
|
F-28
|
|
Notes
to Interim Condensed Consolidated Financial Statements
(Unaudited)
|
|
|
F-29
|
|
|
|
|
|
|
INDEPENDENT
AUDITORS’ REPORT
REPORT
OF INDEPENDENT REGISTERED ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Remedent, Inc.:
We have
audited the accompanying consolidated balance sheets of Remedent, Inc. as of
March 31, 2008 and March 31, 2007 and the related consolidated statements of
operations, stockholders’ equity, cash flows, and comprehensive loss for the
years then ended. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated 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 an audit to obtain reasonable assurance whether the
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. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our
opinion, the accompanying consolidated financial statements present fairly, in
all material respects, the financial position of the Company at March 31, 2008
and March 31, 2007 and the results of its operations and its cash flows for the
two years then ended in conformity with accounting principles generally accepted
in the United States of America.
Antwerp —
Belgium,
July 9,
2008
PKF
bedrijfsrevisoren CVBA
Statutory
Auditors
Represented
by
/s/
Ria Verheyen
|
Registered
Auditor
|
Tel +32
(0)3 235 66 66 / Fax +32 (0)3 235 22 22 / antwerpen@pkf.be /
www.pkf.be
PKF
bedrijfsrevisoren CVBA / burgerlijke vennootschap met handelsvorm
Potvlietlaan
6 / 2600 Antwerpen / BTW BE 0439 814 826 / RPR Antwerpen
The PKF
International Association is an association of legally independent
firms.
REMEDENT, INC. AND
SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,728,281
|
|
|
$
|
126,966
|
|
Accounts
receivable, net of allowance for doubtful accounts of $32,181 at March 31,
2008 and $79,996 at March 31, 2007
|
|
|
1,902,920
|
|
|
|
1,724,121
|
|
Inventories,
net
|
|
|
1,360,709
|
|
|
|
1,132,941
|
|
Prepaid
expense
|
|
|
970,173
|
|
|
|
668,421
|
|
Total
current assets
|
|
|
5,962,083
|
|
|
|
3,652,449
|
|
PROPERTY
AND EQUIPMENT, NET
|
|
|
692,609
|
|
|
|
589,623
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
Long
term investments and advances
|
|
|
675,000
|
|
|
|
—
|
|
Patents,
net
|
|
|
115,827
|
|
|
|
135,894
|
|
TOTAL
ASSETS
|
|
$
|
7,445,519
|
|
|
$
|
4,377,966
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Current
portion, long term debt
|
|
$
|
58,583
|
|
|
$
|
43,499
|
|
Line
of Credit
|
|
|
779,718
|
|
|
|
1,530,276
|
|
Notes
payable
|
|
|
—
|
|
|
|
11,282
|
|
Accounts
payable
|
|
|
2,002,439
|
|
|
|
1,441,502
|
|
Accrued
liabilities
|
|
|
781,737
|
|
|
|
412,435
|
|
Due
to related parties
|
|
|
—
|
|
|
|
50,536
|
|
Income
taxes payable
|
|
|
15,121
|
|
|
|
—
|
|
Total
current liabilities
|
|
|
3,637,598
|
|
|
|
3,489,530
|
|
LONG
TERM DEBT
|
|
|
94,754
|
|
|
|
152,343
|
|
STOCKHOLDERS’
DEFICIT:
|
|
|
|
|
|
|
|
|
Preferred
Stock $0.001 par value (10,000,000 shares authorized, none issued and
outstanding)
|
|
|
—
|
|
|
|
—
|
|
Common
stock, $0.001 par value; (50,000,000 shares authorized, 18,637,803 shares
issued and outstanding at March 31, 2008 and 12,996,245 shares issued and
outstanding at March 31, 2007)
|
|
|
18,638
|
|
|
|
12,996
|
|
Additional
paid-in capital
|
|
|
17,929,992
|
|
|
|
11,904,000
|
|
Accumulated
deficit
|
|
|
(14,263,113
|
)
|
|
|
(11,147,600
|
)
|
Accumulated
other comprehensive income (loss) (foreign currency translation
adjustment)
|
|
|
27,650
|
|
|
|
(33,303
|
)
|
Total
stockholders’ equity (deficit)
|
|
|
3,713,167
|
|
|
|
736,093
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
$
|
7,445,519
|
|
|
$
|
4,377,966
|
|
COMMITMENTS
(Note 20)
SUBSEQUENT
EVENT (Note 21)
The
accompanying notes are an integral part of these consolidated financial
statements.
REMEDENT, INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
For
the years ended
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
Net
sales
|
|
$
|
7,482,261
|
|
|
$
|
6,676,365
|
|
Cost
of sales
|
|
|
3,975,777
|
|
|
|
3,342,716
|
|
Gross
profit
|
|
|
3,506,484
|
|
|
|
3,333,649
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
332,958
|
|
|
|
341,764
|
|
Sales
and marketing
|
|
|
1,886,389
|
|
|
|
888,810
|
|
General
and administrative
|
|
|
4,057,007
|
|
|
|
3,288,723
|
|
Depreciation
and amortization
|
|
|
301,260
|
|
|
|
209,340
|
|
TOTAL
OPERATING EXPENSES
|
|
|
6,577,614
|
|
|
|
4,728,637
|
|
INCOME
(LOSS) FROM OPERATIONS
|
|
|
(3,071,130
|
)
|
|
|
(1,394,988
|
)
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(138,168
|
)
|
|
|
(176,344
|
)
|
Other
income
|
|
|
121,032
|
|
|
|
75,283
|
|
TOTAL
OTHER INCOME (EXPENSES)
|
|
|
(17,136
|
)
|
|
|
(101,061
|
)
|
INCOME
(LOSS) BEFORE INCOME TAXES
|
|
|
(3,088,266
|
)
|
|
|
(1,496,049
|
)
|
Income
tax (expense) benefit
|
|
|
(27,247
|
)
|
|
|
—
|
|
NET
LOSS
|
|
$
|
(3,115,513
|
)
|
|
$
|
(1,496,049
|
)
|
LOSS
PER SHARE
|
|
|
|
|
|
|
|
|
Basic
and fully diluted
|
|
$
|
(0.17
|
)
|
|
$
|
(0.12
|
)
|
WEIGHTED
AVERAGE SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
Basic
and fully diluted
|
|
|
17,823,012
|
|
|
|
12,971,795
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
REMEDENT, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF
STOCKHOLDERS’ EQUITY (DEFICIT)
FOR
THE YEARS ENDED MARCH 31, 2008 and 2007
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid
in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Common
Stock
Subscribed
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Balance,
March 31, 2006
|
|
|
12,764,112
|
|
|
|
12,764
|
|
|
|
11,624,234
|
|
|
|
(9,651,551
|
)
|
|
|
200
|
|
|
|
(28,274
|
)
|
|
|
1,957,373
|
|
Common
stock issued for development services
|
|
|
200,000
|
|
|
|
200
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(200
|
)
|
|
|
—
|
|
|
|
—
|
|
Common
stock issued on conversion of convertible debentures
|
|
|
32,133
|
|
|
|
32
|
|
|
|
57,807
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
57,839
|
|
Value
of stock options issued to employees
|
|
|
—
|
|
|
|
—
|
|
|
|
221,959
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
221,959
|
|
Cumulative
translation adjustment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,029
|
)
|
|
|
(5,029
|
)
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,496,049
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,496,049
|
)
|
Balance,
March 31, 2007
|
|
|
12,996,245
|
|
|
|
12,996
|
|
|
|
11,904,000
|
|
|
|
(11,147,600
|
)
|
|
|
—
|
|
|
|
(33,303
|
)
|
|
|
736,093
|
|
Common
stock issued by private placement
|
|
|
5,600,000
|
|
|
|
5,600
|
|
|
|
6,994,400
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,000,000
|
|
Commissions
and other costs of private placement
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,224,498
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,224,498
|
)
|
Shares
issued on exercise of warrants
|
|
|
10,000
|
|
|
|
10
|
|
|
|
15,890
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,900
|
|
Shares
issued Debt Conversion
|
|
|
31,558
|
|
|
|
32
|
|
|
|
50,504
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
50,536
|
|
Value
of stock options issued to employees
|
|
|
—
|
|
|
|
—
|
|
|
|
189,696
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
189,696
|
|
Cumulative
translation adjustment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
60,953
|
|
|
|
60,953
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,115,513
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,115,513
|
)
|
Balance,
March 31, 2008
|
|
|
18,637,803
|
|
|
|
18,638
|
|
|
|
17,929,992
|
|
|
|
(14,263,113
|
)
|
|
|
—
|
|
|
|
27,650
|
|
|
|
3,713,167
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
REMEDENT, INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
For
the year ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(3,115,513
|
)
|
|
$
|
(1,496,049
|
)
|
Adjustments
to reconcile net (loss) to net cash used by operating
activities
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
301,260
|
|
|
|
209,340
|
|
Inventory
reserve
|
|
|
2,446
|
|
|
|
—
|
|
Allowance
for doubtful accounts
|
|
|
(47,815
|
)
|
|
|
(1,813
|
)
|
Stock
issued upon conversion of convertible debentures
|
|
|
—
|
|
|
|
25,706
|
|
Value
of issued stock options to employees
|
|
|
189,696
|
|
|
|
221,959
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(178,799
|
)
|
|
|
870,014
|
|
Inventories
|
|
|
(227,768
|
)
|
|
|
476,814
|
|
Prepaid
expenses
|
|
|
(301,752
|
)
|
|
|
(297,844
|
)
|
Accounts
payable
|
|
|
548,811
|
|
|
|
(336,606
|
)
|
Accrued
liabilities
|
|
|
369,302
|
|
|
|
(220,360
|
)
|
Income
taxes payable
|
|
|
15,121
|
|
|
|
(110,468
|
)
|
Net
cash used by operating activities
|
|
|
(2,445,011
|
)
|
|
|
(659,307
|
)
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Decrease
(increase) in restricted cash
|
|
|
—
|
|
|
|
70,762
|
|
Long
term investments and advances
|
|
|
(675,000
|
)
|
|
|
—
|
|
Purchase
of patent rights
|
|
|
(11,556
|
)
|
|
|
—
|
|
Purchases
of equipment
|
|
|
(198,994
|
)
|
|
|
(385,866
|
)
|
Net
cash used by investing activities
|
|
|
(885,550
|
)
|
|
|
(315,104
|
)
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net
proceeds from share issuances
|
|
|
5,791,402
|
|
|
|
—
|
|
Net
proceeds from (repayments of) capital lease note payable
|
|
|
(42,505
|
)
|
|
|
111,231
|
|
Note
payments — related parties
|
|
|
(0
|
)
|
|
|
(8,422
|
)
|
Proceeds
from (repayments of) line of credit
|
|
|
(750,558
|
)
|
|
|
837,180
|
|
Net
cash provided by financing activities
|
|
|
4,998,339
|
|
|
|
939,988
|
|
NET
(DECREASE) INCREASE IN CASH
|
|
|
1,667,778
|
|
|
|
(34,423
|
)
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
(66,463
|
)
|
|
|
(170,756
|
)
|
CASH
AND CASH EQUIVALENTS, BEGINNING
|
|
|
126,966
|
|
|
|
332,145
|
|
CASH
AND CASH EQUIVALENTS, ENDING
|
|
$
|
1,728,281
|
|
|
$
|
126,966
|
|
Supplemental Cash Flow
Information
:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
62,073
|
|
|
$
|
111,493
|
|
Income
taxes paid
|
|
$
|
—
|
|
|
$
|
—
|
|
SUPPLEMENTAL
NON-CASH FINANCING AND INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Common
shares issued upon conversion of convertible debt
|
|
$
|
50,536
|
|
|
$
|
—
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
REMEDENT, INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
|
|
For
the year ended
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
Net
Loss
|
|
$
|
(3,115,513
|
)
|
|
$
|
(1,496,049
|
)
|
OTHER
COMPREHENSIVE LOSS:
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
60,953
|
|
|
|
(5,029
|
)
|
Comprehensive
loss
|
|
$
|
(3,054,560
|
)
|
|
$
|
(1,501,078
|
)
|
The
accompanying notes are an integral part of these consolidated financial
statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1.
|
BACKGROUND AND
ORGANIZATION
|
The
Company is a manufacturer and distributor of cosmetic dentistry products,
including a full line of professional dental and retail “Over-The-Counter” tooth
whitening products which are distributed in Europe, and recently in Asia and the
United States. The Company manufactures many of its products in its
facility in Deurle, Belgium as well as outsourced manufacturing in
China. The Company distributes its products using both its own
internal sales force and through the use of third party
distributors.
The
accompanying consolidated financial statements include the accounts of Remedent,
Inc. (formerly Remedent USA, Inc.), a Nevada corporation, and its four
subsidiaries, Remedent N.V. (Belgian corporation) located in Deurle, Belgium,
Remedent Professional, Inc. (incorporated in California) and a subsidiary of
Remedent Professional Holdings, Inc., Remedent Asia Pte Ltd, a wholly-owned
subsidiary formed under the laws of Singapore, and Sylphar N.V. (incorporated in
Belgium as a wholly owned subsidiary on September 24, 2007) (collectively, the
“Company”). Remedent, Inc. is a holding company with headquarters in
Deurle, Belgium and, as of October 2005, offices in Los Angeles,
California. Remedent Professional, Inc. and Remedent Professional
Holdings, Inc. have been dormant since inception. Remedent Asia
Pte. Ltd., commenced operations as of July 2005. All
significant inter-company accounts and transactions have been eliminated in the
consolidated financial statements.
The
Company was originally incorporated under the laws of Arizona in September 1996
under the name Remedent USA, Inc. In October 1998, the Company was
acquired by Resort World Enterprises, Inc., a Nevada corporation (“RWE”) in a
share exchange and RWE immediately changed its name to Remedent USA,
Inc. The share exchange was a “reverse acquisition” and accounted for
as if the Company acquired RWE and then recapitalized its capital
structure. On July 1, 2001, the Company formed three wholly-owned
subsidiaries, Remedent Professional Holdings, Inc., Remedent Professional, Inc.
and Remedent N.V. (a Belgium corporation). Remedent Professional,
Inc. and Remedent Professional Holdings, Inc. are both wholly-owned subsidiaries
and have been inactive since inception. In June 2005, the Company
formed Remedent Asia Pte Ltd, a wholly-owned subsidiary formed under the laws of
Singapore. In October, 2005, the Company established a sales office
in Los Angeles, California in order to introduce its products to the United
States market.
During
the quarter ended March 31, 2002, through the Company’s Belgium based
subsidiary, Remedent N.V., the Company initiated its entrance into the high
technology dental equipment market. Since that time, the majority of
the Company’s operations have been conducted through its subsidiary, Remedent
N.V. For the last five fiscal years, substantially all of the
Company’s revenue has been generated by Remedent N.V., which has become a
provider of cosmetic dentistry products, including a full line of professional
dental and retail “over-the-counter” tooth whitening products in
Europe. Because the controlling stockholders of Remedent N.V.
consisted of the Company’s executive officers or companies owned by these
executive officers, the Company has always had effective “control” over Remedent
N.V., as defined by APB 51 “
Consolidated Financial
Statements
,” even though it owned only twenty two percent (22%) of this
subsidiary.
On June
3, 2005, the Company consummated the acquisition of the remaining 78% of
Remedent N.V., and issued 7,715,703 shares of the Company’s common stock in
exchange for the 78% of the common stock of Remedent N.V. not owned by the
Company. As a result of this acquisition, Remedent N.V. is now our
wholly-owned subsidiary.
In
addition, on June 3, 2005, the Company amended its Articles of Incorporation
pursuant to the filing of the Amended and Restated Articles of Incorporation
with the Nevada Secretary of State. The Amended and Restated Articles
of Incorporation (i) changed the name of the Company from “Remedent USA, Inc.”
to “Remedent, Inc.” (ii) increased the number of authorized shares to 60,000,000
shares consisting of 50,000,000 shares of common stock and 10,000,000 shares of
Preferred Stock, and (iii) effected a one-for-twenty reverse stock split
(collectively, the “Amendments”). The consolidated financial
statements and accompanying notes have been retroactively adjusted to reflect
the effects of the reverse split and authorization of 10,000,000 shares of
Preferred Stock.
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
|
Organization
and Principles of Consolidation
The
accompanying consolidated financial statements include the accounts of Remedent,
Inc. (formerly Remedent USA, Inc.), a Nevada corporation, and its four
subsidiaries, Remedent N.V. (Belgian corporation) located in Deurle, Belgium,
Remedent Professional, Inc. (incorporated in California) and a subsidiary of
Remedent Professional Holdings, Inc., Remedent Asia Pte. Ltd, a
wholly-owned subsidiary formed under the laws of Singapore, and Sylphar N.V.
(incorporated in Belgium as a wholly owned subsidiary on September 24, 2007),
(collectively, the “Company”). Remedent, Inc. is a holding company
with headquarters in Deurle, Belgium. Remedent Professional, Inc. and
Remedent Professional Holdings, Inc. have been dormant since
inception. Remedent Asia Pte. Ltd., commenced operations
as of July 2005. All significant inter-company accounts and
transactions have been eliminated in the consolidated financial
statements. Corporate administrative costs are not allocated to
subsidiaries.
Basis of
Presentation
The
Company’s financial statements have been prepared on an accrual basis of
accounting, in conformity with accounting principles generally accepted in the
United States of America. These principles contemplate the
realization of assets and liquidation of liabilities in the normal course of
business. 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 at the date of the financial statements and reported amounts of
revenues and expenses during the reporting periods. Actual results
could differ from those estimates. These financial statements do not
include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
Revenue
Recognition
The
Company recognizes revenue from product sales when persuasive evidence of a sale
exists: that is, a product is shipped under an agreement with a customer; risk
of loss and title has passed to the customer; the fee is fixed or determinable;
and collection of the resulting receivable is reasonably
assured. Sales allowances are estimated based upon historical
experience of sales returns. Impairment of Long-Lived
Assets
Long-lived
assets consist primarily of patents and property and equipment. The
recoverability of long-lived assets is evaluated by an analysis of operating
results and consideration of other significant events or changes in the business
environment. If impairment exists, the carrying amount of the
long-lived assets is reduced to its estimated fair value, less any costs
associated with the final settlement. As of March 31, 2008,
management believes there was no impairment of the Company’s long-lived
assets.
Pervasiveness
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the Company to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. On an on-going basis, the Company evaluates
estimates and judgments, including those related to revenue, bad debts,
inventories, fixed assets, intangible assets, stock based compensation, income
taxes, and contingencies. Estimates are based on historical
experience and on various other assumptions that the Company believes reasonable
in the circumstances. The results form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results could differ from those
estimates.
Cash and
Cash Equivalents
The
Company considers all highly liquid investments with maturities of three months
or less to be cash or cash equivalents.
Accounts
Receivable and Allowance for Doubtful Accounts
The
Company sells professional dental equipment to various companies, primarily to
distributors located in Western Europe. The terms of sales vary by
customer, however, generally are 2% 10 days, net 30 days. Accounts
receivable is reported at net realizable value and net of allowance for doubtful
accounts. The Company uses the allowance method to account for
uncollectible accounts receivable. The Company’s estimate is based on
historical collection experience and a review of the current status of trade
accounts receivable.
Inventories
The
Company purchases certain of its products in components that require assembly
prior to shipment to customers. All other products are purchased as
finished goods ready to ship to customers.
The
Company writes down inventories for estimated obsolescence to estimated market
value based upon assumptions about future demand and market
conditions. If actual market conditions are less favorable than those
projected, then additional inventory write-downs may be
required. Inventory reserves for obsolescence totaled $15,812 at
March 31, 2008 and $13,366 at March 31, 2007.
Prepaid
Expense
The
Company’s prepaid expense consists of prepayments to suppliers for inventory
purchases and to the Belgium customs department, to obtain an exemption of
direct VAT payments for imported goods out of the European Union
(“EU”). This prepayment serves as a guarantee to obtain the facility
to pay VAT at the moment of sale and not at the moment of importing goods at the
border. Prepaid expenses also include VAT payments made for goods and
services in excess of VAT payments received from the sale of products as well as
amounts for other prepaid operating expenses.
Property
and Equipment
Property
and equipment are stated at cost. Major renewals and improvements are
charged to the asset accounts while replacements, maintenance and repairs, which
do not improve or extend the lives of the respective assets, are
expensed. At the time property and equipment are retired or otherwise
disposed of, the asset and related accumulated depreciation accounts are
relieved of the applicable amounts. Gains or losses from retirements
or sales are credited or charged to income.
The
Company depreciates its property and equipment for financial reporting purposes
using the straight-line method based upon the following useful lives of the
assets:
Tooling
|
3
Years
|
Furniture
and fixtures
|
4
Years
|
Machinery
and Equipment
|
4
Years
|
Patents
Patents
consist of the costs incurred to purchase patent rights and are reported net of
accumulated amortization. Patents are amortized using the
straight-line method over a period based on their contractual
lives.
Research
and Development Costs
The
Company expenses research and development costs as incurred.
Advertising
Costs
incurred for producing and communicating advertising are expensed when incurred
and included in sales and marketing and general and administrative
expenses. For the years ended March 31, 2008 and March 31, 2007,
advertising expense was $395,964 and $350,793, respectively.
Income
taxes
Income
taxes are provided in accordance with Statement of Financial Accounting
Standards No. 109 (SFAS 109), “Accounting for Income Taxes.” Deferred taxes are
recognized for temporary differences in the bases of assets and liabilities for
financial statement and income tax reporting as well as for operating losses and
credit carry forwards. A provision has been made for income taxes due
on taxable income and for the deferred taxes on the temporary
differences. The components of the deferred tax asset and liability
are individually classified as current and non-current based on their
characteristics.
Deferred
tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of
enactment.
Warranties
The
Company typically warrants its products against defects in material and
workmanship for a period of 18 months from shipment. Based upon
historical trends and warranties provided by the Company’s suppliers and
sub-contractors, the Company has made a provision for warranty costs of $23,718
and $20,049 as of March 31, 2008 and March 31, 2007, respectively.
Segment
Reporting
Statement
of Financial Accounting Standards No. 131 (“SFAS 131”), “Disclosure About
Segments of an Enterprise and Related Information” requires use of the
“management approach” model for segment reporting. The management
approach model is based on the way a company’s management organizes segments
within the company for making operating decisions and assessing
performance. Reportable segments are based on products and services,
geography, legal structure, management structure, or any other manner in which
management disaggregates a company. The Company’s management
considers its business to comprise one segment for reporting
purposes.
Computation
of Earnings (Loss) per Share
Basic net
income (loss) per common share is computed by dividing net income (loss)
attributable to common stockholders by the weighted average number of shares of
common stock outstanding during the period. Net income (loss) per
common share attributable to common stockholders assuming dilution is computed
by dividing net income by the weighted average number of shares of common stock
outstanding plus the number of additional common shares that would have been
outstanding if all dilutive potential common shares had been
issued. Potential common shares related to stock options and stock
warrants are excluded from the computation when their effect is
anti-dilutive.
Conversion
of Foreign Currencies
The
reporting currency for the consolidated financial statements of the Company is
the U.S. dollar. The functional currency for the Company’s
European subsidiaries, Remedent N.V. and Sylphar N.V., is the Euro, for Remedent
Asia the Singapore Dollar. Finally, the functional currency for
Remedent Professional, Inc. is the U.S. dollar. The
Company translates foreign currency statements to the reporting currency in
accordance with FASB 52. The assets and liabilities of companies
whose functional currency is other that the U.S. dollar are included
in the consolidation by translating the assets and liabilities at the exchange
rates applicable at the end of the reporting period. The statements
of income of such companies are translated at the average exchange rates during
the applicable period. Translation gains or losses are accumulated as
a separate component of stockholders’ equity.
Comprehensive
Income (Loss)
The
Company has adopted the provisions of Statement of Financial Accounting
Standards No. 130, “
Reporting
Comprehensive Income
” (“SFAS No. 130”). SFAS No. 130
establishes standards for the reporting and display of comprehensive income, its
components and accumulated balances in a full set of general purpose financial
statements. SFAS No. 130 defines comprehensive income (loss) to
include all changes in equity except those resulting from investments by owners
and distributions to owners, including adjustments to minimum pension
liabilities, accumulated foreign currency translation, and unrealized gains or
losses on marketable securities.
The
Company’s only component of other comprehensive income is the accumulated
foreign currency translation consisting of gains and (losses) of $60,953 and
$(5,029) for the years ended March 31, 2008 and 2007,
respectively. These amounts have been recorded as a separate
component of stockholders’ equity (deficit).
Stock
Based Compensation
In
December 2004, the Financial Accounting Standards Board issued SFAS No. 123R,
“Share-Based Payment.” Subsequently, the Securities and Exchange Commission
(“SEC”) provided for a phase-in implementation process for SFAS No. 123R, which
required adoption of the new accounting standard no later than January 1,
2006. SFAS No. 123R requires accounting for stock options using a
fair-value-based method as described in such statement and recognize the
resulting compensation expense in the Company’s financial
statements. Prior to April 1, 2006, the Company accounted for
employee stock options using the intrinsic value method under APB No. 25,
“Accounting for Stock Issued to Employees” and related Interpretations, which
generally resulted in no employee stock option expense. The Company
adopted SFAS No. 123R on April 1, 2006 and does not plan to restate financial
statements for prior periods. The Company plans to continue to use
the Black-Scholes option valuation model in estimating the fair value of the
stock option awards issued under SFAS No. 123R. The adoption of SFAS
No. 123R has a material impact on the Company’s results of
operations. For the years ended March 31, 2008 and March 31, 2007,
equity compensation in the form of stock options and grants of restricted stock
totaled $189,696 and $221,959 respectively.
Adoption
of New Accounting Policies
Effective
April 1, 2006, the Company adopted the provisions of the FASB Staff Position
(“
FSP
8”) on
EITF Issue 00-19-2 “
Accounting
for Registration
Payment
Arrangements
”. This accounting position was adopted on a
prospective basis with no restatement of prior period consolidated financial
statements. This position specifies that the contingent obligation to
make future payments or otherwise transfer consideration under a registration
payment arrangement, whether issued as a separate agreement or included as a
provision of a financial instrument or other agreement, should be separately
recognized and measured in accordance with FASB Statement No. 5 “Accounting for
Contingencies”. Transition to the FSP will be achieved by reporting a
change in accounting principle through a cumulative-effect adjustment to the
opening balance of deficit.
The
Company adopted FASB Interpretation No. 48, “
Accounting for Uncertainty
in
Income Taxes, an
interpretation of FASB Statements No. 109”
(“FIN 48”) on April 1,
2006. FIN 48 clarifies the accounting for uncertainty in income taxes
by prescribing a two-step method of first evaluating whether a tax position has
met a more likely than not recognition threshold and second, measuring that tax
position to determine the amount of benefit to be recognized in the financial
statements. FIN 48 provides guidance on the presentation of such
positions within a classified statement of financial position as well as on
derecognition, interest and penalties, accounting in interim periods,
disclosure, and transition. The adoption of this statement did result
in a cumulative adjustment to equity and there were no unrecognized tax
benefits, penalties or interest at the time of, or subsequent to,
adoption.
Recent
Accounting Pronouncements
In March
2008, the FASB issued SFAS No. 161, “
Disclosures about
Derivative
Instruments
and Hedging Activities"
This statement changes the disclosure
requirements for derivative instruments and hedging
activities. Entities are required to provide enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, and its related
interpretations, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash
flows. This statement is effective for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008 (the
Company’s fiscal year beginning April 1, 2009), with early application
encouraged. This statement encourages, but does not require,
comparative disclosures for earlier periods at initial
adoption. Management is in the process of evaluating the impact the
future application of this pronouncement may have on its consolidated financial
statements.
In
December 2007, the FASB issued SFAS No. 141 (Revised 2007) “
Business
Combinations
”. SFAS
141 (Revised) establishes principles and requirements for how the acquirer of a
business recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree. The statement also provides guidance for recognizing and
measuring the goodwill acquired in the business combination and determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. The
guidance will become effective for the Company’s fiscal year beginning April 1,
2009. Management is in the process of evaluating the impact SFAS 141
(Revised) will have on the Company’s financial statements upon
adoption.
In
December 2007, the FASB issued SFAS No. 160 “Noncontrolling
Interests in
Consolidated Financial Statements —
an amendment of ARB No. 51
”. SFAS 160 establishes accounting
and reporting standards for the noncontrolling interest in a subsidiary and for
the deconsolidation of a subsidiary. The guidance will become
effective for the Company’s fiscal year beginning April 1,
2009. Management is in the process of evaluating the impact SFAS 160
will have on the Company’s financial statements upon adoption.
In
February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
159, “
The Fair Value Option
for Financial
Assets
and Financial Liabilities
— Including an Amendment of FASB
Statement No. 115
”. This statement permits entities to choose
to measure many financial instruments and certain other items at fair
value. Most of the provisions of SFAS No. 159 apply only to entities
that elect the fair value option. However, the amendment to SFAS No.
115 “Accounting for Certain Investments in Debt and Equity Securities” applies
to all entities with available-for-sale and trading securities. SFAS
No. 159 is effective for the Company’s fiscal year beginning April 1,
2008. The Company adopted SFAS No. 159 on April 1, 2008, with no
financial statement impact.
In
September 2006, the FASB issued SFAS Statement No. 158, “
Employers’
Accounting for Defined Benefit
Pension and Other Postretirement Plans”
. This new standard
will require employers to fully recognize the obligations associated with
single-employer defined benefit pension, retiree healthcare and other
postretirement plans in their financial statements. The Company
adopted SFAS No. 158 on April 1, 2007, resulting in no financial statement
impact since the Company currently does not sponsor the defined benefit pension
or postretirement plans within the scope of the standard.
In
September 2006, FASB issued SFAS No. 157, “
Fair Value Measurements
”
(“SFAS 157”). The objective of SFAS 157 is to increase consistency
and comparability in fair value measurements and to expand disclosures about
fair value measurements. SFAS 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles,
and expands disclosures about fair value measurements. SFAS 157
applies under other accounting pronouncements that require or permit fair value
measurements and does not require any new fair value
measurements. The provisions of SFAS 157 are effective for fair value
measurements made in the Company’s fiscal years beginning April 1,
2008. The Company has not determined the effect, if any, that the
adoption of SFAS 157 will have on the Company’s consolidated financial position
or results of operations.
In March
2006, the FASB issued SFAS No. 156, “
Accounting for Servicing
of Financial
Assets”
. This statement amends SFAS 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,
a replacement of FASB Statement 125, or SFAS 140, regarding (1) the
circumstances under which a servicing asset or servicing liability must be
recognized, (2) the initial and subsequent measurement of recognized servicing
assets and liabilities, and (3) information required to be disclosed relating to
servicing assets and liabilities. The Company adopted this standard
on April 1, 2007, with no impact on its consolidated financial
statements.
In
February 2006, the FASB issued SFAS No. 155, “
Accounting for
Certain Hybrid Financial
Instruments”
, or SFAS 155. This statement amends SFAS No. 133,
“
Accounting for Derivative
Instruments and
Hedging
Activities”
, to narrow the scope exception for interest-only and
principal-only strips on debt instruments to include only such strips
representing rights to receive a specified portion of the contractual interest
or principal cash flows. SFAS 155 also amends SFAS 140 to allow
qualifying special-purpose entities to hold a passive derivative financial
instrument pertaining to beneficial interests that itself is a derivative
financial instrument. The Company adopted this standard on April 1,
2007, with no impact on its consolidated financial statements.
EITF No.
07-3, “
Accounting for
Nonrefundable Advance Payments for
Goods or Services Received for Use
in Future Research and Development
Activities”
, was issued in
June 2007. The EITF reached a consensus that nonrefundable payments
for goods and services that will be used or rendered for future research and
development activities should be deferred and capitalized. Such
amounts should be recognized as an expense as the related goods are delivered
and the related services are performed. Entities should continue to
evaluate whether they expect the goods to be delivered or services to be
rendered. If the entity does not expect the goods to be delivered or
services to be rendered, the capitalized advance payment should be charged to
expense. This pronouncement is effective for financial statements
issued for fiscal years beginning after December 15, 2007 (the Company’s fiscal
year beginning April 1, 2008) and interim periods within those fiscal
years. Earlier application is not permitted. Entities are
required to report the effects of applying this pronouncement prospectively for
new contracts entered into on or after the effective date of this
pronouncement. The Company currently is not a party to research and
development arrangements that include nonrefundable advance
payments. To the extent that the Company enters into research and
development arrangements in the future that include nonrefundable advance
payments, the future application of this pronouncement may have a material
effect on its financial condition and results of operations.
On June
25, 2007, the Company completed its private offering of 5,600,000 shares of its
common stock, par value $.001 per share at a purchase price of $1.25 per share
(the “Shares”) and warrants to purchase 4,200,000 shares of common stock, par
value $.001 per share, at an exercise price of $1.55 per share (the “Warrants”)
to certain institutional and accredited investors, for an aggregate purchase
price of $7,000,000 (the “Offering”).
Under the
terms of the Offering, the Warrants are exercisable for a period of five years
and entitle the holder to purchase one share of restricted common stock (the
“Warrant Shares”) for $1.55 per Warrant Share. The Company also has
the right to redeem the Warrants for $0.001 per Warrant Share covered by the
Warrants if the Shares trade on the Over-The-Counter Electronic Bulletin Board
or similar market above $5.25 per share for 20 consecutive trading days
following the second anniversary of the initial effective date of the
registration statement covering the resale of the Shares and Warrant Shares,
based upon the closing bid price for the Shares for each trading day provided
certain conditions are met (the “Redemption Right”). Once the
Redemption Right vests, the Company has the right, but not the obligation, to
redeem the Warrants for $0.001 per Warrant Share covered by the Warrants upon 30
days written notice to the holders of the Warrants.
Under the
terms of the Purchase Agreement and the Registration Rights Agreement, the
Company was required to prepare and file with the Securities and Exchange
Commission (the “Commission”) a registration statement covering the resale of
the Shares and the Warrant Shares. The Company agreed to prepare and
file a registration statement covering the resale no later than 30 days after
the Closing. The registration statement became effective October 23,
2007.
The
Company engaged Roth Capital Partners, LLC, as its exclusive agent to offer the
Shares and Warrants (the “Placement Agent”). The Placement Agent is
entitled to a fee equal to ten percent (10%) of the gross proceeds derived from
the Offering, of which the Placement Agent may, at its option, receive up to 2%
of its 10% fee in securities issued in the Offering. Further, the
Company agreed to pay the Placement Agent 5% of the exercise price of the
Warrants promptly following the Company’s receipt thereof. In
addition, the Company agreed to reimburse the Placement Agent for its
out-of-pocket expenses related to the Offering, including an up front payment of
$25,000 to cover such expenses, of which any unused amount will be netted
against the Placement Agent’s 10% fee.
As of
March 31, 2008, the total costs of this private placement were $1,224,498,
comprising of: commissions of $762,505; out-of-pocket costs of $25,000;
professional fees of $365,013 and direct travel costs of $71,980; and have been
recorded against share capital as a cost of financing.
The
Offering was conducted in reliance upon an exemption from registration under the
Securities Act of 1933, as amended (the “Securities Act”), including, without
limitation, that under Section 506 of Regulation D promulgated under the
Securities Act. The Units were offered and sold by the Company to
accredited investors in reliance on Section 506 of Regulation D of the
Securities Act of 1933, as amended.
Financial
Instruments — Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of trade accounts
receivable.
Concentrations
of credit risk with respect to trade receivables are normally limited due to the
number of customers comprising the Company’s customer base and their dispersion
across different geographic areas. At March 31, 2008 two customers
accounted for 25% and 10% of the Company’s trade accounts
receivable. At March 31, 2007, two customers accounted for 35% and
10% of the Company’s trade accounts receivable. The Company performs
ongoing credit evaluations of its customers and normally does not require
collateral to support accounts receivable.
Purchases
— The Company has diversified its sources for product components and finished
goods and, as a result, the loss of a supplier would not have a material impact
on the Company’s operations. For the year ended March 31, 2008, the
Company had one supplier who accounted for 33% of gross purchases and four other
suppliers who accounted for between 14% and 21% of gross purchases
each. For the year ended March 31, 2007, the Company had one supplier
who accounted for 28% of gross purchases and four other suppliers who accounted
for between 10% and 20% of gross purchases each.
Revenues
— For the year ended March 31, 2008 the Company had one customer that accounted
for 16% of total revenues. For the year ended March 31, 2007 the
Company had two customers that accounted for 35% and 10% respectively, of total
revenues.
5.
|
ACCOUNTS RECEIVABLE AND
ALLOWANCE FOR DOUBTFUL
ACCOUNTS
|
The
Company’s accounts receivable at year end were as follows:
|
|
March
31, 2008
|
|
|
March
31, 2007
|
|
Accounts
receivable, gross
|
|
$
|
1,935,101
|
|
|
$
|
1,804,117
|
|
Less:
allowance for doubtful accounts
|
|
|
(32,181
|
)
|
|
|
(79,996
|
)
|
Accounts
receivable, net
|
|
$
|
1,902,920
|
|
|
$
|
1,724,121
|
|
Inventories
at year end are stated at the lower of cost (first-in, first-out) or net
realizable value and consisted of the following:
|
|
March
31, 2008
|
|
|
March
31, 2007
|
|
Raw
materials
|
|
$
|
29,788
|
|
|
$
|
30,579
|
|
Components
|
|
|
970,101
|
|
|
|
786,728
|
|
Finished
goods
|
|
|
376,632
|
|
|
|
329,000
|
|
|
|
|
1,376,521
|
|
|
|
1,146,307
|
|
Less:
reserve for obsolescence
|
|
|
(15,812
|
)
|
|
|
(13,366
|
)
|
Net
inventory
|
|
$
|
1,360,709
|
|
|
$
|
1,132,941
|
|
Prepaid
expenses are summarized as follows:
|
|
March
31, 2008
|
|
|
March
31, 2007
|
|
Prepaid
materials and components
|
|
$
|
588,639
|
|
|
$
|
394,598
|
|
Prepaid
Belgium income taxes
|
|
|
79,060
|
|
|
|
66,830
|
|
Prepaid
consulting
|
|
|
62,237
|
|
|
|
66,830
|
|
VAT
payments in excess of VAT receipts
|
|
|
117,467
|
|
|
|
47,260
|
|
Royalties
|
|
|
39,530
|
|
|
|
33,415
|
|
Prepaid
trade show expenses
|
|
|
25,276
|
|
|
|
6,523
|
|
Prepaid
rent
|
|
|
10,812
|
|
|
|
7,054
|
|
Other
|
|
|
47,152
|
|
|
|
45,911
|
|
|
|
$
|
970,173
|
|
|
$
|
668,421
|
|
8.
|
PROPERTY AND
EQUIPMENT
|
Property
and equipment are summarized as follows:
|
|
March
31, 2008
|
|
|
March
31, 2007
|
|
Furniture
and Fixtures
|
|
$
|
182,079
|
|
|
$
|
137,560
|
|
Machinery
and Equipment
|
|
|
801,251
|
|
|
|
559,422
|
|
Tooling
|
|
|
254,450
|
|
|
|
188,450
|
|
|
|
|
1,237,780
|
|
|
|
885,432
|
|
Accumulated
depreciation
|
|
|
(545,171
|
)
|
|
|
(295,809
|
)
|
Property
& equipment, net
|
|
$
|
692,609
|
|
|
$
|
589,623
|
|
Tooling
includes a payment made to a company called Sensable, in reference to the
development of a tailored veneer modeling solution, referred to as “GlamSmile
Design Software”. At the end of March 31, 2008, named software was
still under development and is expected to be delivered to the Company by early
fiscal 2009.
9.
|
LONG TERM INVESTMENTS AND
ADVANCES
|
Innovative Medical & Dental
Solutions, LLC (“IMDS, LLC”)
Effective
July 15, 2007 the Company entered into a Limited Liability Company Merger and
Equity Reallocation Agreement (the “Participation Agreement”) through its
subsidiary, Remedent N.V. Pursuant to the terms of the Participation
Agreement, the Company has acquired a 10% equity interest in IMDS, LLC in
consideration for $300,000 which was converted against IMDS
receivables.
The
agreement stipulates certain exclusive world wide rights to certain tooth
whitening technology, and the right to purchase at standard cost certain
whitening lights and accessories and to sell such lights in markets not served
by the LLC. The terms of the Participation Agreement also provide
that Remedent N.V. has the first right to purchase additional
equity. Parties to the Participation Agreement include two officers
of IMDS, LLC, and an individual who is both an officer and director of Remedent
Inc., and certain unrelated parties.
IMDS, LLC
is registered with the Secretary of the State of Florida as a limited liability
company and with the Secretary of the State of California as a foreign
corporation authorized to operate in California. IMDS, LLC is merging
with White Science World Wide, LLC, a limited liability company organized under
the laws of the State of Georgia. The merged companies are operating
as a single entity as IMDS, LLC, a Florida limited liability
company.
Soca Networks Singapore
(“Soca”)
Pursuant
to the terms of a letter of intent dated December 17, 2007, the Company has
agreed to purchase 20% of Soca for a total purchase price of
$750,000. Half of the purchase price has been advanced $375,000 to
Soca as a down payment, pending completion of the agreement
terms. The balance of $375,000 is to be paid through the issuance of
220,588 shares of the Company’s common stock. The final agreement is
currently being negotiated and management expects to close the agreement within
the first half of the new fiscal year 2009.
Teeth
Whitening Patents
In
October 2004, the Company acquired from the inventor the exclusive, perpetual
license to two issued United States patents which are applicable to several
teeth whitening products currently being marketed by the
Company. Pursuant to the terms of the license agreement, the Company
was granted an exclusive, worldwide, perpetual license to manufacture, market,
distribute and sell the products contemplated by the patents subject to the
payment of $65,000 as reimbursement to the patent holder for legal and other
costs associated with obtaining the patents, which was paid in October 2004, and
royalties for each unit sold subject to an annual minimum royalty of $100,000
per year. The Company is amortizing the initial cost of $65,000 for
these patents over a ten year period and accordingly has recorded $22,750 of
accumulated amortization for this patent as of March 31, 2008. The
Company accrues this royalty when it becomes payable to inventory therefore no
provision has been made for this obligation as of March 31, 2008
(2007-Nil).
Universal
Applicator Patent
In
September 2004, the Company entered into an agreement with Lident N.V.
(“Lident”), a company controlled by Mr. De Vreese, the Company’s Chairman, to
obtain an option, exercisable through December 31, 2005, to license an
international patent (excluding the US) and worldwide manufacturing and
distribution rights for a potential new product which Lident had been assigned
certain rights by the inventors of the products, who are unrelated parties,
prior to Mr. De Vreese association with the Company. The patent is an
Italian patent which relates to a single use universal applicator for dental
pastes, salves, creams, powders, liquids and other substances where manual
application could be relevant. The Company has filed to have the
patent approved throughout Europe. The agreement required the Company
to advance to the inventors through Lident a fully refundable deposit of
€100,000 subject to the Company’s due diligence regarding the enforceability of
the patent and marketability of the product, which, if viable, would be assigned
to the Company for additional consideration to the inventors of €100,000 and an
ongoing royalty from sales of products related to the patent equal to 3% of net
sales and, if not viable, the deposit would be repaid in full by
Lident. The consideration the Company had agreed to pay Lident upon
the exercise of the option is the same as the consideration Lident is obligated
to pay the original inventors. Consequently, Lident would not have
profited from the exercise of the option. Furthermore, at a meeting
of the Company’s Board of Directors on July 13, 2005, the Board accepted
Lident’s offer to facilitate an assignment of Lident’s intellectual property
rights to the technology to the Company in exchange for the reimbursement of
Lident’s actual costs incurred relating to the intellectual
property. Consequently, when the Company exercises the option, all
future payments, other than the reimbursement of costs would be paid directly to
the original inventors and not to Lident.
On
December 12, 2005, the Company exercised the option and the Company and the
patent holder agreed to revise the assignment agreement whereby the Company
agreed to pay €50,000 additional compensation in the form of prepaid royalties
instead of the €100,000 previously agreed, €25,000 of which had been paid by the
Company in September 2005 and the remaining €25,000 to be paid upon the
Company’s first shipment of a product covered by the patent. As of
March 31, 2008 the company has not yet received the final
Product. The patent is being amortized over five (5) years and
accordingly, the Company has recorded $55,468 of accumulated amortization for
this patent as of March 31, 2008.
On
October 8, 2004, our wholly owned subsidiary, Remedent N.V., obtained a
mixed-use line of credit facility with Fortis Bank, a Belgian bank, for
€1,070,000 (the “Facility”). The Facility was secured by a first lien
on the assets of Remedent N.V. The purpose of the Facility is to
provide working capital to grow our business and to finance certain accounts
receivable as necessary. Since opening the Facility in 2004, Remedent
N.V. and Fortis Bank have subsequently amended the Facility several times to
increase or decrease the line of credit. On May 3, 2005 the Facility
was amended to decrease the line of credit to €1,050,000. On March
13, 2006 the Facility was amended to increase the mixed-use line of credit to
€2,300,000, consisting of a €1,800,000 credit line based on the eligible
accounts receivable and a €500,000 general line of credit. The latest
amendment to the Facility, dated January 3, 2008, amended and decreased the
mixed-use line of credit to €2,050,000, to be used by Remedent NV and/or Sylphar
NV . Each line of credit carries its own interest rates and fees as
provided in the Facility. Remedent N.V. and Sylphar N.V. are
currently only utilizing two lines of credit, advances based on account
receivables and the straight loan. As of March 31, 2008 and March 31,
2007, Remedent N.V. and Sylphar N.V. had in aggregate, $779,718 and $1,530,276
in advances outstanding, respectively, under this mixed-use line of credit
facility.
On June
15, 2005, the Company entered into two five year capital lease agreements for
manufacturing equipment totaling €70,296 (US $85,231). On October 24,
2006, the Company entered into another five year capital lease agreement for
additional manufacturing equipment totaling €123,367 (US
$157,503). The leases require monthly payments of principal and
interest at 7.43% of €1,258 (US$1,989 at March 31, 2008) for the first two
leases and 9.72% of €2,256 (US$3,567 at March 31, 2008) and provide for buyouts
at the conclusion of the five year term of €2,820 (US$4,459) or 4.0% of original
value for the first two contracts and €4,933 (US $7,800) or 4.0 % of the
original value for the second contract. The book value as of March
31, 2008 and March 31, 2007 of the equipment subject to the foregoing leases are
$149,673 and $198,225, respectively.
13.
|
DUE TO RELATED PARTIES AND
RELATED PARTY TRANSACTIONS
|
Balances
due to related parties consist of the following:
|
|
March
31, 2008
|
|
|
March
31, 2007
|
|
Demand
loan from a former officer and major stockholder
|
|
$
|
—
|
|
|
$
|
50,536
|
|
|
|
$
|
—
|
|
|
$
|
50,536
|
|
Borrowings
from employees and entities controlled by officers of the Company are,
unsecured, non-interest bearing, and due on demand.
Transactions
with related parties consisted of the following:
Compensation:
During
the years ended March 31, 2008 and 2007 respectively, the Company incurred
$671,170 and $595,949 respectively, as compensation for all directors and
officers.
Sales
Transactions:
One of
the Company’s directors owns a minority interest in a client company, IMDS Inc.,
to which goods were sold during the years ended March 31, 2008 and 2007 totaling
$87,790 and $476,122 respectively. Accounts receivable at year end
with this customer totaled $91,533 and $392,057 as at March 31, 2008 and 2007
respectively.
All
related party transactions involving provision of services or tangible assets
were recorded at the exchange amount, which is the value established and agreed
to by the related parties reflecting arms length consideration payable for
similar services or transfers. Other related party transactions are
disclosed in Note 17.
Accrued
liabilities are summarized as follows:
|
|
March
31, 2008
|
|
|
March
31, 2007
|
|
Accrued
employee benefit taxes and payroll
|
|
$
|
178,645
|
|
|
$
|
260,676
|
|
Accrued
Travel
|
|
|
17,667
|
|
|
|
—
|
|
Advances
and deposits
|
|
|
212,736
|
|
|
|
—
|
|
Commissions
|
|
|
130,875
|
|
|
|
2,834
|
|
Accrued
audit and tax preparation fees
|
|
|
4,000
|
|
|
|
27,282
|
|
Reserve
for warranty costs
|
|
|
23,718
|
|
|
|
20,049
|
|
Accrued
interest
|
|
|
984
|
|
|
|
6,180
|
|
Accrued
consulting fees
|
|
|
35,204
|
|
|
|
2,528
|
|
Other
accrued expenses
|
|
|
177,908
|
|
|
|
92,886
|
|
|
|
$
|
781,737
|
|
|
$
|
412,435
|
|
The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, “
Accounting
for Income Taxes
” (SFAS No. 109). Under the asset and
liability method of SFAS No. 109, deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under
SFAS No. 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date.
In
assessing the realizability of deferred tax assets, the Company 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. The
Company considers the scheduled reversals of deferred tax liabilities, projected
future taxable income and tax planning strategies in making this
assessment.
The
domestic and foreign (“Belgium” and “Singapore”) components of income (loss)
before income taxes and minority interest were comprised of the
following:
|
|
March
31, 2008
|
|
|
March
31, 2007
|
|
Domestic
|
|
$
|
(1,722,134
|
)
|
|
$
|
(1,627,604
|
)
|
Foreign
|
|
|
(1,366,132
|
)
|
|
|
131,555
|
|
|
|
$
|
(3,088,266
|
)
|
|
$
|
(1,496,049
|
)
|
The
Company’s domestic and foreign components of deferred income taxes are as
follows:
|
|
March
31, 2008
|
|
|
March
31, 2007
|
|
Domestic
— Net operating loss carryforward
|
|
$
|
3,561,841
|
|
|
$
|
3,025,488
|
|
Foreign
— Net operating loss carryforward
|
|
|
639,893
|
|
|
|
202,731
|
|
Total
|
|
|
4,201,734
|
|
|
|
3,228,219
|
|
Valuation
allowance
|
|
|
(4,201,734
|
)
|
|
|
(3,228,219
|
)
|
Net
deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
The
principal reasons for the difference between the income tax (benefit) and the
amounts computed by applying the statutory income tax rates to the income (loss)
for the year ended March 31, 2008 and March 31, 2007 are as
follows:
|
|
March
31, 2008
|
|
|
March
31, 2007
|
|
Domestic
|
|
|
|
|
|
|
Pre
tax income (loss)
|
|
$
|
(1,722,134
|
)
|
|
$
|
(1,627,604
|
)
|
Statutory
tax rate
|
|
|
35
|
%
|
|
|
35
|
%
|
Tax
benefit based upon statutory rate
|
|
|
(602,747
|
)
|
|
|
(569,661
|
)
|
Valuation
allowance
|
|
|
602,747
|
|
|
|
569,661
|
|
Net
domestic income tax (benefit)
|
|
|
—
|
|
|
|
—
|
|
Foreign
|
|
|
|
|
|
|
|
|
Pre
tax income (loss)
|
|
|
(1,366,132
|
)
|
|
|
135,101
|
|
Statutory
tax rate
|
|
|
32
|
%
|
|
|
32
|
%
|
Tax
expense (benefit) based upon statutory rate
|
|
|
(437,162
|
)
|
|
|
43,232
|
|
Permanent
differences
|
|
|
437,162
|
|
|
|
(43,232
|
)
|
Net
operating loss
|
|
|
—
|
|
|
|
—
|
|
Net
foreign income tax (benefit)
|
|
|
—
|
|
|
|
—
|
|
Total
Income tax (benefit )
|
|
$
|
—
|
|
|
$
|
—
|
|
On June
25, 2007, the Company completed a private offering of 5,600,000 shares of its
common stock, par value $.001 per share at a purchase price of $1.25 per share
(the “Shares”) and five year warrants to purchase 4,200,000 shares of common
stock, par value $.001 per share, at an exercise price of $1.55 per share (the
“Warrants”) to certain institutional and accredited investors, for an aggregate
purchase price of $7,000,000 (the “Offering”).
Under the
terms of the Offering, the Company has the right to redeem the Warrants for
$0.001 per Warrant Share covered by the Warrants if the Shares trade on the
Over-The-Counter Electronic Bulletin Board or similar market above $5.25 per
share for 20 consecutive trading days following the second anniversary of the
initial effective date of the registration statement covering the resale of the
Shares and Warrant Shares, based upon the closing bid price for the Shares for
each trading day and certain other conditions are met (the “Redemption
Right”). Once the Redemption Right vests, the Company has the right,
but not the obligation, to redeem the Warrants for $0.001 per Warrant Share
covered by the Warrants upon 30 days written notice to the holders of the
Warrants.
Under the
terms of the Purchase Agreement and the Registration Rights Agreement, the
Company is required to prepare and file with the SEC a registration statement
covering the resale of the Shares and the Warrant Shares. The Company
has agreed to prepare and file a registration statement covering the resale no
later than 30 days after the Closing (the “Filing Deadline”). In the
event the Company is unable to file a registration statement by the Filing
Deadline or the registration statement is not declared effective on or before 90
days from the Closing (120 days from the Closing if the registration statement
is reviewed by the SEC) (“Effective Deadline”), then the Company will have to
pay liquidated damages equal to 1.5% of the aggregate amount invested by each
investor for each 30-day period, or pro rata portion thereof, following the date
by which such registration statement should have been effective, until the
registration statement has been declared effective by the SEC. All
payments must be made in cash.
The
Placement Agent is entitled to a fee equal to ten percent (10%) of the gross
proceeds derived from the Offering, of which the Placement Agent may, at its
option, receive up to 2% of its 10% fee in securities issued in the
Offering. The Company has agreed to pay the Placement Agent 5% of the
exercise price of the Warrants promptly following the Company’s receipt
thereof. In addition, the Company agreed to reimburse the Placement
Agent for its out-of-pocket expenses related to the Offering, including an
up-front payment of $25,000 to cover such expenses, of which any unused amount
will be netted against the Placement Agent’s 10% fee.
The Units
were offered and sold by the Company to accredited investors in reliance on
Section 506 of Regulation D of the Securities Act of 1933, as
amended.
During
the three months ended December 31, 2007 the Company received $15,900 on the
exercise of 10,000 common stock purchase warrants.
On
February 19, 2008, the Company entered into a formal debt conversion and
Registration Rights Agreement with a former investor of the
Company. The debt was in the amount of $50,536 and was for past
services and obligations attributable to the operations of the Company and its
California subsidiaries. In exchange for the debt the Company issued
31,558 common shares of its capital stock.
17.
|
EQUITY COMPENSATION
PLANS
|
The Board
of Directors and stockholders approved the Nonstatutory Stock Option Plan (the
“2001 Plan”) and adopted it on May 29, 2001. The Company has reserved
250,000 shares of its common stock for issuance to the directors, employees and
consultants under the Plan. The Plan is administered by the Board of
Directors. Vesting terms of the options range from immediately to
five years.
Pursuant
to an Information Statement on Schedule 14C mailed on May 9, 2005 to all
stockholders of record as of the close of business on February 1, 2005 and
became effective June 3, 2005, the Company authorized the implementation of a
2004 Incentive and Nonstatutory Stock Option Plan (“2004 Plan”) reserving
800,000 shares of common stock for issuance to employees, directors and
consultants of the Company or any subsidiaries. This plan became
effective as of June 3, 2005 after the Company had completed a one for twenty
reverse split.
On
October 12, 2005, the Company entered into an Employment Agreement with an
individual to render full-time employment to the Company as for an initial term
of three (3) years whose duties include managing worldwide sales for the
Company. The agreement automatically renews for an additional one (1)
year period at the end of each then existing term, unless one party gives to the
other written notice to terminate. The agreement provides for an
annual salary of $275,000 and quarterly bonuses in the amount of $25,000,
subject to certain conditions. The agreement also granted 400,000
options under the Company’s 2004 Incentive and Nonstatutory Stock Option Plan
(the “Stock Plan”). The options were priced at $4.00. The
options vest one third each on the last day of the first, second and third years
of employment. These options have a term of eight (8) years from the
date of grant and are subject to other standard terms and conditions under the
Stock Plan and contain standard anti-dilution language and a provision for
cashless exercise. The market value of the foregoing option grant
based upon the Black-Scholes option pricing model utilizing a market price on
the date of grant of $3.50 per share, an annualized volatility of 155%, a risk
free interest rate of 4.5% and an expected life of eight years is $3.41 per
option granted, for a total value of approximately $1,364,490.
On
December 23, 2005, the Company granted to its Chief Financial Officer 75,000 ten
year options to purchase the Company’s common stock at an exercise price of
$2.46, the market value of the Company’s stock on the date of
grant. The options were fully vested upon issue. The value
of the foregoing option grants based upon the Black-Scholes option pricing model
utilizing a market price on the date of grant of $2.46 per share, an annualized
volatility of 155%, a risk free interest rate of 4.5% and an expected life of
eight years is $2.40 per option granted, for a total value of approximately
$180,000.
On
October 1, 2006, the Company granted to a marketing consultant 25,000 options to
purchase the Company’s common stock at a price of $1.80 per
share. These options vested immediately upon grant and are
exercisable for a period of five years. The Company valued the
foregoing options using the Black Scholes option pricing model using the
following assumptions: no dividend yield; expected volatility rate of 91.58%;
risk free interest rate of 5% and an average life of 5 years resulting in a
value of $1.298 per option granted.
On June
14, 2006, pursuant to an S-8 filed with the SEC, the Company registered
1,150,000 common shares, pursuant to compensation arrangements.
On August
17, 2007, pursuant to the terms of the Company’s 2004 Plan, the Company granted
to an employee 100,000 options to purchase the Company’s common stock at a price
of $1.50 per share. These options will vest over the next 3 years and
are exercisable for a period of 5 years. The Company valued the
foregoing options using the Black Scholes option pricing model using the
following assumptions: no dividend yield; expected volatility rate of 115%; risk
free interest rate of 4.75% and an average life of 5 years resulting in a value
of $1.24 per option granted. The value of these options will be
recognized on a straight-line basis over the next three years and accordingly a
value of $28,780 has been recorded in the year ended March 31,
2008.
On
September 21, 2007 the Company granted to employees and directors a total of
570,000 options to purchase the Company’s common stock at a price of $1.75 per
share. These options will vest over the next 3 years and are
exercisable for a period of 10 years. The Company valued the
foregoing options using the Black Scholes option pricing model using the
following assumptions: no dividend yield; expected volatility rate of 115%; risk
free interest rate of 4.75% and an average life of 7 years resulting in a value
of $1.47 per option granted. The value of these options will be
recognized on a straight-line basis over the next three years and accordingly a
value of $160,916 has been recorded in the year ended March 31,
2008.
A summary
of the option activity for the years ended March 31, 2008 and 2007 pursuant to
the terms of the plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Weighted
Average
|
|
|
Outstanding
|
|
|
Weighted
Average
|
|
|
Outstanding
|
|
|
Weighted
Average
|
|
Options
outstanding , March 31, 2007
|
|
|
222,500
|
|
|
$
|
1.29
|
|
|
|
210,666
|
|
|
$
|
3.19
|
|
|
|
—
|
|
|
|
—
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
520,000
|
|
|
|
1.71
|
|
|
|
150,000
|
|
|
$
|
1.75
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Cancelled
or expired
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Options
outstanding, March 31, 2008
|
|
|
222,500
|
|
|
$
|
1.29
|
|
|
|
730,666
|
|
|
$
|
2.29
|
|
|
|
150,000
|
|
|
$
|
1.75
|
|
Options
exercisable March 31, 2008
|
|
|
222,500
|
|
|
$
|
1.29
|
|
|
|
210,666
|
|
|
$
|
4.46
|
|
|
|
—
|
|
|
|
—
|
|
Exercise
price range
|
|
$
|
1.00 to $4.00
|
|
|
|
|
|
|
$
|
1.50 to $4.00
|
|
|
|
|
|
|
$
|
1.75
|
|
|
|
|
|
Weighted
average remaining life
|
|
4.0 years
|
|
|
|
|
|
|
5.43 years
|
|
|
|
|
|
|
8.72 years
|
|
|
|
|
|
Shares
available for future issuance
|
|
|
27,500
|
|
|
|
|
|
|
|
69,334
|
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
A summary
of the Company’s equity compensation plans approved and not approved by
shareholders is as follows:
|
|
Number
of
securities
to be
issued
upon
exercise
of
outstanding
options,
warrants
and
right
|
|
|
Weighted-average
exercise
price of
outstanding
options
warrants
and rights
|
|
|
Number
of securities
remaining
available for
future
issuance under
equity
compensation
plans
(excluding
securities
reflected
in
column (a))
|
|
Equity
Compensation Plans approved by security holders
|
|
|
1,103,166
|
|
|
$
|
2.01
|
|
|
|
96,834
|
|
Equity
Compensation Plans not approved by security holders
|
|
|
297,298
|
|
|
$
|
1.50
|
|
|
NA
|
|
|
|
|
1,400,464
|
|
|
$
|
1.91
|
|
|
|
96,834
|
|
Prior to
January 1, 2006, the Company accounted for employee stock-based compensation
under the recognition and measurement principles of Accounting Principles Board
Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees,” and related
Interpretations, as permitted by SFAS No. 123, “Accounting for Stock-Based
Compensation”. Under the recognition principles of APB No. 25,
compensation expense related to restricted stock and performance units was
recognized in the financial statements. However, APB No. 25 generally
did not require the recognition of compensation expense for stock options
because the exercise price of these instruments was generally equal to the fair
value of the underlying common stock on the date of grant, and the related
number of shares granted were fixed at that point in time.
Effective
January 1, 2006, the Company adopted the fair value recognition provisions of
SFAS No. 123(R), “Share-Based Payment”. In addition to recognizing
compensation expense related to restricted stock and performance units, SFAS No.
123(R) also requires recognition of compensation expense related to the
estimated fair value of stock options. The Company adopted SFAS No.
123(R) using the modified-prospective-transition method. Under that
transition method, compensation expense recognized subsequent to adoption
includes: (a) compensation cost for all share-based payments granted prior to,
but not yet vested as of January 1, 2006, based on the values estimated in
accordance with the original provisions of SFAS No. 123, and (b) compensation
cost for all share-based payments granted subsequent to January 1, 2006, based
on the grant-date fair values estimated in accordance with the provisions of
SFAS No. 123(R). Consistent with the modified-prospective-transition
method, the Company’s results of operations for prior periods have not been
adjusted to reflect the adoption of FAS 123(R). For the year ended
March 31, 2008, the Company recognized $189,696 (2007 — $221,959) in
compensation expense in the consolidated statement of operations
18.
|
COMMON STOCK WARRANTS AND OTHER
OPTIONS
|
On
February 10, 2006, the Company issued to an individual the right to purchase
150,000 shares of the Company’s common stock at an exercise price of $2.60 per
share for a term of five (5) years pursuant to the terms and conditions of a
Stock Option Agreement as consideration for past services performed and the
release of any and all claims under this individual’s prior agreements with the
Company. The 150,000 options have been valued in accordance with the
Black-Scholes pricing model utilizing an historic volatility factor of 1.55, a
risk free interest rate of 4.5% and an expected life for the options of five
years, resulting in a value of $2.41 per option granted for a total for the
warrants of $361,500. The value of this option grant was recorded as
of December 31, 2005 as a research and development expense.
In
November 2006, the Company entered into a Settlement Agreement and Release
(“Settlement Agreement”) with this individual pursuant to which the prior
agreement was terminated. In connection with the Settlement
Agreement, the Company agreed to pay this individual $65,000 in settlement of
all accounts which was recorded as an expense as of the date of the Settlement
Agreement and he in turn agreed to the cancellation of his options to purchase
150,000 shares of the Company’s common stock in exchange for certain product
rights that the Company had elected not to pursue.
As of
March 31, 2008, the Company has 7,260,026 warrants to purchase the Company’s
common stock outstanding that were not granted under shareholder approved equity
compensation plans at prices ranging between $1.20 and $3.00 per share with
expiration dates between August 2007 and September 2012 as follows:
|
|
Outstanding
Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
Warrants
and options outstanding , March 31, 2007
|
|
|
3,105,651
|
|
|
$
|
1.72
|
|
Granted
|
|
|
4,200,000
|
|
|
|
1.55
|
|
Exercised
|
|
|
(10,000
|
)
|
|
|
1.59
|
|
Cancelled
or expired
|
|
|
(35,725
|
)
|
|
|
—
|
|
Warrants
exercisable March 31, 2008
|
|
|
7,260,026
|
|
|
$
|
1.67
|
|
Exercise
price range
|
|
$
|
1.20 to $10.00
|
|
|
|
|
|
Weighted
average remaining life
|
|
4.93
Years
|
|
|
|
|
|
The
Company’s only operating segment consists of dental products and oral hygiene
products sold by Remedent Inc., Remedent N.V., Sylphar N.V. and Remedent Asia
Ltd.. Since the Company only has one segment, no further segment
information is presented.
Customers
Outside of the United States
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
U.S. sales
|
|
$
|
1,598,046
|
|
|
$
|
561,055
|
|
Foreign
sales
|
|
|
5,884,215
|
|
|
|
6,115,310
|
|
|
|
$
|
7,482,261
|
|
|
$
|
6,676,365
|
|
Real
Estate Lease
The
Company leases its 26,915 square feet office and warehouse facility in Deurle,
Belgium from an unrelated party pursuant to a nine year lease commencing
December 20, 2001 at a base rent of #$6,838 per month ($11,097 per month at
March 31, 2008). The minimum aggregate rent to be paid over the
remaining lease term based upon the conversion rate for the € at March 31, 2008
is $359,773. Rent expense for the forgoing lease for the years ended
March 31, 2008 and March 31, 2007 was $119,097 and $105,276
respectively.
Minimum
monthly lease payments for real estate, and all other leased equipment for the
next three years are as follows based upon the conversion rate for the (Euro) at
March 31, 2008.
March
31, 2009
|
|
$
|
240,734
|
|
March
31, 2010
|
|
$
|
76,896
|
|
March
31, 2011
|
|
$
|
42,143
|
|
Total:
|
|
$
|
359,773
|
|
On April
24, 2008, the Company entered into a Factoring Agreement (“Agreement”) with
First Community Financial, a division of Pacific Western Bank (“First
Community”) whereby First Community may purchase, from time to time, on a
limited recourse basis such of the Company’s accounts now existing or hereafter
created and arising out of the sale of goods or service by the
Company. The factoring credit facility limit is $1,000,000 and
amounts factored are subject to an interest rate of prime plus
2%. Security for the factoring credit facility is a first charge over
all the assets of the Company. The Agreement shall remain in effect
until October 16, 2008 and may be renewed for successive six month periods
unless terminated under certain conditions.
On June
30, 2008, the Company entered into an OEM Agreement (“Agreement”) with SensAble
Technologies, Inc., a corporation under the laws of Delaware (“SensAble”)
whereby the Company will integrate SensAble products and technology into the
Company’s system. The Agreement provides the Company with the
exclusive right to distribute certain SensAble products throughout the world for
a period of twelve (12) months from the date of the Agreement. The
Company has the option and right to extend the initial twelve (12) month
exclusivity period for another twelve (12) months. The term of the
Agreement will be for two years and began on June 30, 2008.
REMEDENT,
INC. AND SUBSIDIARIES
INTERIM
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2008
(unaudited)
REMEDENT,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
December 31, 2008
|
|
|
March 31, 2008
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
2,569,888
|
|
|
$
|
1,728,281
|
|
Accounts
receivable, net of allowance for doubtful accounts of $28,310 at
December 31, 2008 and $32,181 at March 31, 2008
|
|
|
2,612,651
|
|
|
|
1,902,920
|
|
Inventories,
net
|
|
|
1,936,603
|
|
|
|
1,360,709
|
|
Prepaid
expense
|
|
|
1,582,502
|
|
|
|
970,173
|
|
Total
current assets
|
|
|
8,701,644
|
|
|
|
5,962,083
|
|
PROPERTY
AND EQUIPMENT, NET
|
|
|
917,261
|
|
|
|
692,609
|
|
OTHER
ASSETS
|
|
|
675,000
|
|
|
|
675,000
|
|
Patents,
net
|
|
|
251,125
|
|
|
|
115,827
|
|
TOTAL
ASSETS
|
|
$
|
10,545,030
|
|
|
$
|
7,445,519
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Current
portion, long term debt
|
|
$
|
20,072
|
|
|
$
|
58,583
|
|
Line
of Credit
|
|
|
907,558
|
|
|
|
779,718
|
|
Accounts
payable
|
|
|
1,444,087
|
|
|
|
2,002,439
|
|
Accrued
liabilities
|
|
|
1,043,501
|
|
|
|
781,737
|
|
Income
taxes payable
|
|
|
10,989
|
|
|
|
15,121
|
|
Total
current liabilities
|
|
|
3,426,207
|
|
|
|
3,637,598
|
|
LONG
TERM DEBT
|
|
|
178,392
|
|
|
|
94,754
|
|
MINORITY
INTEREST
|
|
|
782,497
|
|
|
|
—
|
|
STOCKHOLDERS’
EQUITY:
|
|
|
|
|
|
|
|
|
Preferred
Stock $0.001 par value (10,000,000 shares authorized, none issued and
outstanding)
|
|
|
—
|
|
|
|
—
|
|
Common
stock, $0.001 par value;
(50,000,000
shares authorized, 19,995,969 and 18,637,803 shares issued and outstanding
at December 31, 2008 and March 31, 2008 respectively
)
|
|
|
19,996
|
|
|
|
18,638
|
|
Additional
paid-in capital
|
|
|
23,700,875
|
|
|
|
17,929,992
|
|
Accumulated
other comprehensive income (loss) (foreign currency translation
adjustment)
|
|
|
(595,224
|
)
|
|
|
27,650
|
|
Accumulated
deficit
|
|
|
(16,136,263
|
)
|
|
|
(14,263,113
|
)
|
Treasury
stock, at cost; 723,000 and 0 shares at December 31, 2008 and March 31,
2008 respectively
|
|
|
(831,450
|
)
|
|
|
—
|
|
Total
stockholders’ equity
|
|
|
6,157,934
|
|
|
|
3,713,167
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
10,545,030
|
|
|
$
|
7,445,519
|
|
COMMITMENTS
(Note 22)
The
accompanying notes are an integral part of these consolidated financial
statements.
REMEDENT, INC. AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
|
|
For
the three months ended
December
31,
|
|
|
For
the nine months ended
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
4,842,628
|
|
|
$
|
2,132,950
|
|
|
$
|
11,249,186
|
|
|
$
|
4,453,899
|
|
Cost
of sales
|
|
|
2,909,531
|
|
|
|
1,271,430
|
|
|
|
4,964,408
|
|
|
|
2,623,506
|
|
Gross
profit
|
|
|
1,933,097
|
|
|
|
861,520
|
|
|
|
6,284,778
|
|
|
|
1,830,393
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
52,006
|
|
|
|
172,108
|
|
|
|
224,379
|
|
|
|
247,665
|
|
Sales
and marketing
|
|
|
912,422
|
|
|
|
611,144
|
|
|
|
2,423,928
|
|
|
|
996,937
|
|
General
and administrative
|
|
|
1,268,500
|
|
|
|
1,087,313
|
|
|
|
3,672,536
|
|
|
|
2,891,165
|
|
Depreciation
and amortization
|
|
|
167,399
|
|
|
|
80,157
|
|
|
|
441,771
|
|
|
|
215,941
|
|
TOTAL
OPERATING EXPENSES
|
|
|
2,400,327
|
|
|
|
1,950,722
|
|
|
|
6,762,614
|
|
|
|
4,351,708
|
|
INCOME
(LOSS) FROM OPERATIONS
|
|
|
(467,230
|
)
|
|
|
(1,089,202
|
)
|
|
|
(477,836
|
)
|
|
|
(2,521,315
|
)
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued pursuant to Distribution Agreement
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,323,207
|
)
|
|
|
—
|
|
Gain
on disposition of OTC (Note 3)
|
|
|
2,830,953
|
|
|
|
—
|
|
|
|
2,830,953
|
|
|
|
—
|
|
Interest
expense
|
|
|
(168,659
|
)
|
|
|
(16,588
|
)
|
|
|
(250,175
|
)
|
|
|
(71,802
|
)
|
Interest
income
|
|
|
289,646
|
|
|
|
9,040
|
|
|
|
347,113
|
|
|
|
100,665
|
|
TOTAL
OTHER INCOME (EXPENSES)
|
|
|
2,951,940
|
|
|
|
(7,548
|
)
|
|
|
(1,395,316
|
)
|
|
|
28,863
|
|
NET
INCOME (LOSS)
|
|
$
|
2,484,710
|
|
|
$
|
(1,096,750
|
)
|
|
$
|
(1,873,152
|
)
|
|
$
|
(2,492,452
|
)
|
INCOME
(LOSS) PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and fully diluted
|
|
$
|
0.13
|
|
|
$
|
(0.06
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.14
|
)
|
WEIGHTED
AVERAGE SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and fully diluted
|
|
|
19,332,760
|
|
|
|
18,602,115
|
|
|
|
19,045,368
|
|
|
|
17,557,700
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
REMEDENT,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
For
the three months ended
December 31,
|
|
|
For
the nine months ended
December 31,
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Net
Income (Loss)
|
|
$
|
2,484,710
|
|
|
$
|
(1,096,750
|
)
|
|
$
|
(1,873,152
|
)
|
|
$
|
(2,492,452
|
)
|
OTHER
COMPREHENSIVE INCOME (LOSS):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
(409,200
|
)
|
|
|
58,949
|
|
|
|
(622,874
|
)
|
|
|
10,345
|
|
Comprehensive
income (loss)
|
|
$
|
2,075,510
|
|
|
$
|
(1,037,801
|
)
|
|
$
|
(2,496,026
|
)
|
|
$
|
(2,482,107
|
)
|
REMEDENT, INC. AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
For
the nine months ended
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,873,152
|
)
|
|
$
|
(2,492,452
|
)
|
Adjustments
to reconcile net income (loss) to net cash used by operating
activities
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
441,771
|
|
|
|
215,941
|
|
Inventory
reserve
|
|
|
394
|
|
|
|
—
|
|
Allowance
for doubtful accounts
|
|
|
(3,871
|
)
|
|
|
(13,417
|
)
|
Stock
based compensation
|
|
|
265,275
|
|
|
|
101,271
|
|
Gain
on disposition of OTC
|
|
|
(2,830,953
|
)
|
|
|
—
|
|
Warrants
issued pursuant to Distribution Agreement
|
|
|
4,323,207
|
|
|
|
—
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(709,731
|
)
|
|
|
137,273
|
|
Inventories
|
|
|
(575,894
|
)
|
|
|
4,043
|
|
Prepaid
expenses
|
|
|
(612,329
|
)
|
|
|
(352,607
|
)
|
Accounts
payable
|
|
|
(558,352
|
)
|
|
|
203,075
|
|
Accrued
liabilities
|
|
|
261,764
|
|
|
|
(35,253
|
)
|
Income
taxes payable
|
|
|
(4,132
|
)
|
|
|
81,859
|
|
Net
cash used by operating activities
|
|
|
(1,876,003
|
)
|
|
|
(2,150,267
|
)
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
investments
|
|
|
—
|
|
|
|
(675,000
|
)
|
Purchases
of patents
|
|
|
—
|
|
|
|
(11,998
|
)
|
Purchases
of equipment
|
|
|
(455,694
|
)
|
|
|
(165,195
|
)
|
Net
cash used by investing activities
|
|
|
(455,694
|
)
|
|
|
(852,193
|
)
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net
proceeds from issuance of stock
|
|
|
—
|
|
|
|
5,792,893
|
|
Proceeds
on sale of minority interest in Sylphar NV
|
|
|
2,782,000
|
|
|
|
—
|
|
Proceeds
from (principal payments on) capital lease note payable
|
|
|
45,127
|
|
|
|
(31,684
|
)
|
Proceeds
from (repayments of) line of credit
|
|
|
127,840
|
|
|
|
(716,932
|
)
|
Net
cash provided by financing activities
|
|
|
2,954,967
|
|
|
|
5,044,277
|
|
NET
(DECREASE) INCREASE IN CASH
|
|
|
623,270
|
|
|
|
2,041,817
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
218,337
|
|
|
|
(152,245
|
)
|
CASH
AND CASH EQUIVALENTS, BEGINNING
|
|
|
1,728,281
|
|
|
|
126,966
|
|
CASH
AND CASH EQUIVALENTS, ENDING
|
|
$
|
2,569,888
|
|
|
$
|
2,016,538
|
|
Supplemental
Information:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
98,493
|
|
|
$
|
14,418
|
|
Income
taxes paid
|
|
$
|
—
|
|
|
$
|
—
|
|
Schedule
of non-cash financing and investing activities:
|
|
|
|
|
|
|
|
|
Restricted
shares returned to treasury in exchange for 50% of OTC
Business
|
|
$
|
831,450
|
|
|
$
|
—
|
|
Warrants
issued pursuant to Distribution Agreement
|
|
$
|
4,323,207
|
|
|
$
|
—
|
|
Shares
issued for purchase of Glamtech
|
|
$
|
625,000
|
|
|
$
|
—
|
|
Shares
issued as prepayment for goods
|
|
$
|
250,000
|
|
|
$
|
—
|
|
Shares
issued for license
|
|
$
|
319,483
|
|
|
$
|
—
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
NOTES
TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.
|
BACKGROUND AND
ORGANIZATION
|
The
Company is a manufacturer and distributor of cosmetic dentistry products,
including a full line of professional dental and retail “Over-The-Counter” tooth
whitening products which are distributed in Europe, Asia and the
United States. The Company manufactures many of its products in its
facility in Deurle, Belgium as well as outsourced manufacturing in
China. The Company distributes its products using both its own
internal sales force and through the use of third party
distributors.
On
December 11, 2008, the Company completed a restructuring in the form of a
management-led buyout of 50% of its OTC retail business. The buyout
was led by Mr. List, the Company’s former director and Chief Executive Officer,
with financing provided by Concordia Fund VC, a non-affiliated foreign
investment fund. Prior to the sale, the Board approved a
restructuring plan and strategy for transferring the Company’s OTC
business through a series of transactions involving subsidiary formations,
contributions of subsidiary(ies) interests and sales of stock interests through
subsidiary transactions, with particular emphasis focused on current OTC
business operations conducted through the Company’s subsidiaries, both
internationally and within the domestic U.S. (the
“Plan”).
The total
consideration for the sale of OTC business is approximately €4,654,736, which
consists of (1) €1,000,000 in cash,
(2) €654,736 based on the exchange rate as of January 12,
2008 for the 723,000 restricted shares of the Company previously held by Mr.
List (valued at $1.15 per share for an aggregate value of $831,450),
and (3) €3,000,000 which is the estimated value of the ownership interest of 50
% of the shares of Remedent OTC held by the Company.
Pursuant
to the agreements described in Note 3, the sale was conducted through a series
of transactions which included the consolidation of all of the ownership
interest of the Company’s subsidiaries operating the OTC business into Remedent
OTC; a sale of 50% of Remedent OTC to Mr. List; the formation of
Sylphar Holding B.V., a Dutch holding company, followed by
a contribution of the OTC subsidiaries to Sylphar Holding by Remedent
OTC, and a subsequent investment by Concordia
of €2,000,000. Although Mr. List resigned as director and
Chief Executive Officer of the Company and Remedent N.V., Mr. List remains
involved in the key management of the OTC business.
As a
result of the series of transactions related to the sale, the Company now owns
50% of Remedent OTC with Mr. List owning the other 50%, and maintains control of
Remedent OTC as a result of its current control of the Board. In
addition, the Company now owns a partial interest in Sylphar Holding through
Remedent OTC’s 75% ownership interest in Sylphar Holding, which interest is
subject to dilution of up to 24% upon exercise of a call option held by
Concordia Fund VC, who currently owns the remaining 25%. As a result
of the sale, all of the OTC business previously operated by the Company directly
is now operated and held by Sylphar Holding.
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
|
Organization
and Principles of Consolidation
The
accompanying consolidated financial statements include the accounts
of:
(a) Pre-OTC
Restructuring
Remedent,
Inc., a Nevada corporation, and its subsidiaries, Remedent N.V. (incorporated in
Belgium) located in Deurle, Belgium, Remedent Professional, Inc. (incorporated
in California and a subsidiary of Remedent Professional Holdings, Inc.),
Remedent Asia Pte. Ltd. ( a wholly-owned subsidiary formed under the
laws of Singapore), Sylphar N.V. (incorporated in Belgium as a wholly owned
subsidiary on September 24, 2007), and Glamtech-USA, Inc. (a Delaware
corporation acquired effective August 24, 2008).
(b) Post-OTC
Restructuring
Remedent,
Inc., a Nevada corporation, and its subsidiaries, Remedent N.V. (incorporated in
Belgium and located in Deurle, Belgium, Remedent Professional, Inc.
(incorporated in California), Glamtech-USA, Inc. (a Delaware corporation
acquired effective August 24, 2008), Remedent OTC B.V., a Dutch Holding company
and a 50% owned subsidiary, Sylphar Holding B.V. (a Dutch holding
company and a 37.50% owned and controlled subsidiary by Remedent, Inc.), Sylphar
N.V. ( a wholly-owned subsidiary of Sylphar Holding B.V.), Sylphar USA, Inc.
(Nevada corporation and wholly-owned subsidiary of Sylphar Holding
B.V.), and Sylphar Asia Pte ( an Asian company and wholly-owned subsidiary of
Sylphar Holding B.V.).
Remedent,
Inc. is a holding company with headquarters in Deurle,
Belgium. Remedent Professional, Inc. and Remedent Professional
Holdings, Inc. have been dormant since inception. The rebranded
Sylphar Asia Pte Ltd (former Remedent Asia Pte. Ltd.) commenced
operations as of July 2005.
For all
periods presented, all significant inter-company accounts and transactions have
been eliminated in the consolidated financial statements and corporate
administrative costs are not allocated to subsidiaries.
Interim
Financial Information
The
interim consolidated financial statements of Remedent, Inc. and its subsidiaries
(the “Company”) are condensed and do not include some of the information
necessary to obtain a complete understanding of the financial
data. Management believes that all adjustments necessary for a fair
presentation of results have been included in the unaudited consolidated
financial statements for the interim periods presented. Operating
results for the nine months ended December 31, 2008, are not necessarily
indicative of the results that may be expected for the year ended March 31,
2009. Accordingly, your attention is directed to footnote disclosures
found in the Annual Report on Form 10-KSB for the year ended March 31,
2008, and particularly to Note 2, which includes a summary of significant
accounting policies.
Basis of
Presentation
The
Company’s financial statements have been prepared on an accrual basis of
accounting, in conformity with accounting principles generally accepted in the
United States of America and are presented in US dollars unless otherwise
noted. These principles contemplate the realization of assets and
liquidation of liabilities in the normal course of business. These
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
Revenue
Recognition
The
Company recognizes revenue from product sales when persuasive evidence of a sale
exists: that is, a product is shipped under an agreement with a customer; risk
of loss and title has passed to the customer; the fee is fixed or determinable;
and collection of the resulting receivable is reasonably
assured. Sales allowances are estimated based upon historical
experience of sales returns.
Pervasiveness
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the Company to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. On an on-going basis, the Company evaluates
estimates and judgments, including those related to revenue, bad debts,
inventories, fixed assets, intangible assets, stock based compensation, income
taxes, and contingencies. Estimates are based on historical
experience and on various other assumptions that the Company believes reasonable
in the circumstances. The results form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results could differ from those
estimates.
Accounting
Policy Change and
New Accounting
Pronouncements
(a)
Adoption of New Accounting Policy
In
February 2007, the Financial Accounting Standards Board ("FASB") issued SFAS No.
159, "
The Fair Value Option
for Financial Assets and Financial Liabilities
". This
Statement permits entities to choose to measure many financial assets and
financial liabilities at fair value. Unrealized gains and losses on
items for which the fair value option has been elected will be reported in
earnings. SFAS No. 159 is effective for fiscal years beginning after
November 15, 2007.
The
Company adopted the provisions of SFAS No. 159 on April 1, 2008. The
adoption of SFAS No. 159 did not have a material impact on the Company’s
financial reporting.
(b) New
Accounting Pronouncements
In March
2008, the FASB issued SFAS No. 161, “
Disclosures about
Derivative
Instruments
and Hedging Activities”
. This statement changes the disclosure
requirements for derivative instruments and hedging
activities. Entities are required to provide enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, and its related
interpretations, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash
flows. This statement is effective for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008 (the
Company’s fiscal year beginning April 1, 2009), with early application
encouraged. This statement encourages, but does not require,
comparative disclosures for earlier periods at initial
adoption. Management is in the process of evaluating the impact the
future application of this pronouncement may have on its consolidated financial
statements.
In
December 2007, the FASB issued SFAS No. 141 (Revised 2007) “
Business
Combinations
”. SFAS
141 (Revised) establishes principles and requirements for how the acquirer of a
business recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree. The statement also provides guidance for recognizing and
measuring the goodwill acquired in the business combination and determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. The
guidance will become effective for the Company’s fiscal year beginning April 1,
2009. Management is in the process of evaluating the impact SFAS 141
(Revised) will have on the Company’s financial statements upon
adoption.
In
February 2008, the FASB released FSP No. FAS 157-2. FSP No. FAS 157-2
defers the effective date of SFAS 157, "
Fair Value Measurements
", for
one year for nonfinancial assets and nonfinancial liabilities that are
recognized or disclosed at fair value in the financial statements on a
nonrecurring basis. It does not defer recognition and disclosure
requirements for financial assets and financial liabilities, or for nonfinancial
assets and nonfinancial liabilities that are remeasured at least
annually.
In
December 2007, the FASB issued SFAS No. 160 “
Noncontrolling Interests
in
Consolidated
Financial Statements — an amendment of ARB No. 51
”. SFAS 160
establishes accounting and reporting standards for the noncontrolling interest
in a subsidiary and for the deconsolidation of a subsidiary. The
guidance will become effective for the Company’s fiscal year beginning April 1,
2009. Management is in the process of evaluating the impact SFAS 160
will have on the Company’s financial statements upon adoption.
In April
2008, the FASB issued FSP No. 142-3,
Determination of the Useful Life of
Intangible Assets
(“FSP FAS 142-3”), which amends the factors that should
be considered in developing renewal or extension assumptions used to determine
the useful life of a recognized intangible asset under FASB Statement No. 142,
Goodwill and Other Intangible Assets (“SFAS 142”). The intent of FSP
FAS 142-3 is to improve the consistency between the useful life of a recognized
intangible asset under SFAS 142 and the period of expected cash flows used to
measure the fair value of the asset under SFAS 141(R) and other
U.S. generally accepted accounting principles. FSP FAS
142-3 requires an entity to disclose information for a recognized intangible
asset that enables users of the financial statements to assess the extent to
which the expected future cash flows associated with the asset are affected by
the entity’s intent and/or ability to renew or extend the
arrangement. FSP FAS 142-3 is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. The Company does not expect the adoption
of FSP FAS 142-3 to have a material impact on the Company’s financial position
or results of operations.
In May
2008, the FASB issued FASB Staff Position No. APB 14-1,
Accounting for Convertible Debt
Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash
Settlement)
(“FSP No. APB 14-1”). FSP No. APB 14-1 applies to
convertible debt instruments that, by their stated terms, may be settled in cash
(or other assets) upon conversion, including partial cash settlement, unless the
embedded conversion option is required to be separately accounted for as a
derivative under SFAS 133. FSP No. APB 14-1 specifies that issuers of
convertible debt instruments should separately account for the liability and
equity components in a manner that will reflect the entity’s nonconvertible debt
borrowing rate when interest cost is recognized in subsequent
periods. FSP No. APB 14-1 is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. FSP No. APB 14-1 will be applied
retrospectively to all periods presented. The cumulative effect of
the change in accounting principle on periods prior to those presented will be
recognized as of the beginning of the first period presented. An
offsetting adjustment will be made to the opening balance of retained earnings
for that period, presented separately. The adoption of APB 14-1 is
not expected to have a material impact upon the Company’s financial position or
results of operations.
3.
|
RESTRUCTURING
OF OTC BUSINESS
|
To
effectuate the restructuring Plan relating to the management led buyout of the
Over-The-Counter (“OTC”) business the Company entered into the following series
of related agreements:
On
December 10, 2008, the Company entered into a Contribution Agreement with
Sylphar USA, Inc., a newly incorporated Nevada corporation and wholly owned
subsidiary of the Company (“Sylphar USA”), pursuant to which the Company made a
capital contribution of certain assets and liabilities relating to the OTC
business which was valued at $460,568 to Sylphar USA in exchange for 460,568
shares of common stock, par value $1.00, of Sylphar USA.
On
December 10, 2008, the Company entered into a Share Purchase Agreement with
Remedent, N.V., a wholly owned subsidiary of the Company formed under the laws
of Belgium (“Remedent N.V.”), pursuant to which the Company purchased a 99%
ownership interest in Sylphar, N.V., a subsidiary of the Company formed under
the laws of Belgium, from Remedent N.V. As a result of the Sylphar
Purchase Agreement, Sylphar N.V. became a wholly owned subsidiary of the
Company. As consideration for the 99 shares (“Sylphar Shares”), the
Company agreed to pay Remedent N.V. €1,881,000, which was based on the
valuations provided by an independent assessor, by executing an unsecured
non-interest bearing promissory note (the “Promissory Note”) on behalf of
Remedent N.V. for the principal amount of €1,000,160 (the “Debt”) and
having the remainder balance of €880,840 reflected on the existing intercompany
account between Remedent N.V. and the Company.
Then
pursuant to a Deed of Contribution, the Company transferred all of the Company’s
ownership interest in its OTC operating subsidiaries, consisting of Sylphar USA,
Remedent Asia PTE, Sylphar N.V. (“OTC Subsidiaries”), into Remedent OTC B.V., a
Dutch holding company and a wholly owned subsidiary of the Company (“Remedent
OTC”) in exchange for €1,000,160 and an allocation and administer the balance of
the aggregate value of the OTC Subsidiaries and the consideration as share
premium in the books of the Company.
Subsequent
to the contribution of the OTC Subsidiaries to Remedent OTC, the Company sold
fifty percent (50%) of its interest in Remedent OTC to Robin List, a former
Chief Executive Officer, President and Director of the Company, in exchange for
723,000 restricted shares of common stock of the Company held by Mr. List
(“Exchanged Shares”), pursuant to a Share Purchase Agreement on December 10,
2008. The Exchanged Shares were returned to treasury. The
Exchanged Shares were valued at $1.15 per share, based on the average of the 52
week high and low bid, for an aggregate value of $831,450. As a
result, Mr. List and the Company equally own 50% of Remedent OTC with the
Company currently controlling Remedent OTC through its board representations
pursuant to the terms of a certain Voting Agreement entered into by the Company
and Mr. List concurrently with the Share Purchase Agreement. The
Voting Agreement provides that, the Company will initially have 2 board
representation and Mr. List will have 1 board representation. However
upon the occurrence of a “Triggering Event” (as defined in the Voting
Agreement), the Company will have 1 board representation and Mr. List will have
2 board representations.
On
December 11, 2008, the Company entered into an Investment and Shareholders’
Agreement with Remedent OTC, Concordia Fund V.C., a non-affiliated Dutch private
equity fund (“Concordia”), Mr. List, Sylphar Holding, B.V., a Dutch holding
company and wholly owned subsidiary of Remedent OTC (“Sylphar Holding”) and the
OTC Subsidiaries pursuant to which Concordia agreed to purchase shares of
Sylphar Holding from Remedent OTC representing a 12.5% ownership interest in
Sylphar Holding for €1,000,000 and invest an additional €1,000,000 in Sylphar
Holding for an additional 12.5% ownership interest in Sylphar Holding,
representing an aggregate ownership interest of 25% in Sylphar
Holding. Furthermore, Concordia was granted a call option exercisable
from January 1, 2009 until December 31, 2010, unless otherwise extended to
September 30, 2011 pursuant to the terms of such agreement, to purchase an
additional 24% ownership interest in Sylphar Holding for €2,000,000 or any pro
rata portion thereof. It was further agreed upon that the €1,000,000
received from Concordia would be used to pay off the Debt. The shares
of Sylphar Holding are subject to certain drag along rights in the event there
is an offer to purchase such shares.
Pro
Forma Summary Financial Data
The
following pro forma summary financial data presents our pro forma condensed
combined financial information as if we had completed the disposition of 50% of
the OTC business at the beginning of each period shown. This pro
forma financial information should be read in conjunction with the Company’s
financial statements as at March 31, 2008 and December 31, 2008.
|
|
For
the three months ended
December
31,
|
|
|
For
the nine months ended
December
31,
|
|
|
|
Pro
Forma
(unaudited)
|
|
|
Pro
Forma
(unaudited)
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
4,842,628
|
|
|
$
|
2,132,950
|
|
|
$
|
11,249,186
|
|
|
$
|
4,453,899
|
|
Cost
of sales
|
|
|
2,909,531
|
|
|
|
1,271,430
|
|
|
|
4,964,408
|
|
|
|
2,623,506
|
|
Gross
profit
|
|
|
1,933,097
|
|
|
|
861,520
|
|
|
|
6,284,778
|
|
|
|
1,803,393
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
52,006
|
|
|
|
172,108
|
|
|
|
224,379
|
|
|
|
247,665
|
|
Sales
and marketing
|
|
|
912,422
|
|
|
|
611,144
|
|
|
|
2,423,928
|
|
|
|
996,937
|
|
General
and administrative
|
|
|
1,268,500
|
|
|
|
1,087,313
|
|
|
|
3,672,536
|
|
|
|
2,891,165
|
|
Depreciation
and amortization
|
|
|
167,399
|
|
|
|
80,157
|
|
|
|
441,771
|
|
|
|
215,941
|
|
TOTAL
OPERATING EXPENSES
|
|
|
2,400,327
|
|
|
|
1,950,722
|
|
|
|
6,762,614
|
|
|
|
4,351,708
|
|
INCOME
(LOSS) FROM OPERATIONS
|
|
|
(467,230
|
)
|
|
|
(1,089,202
|
)
|
|
|
(477,836
|
)
|
|
|
(2,521,315
|
)
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued pursuant to Distribution Agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,323,207
|
)
|
|
|
-
|
|
Other
income – Sale of asset
|
|
|
2,830,953
|
|
|
|
-
|
|
|
|
2,830,943
|
|
|
|
-
|
|
Interest
expense
|
|
|
(168,659
|
)
|
|
|
(16,588
|
)
|
|
|
(250,175
|
)
|
|
|
(71,802
|
)
|
Interest
income
|
|
|
289,646
|
|
|
|
9,040
|
|
|
|
347,113
|
|
|
|
100,665
|
|
TOTAL
OTHER INCOME (EXPENSES)
|
|
|
2,951,940
|
|
|
|
(7,548
|
)
|
|
|
(1,395,316
|
)
|
|
|
28,863
|
|
NET
LOSS
|
|
|
2,484,710
|
|
|
|
(1,096,750
|
)
|
|
|
(1,873,152
|
)
|
|
|
(2,492,452
|
)
|
Allocated
to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remedent
Inc.
|
|
|
2,562,338
|
|
|
|
(1,125,107
|
)
|
|
|
(1,672,711
|
)
|
|
|
(1,993,580
|
)
|
Minority
interest
|
|
|
(77,628
|
)
|
|
|
28,357
|
|
|
|
(200,441
|
)
|
|
|
(498,873
|
)
|
INCOME
(LOSS) PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocated
to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remedent
Inc.
|
|
$
|
0.13
|
|
|
$
|
(0.06
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.11
|
)
|
Minority
interest
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
WEIGHTED
AVERAGE SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and fully diluted
|
|
|
19,332,760
|
|
|
|
18,602,115
|
|
|
|
19,045,368
|
|
|
|
17,557,700
|
|
4.
|
DISTRIBUTION
AGREEMENT
|
On
August 24, 2008, the Company entered into a distribution agreement (the “
Distribution Agreement”) with Den-Mat Holdings, LLC, a Delaware limited
liability company (“Den-Mat”). Under the terms of the Distribution
Agreement, the Company:
|
(a)
|
appointed
Den-Mat to be the sole and exclusive distributor to market, license and
sell certain products relating to the Company’s GlamSmile tray technology,
including, but not limited to, its GlamSmile veneer products and other
related veneer products (the “Products”), throughout the world, with the
exception of Australia, Austria, Belgium, Brazil, France (including
Dom-Tom), Germany, Italy, New Zealand, Oman, Poland, Qatar, Saudi Arabia,
Singapore, Switzerland, Thailand, and United Arab Emirates (collectively
the “Excluded Markets”) and the China Market;
and
|
|
(b)
|
granted
Den-Mat a sole and exclusive, transferable and sublicensable right and
license to use all intellectual property related to the Products
throughout specified territory, as well as certain rights in the excluded
markets and rights in future intellectual property. Such rights
include the right to manufacture the Products upon payment of royalties
for the initial three year guaranty period (“Guaranty
Period”). Upon the expiration of the Guaranty Period, as
detailed in the Distribution Agreement, the sole and exclusive
distribution rights and licenses granted under the Agreement automatically
become non-exclusive distribution rights and licenses, and all rights to
use the “GlamSmile” name and mark shall cease unless the Guaranty Period
is extended by Den-Mat under the terms of the Distribution
Agreement. Upon termination of the Distribution Agreement, all
of Den-Mat’s rights in the Company’s intellectual property, including the
right to manufacture the Products shall
cease.
|
As
consideration for such distribution, licensing and manufacturing rights, Den-Mat
agreed to pay the Company: (i) an initial payment of $2,425,000 (received
in the period ended September 30, 2008); (ii) a payment of $250,000
for each of the first three contract periods in the initial Guaranty Period,
subject to certain terms and conditions; (iii) certain periodic payments as
additional paid-up royalties in the aggregate amount of $500,000; (iv) a
payment of $1,000,000 promptly after Den-Mat manufactures a limited quantity of
Products at a facility owned or leased by Den-Mat; (v) a payment of
$1,000,000 promptly upon completion of certain training of Den-Mat’s personnel;
(vi) a payment of $ 1,000,000 upon the first to occur of
(a)February 1, 2009 of (b) the date thirty (30) days after den-Mat
sells GlamSmile Products incorporating twenty thousand (20,000) Units/Teeth to
customers regardless of whether Den-Mat has manufactured such Units/Teeth in a
Den-Mat facility or has purchased such Units/Teeth from Remedent;
(vii) certain milestone payments; and (viii) certain royalty
payments. Further, as consideration for Den-Mat’s obligations under
the Distribution Agreement, the Company agreed to, among other things:
(i) issue to Den-Mat or an entity to be designated by Den-Mat, warrants to
purchase up to 3,378,379 shares of the Corporation’s common stock, par value
$0.001 per share (the “Warrant Shares”) at an exercise price of $1.48 per share,
exercisable for a period of five years (the “Den-Mat Warrant”) (issued in the
period ended September 30, 2008); (ii) execute and deliver to Den-Mat
a registration rights agreement covering the registration of the Warrant Shares
(the “Registration Rights Agreement”); and (iii) cause its Chairman of the
Board, Guy De Vreese, to execute and deliver to Den-Mat a non-competition
agreement.
5.
|
ACQUISITION
OF GLAMTECH-USA, INC.
|
On August
24, 2008, as part of the consideration for the rescission and release under the
Rescission Agreement entered into between the Company, our wholly owned
subsidiary, Remedent N.V., and Glamtech-USA, Inc., a Delaware corporation
(“Glamtech”), the Company entered into a Stock Purchase Agreement (the “Stock
Purchase Agreement”) with each of the two Glamtech shareholders (the “Holders”),
for the purchase of 100% of Glamtech’s outstanding common stock in exchange for,
among certain other consideration: at the election of the Holders at
any time within 6 months, to receive either, but not both, (a) an aggregate of
1,000,000 restricted shares of the registrant’s common stock (the “Shares”), or
(b) five (5) year warrants valued by the registrant’s Board of Directors at
$1.48 per warrant, to purchase an aggregate of 1,247,216 restricted shares of
the registrant’s common stock at a exercise price of $1.30 per share (the
“Warrant Shares”). Further, pursuant to the terms of the Stock
Purchase Agreement, the Company agreed to register the Shares or the Warrant
Shares, as applicable, on a registration statement with the
U.S. Securities and Exchange Commission no later than thirty (30)
calendar days following the date of the Holder’s election, but no sooner than
seventy-five (75) days from the effective date of the Stock Purchase
Agreement. All of the securities issued to the two Glamtech
shareholders are exempt from the registration requirements of the Securities Act
of 1933, as amended, pursuant to Sections 4(2), and Rule 506 of Regulation D of
the Securities and Exchange Commission and from various similar state
exemptions.
During
the quarter ended December 31, 2008, both Holders elected to receive a total of
1,000,000 restricted shares. The shares were issued prior to December
31, 2008 and were recorded at a fair value of $625,000.
On June
25, 2007, the Company completed its private offering of 5,600,000 shares of its
common stock, par value $.001 per share at a purchase price of $1.25 per share
(the “Shares”) and warrants to purchase 4,200,000 shares of common stock, par
value $.001 per share, at an exercise price of $1.55 per share (the “Warrants”)
to certain institutional and accredited investors, for an aggregate purchase
price of $7,000,000 (the “Offering”).
Under the
terms of the Offering, the Warrants are exercisable for a period of five years
and entitle the holder to purchase one share of restricted common stock (the
“Warrant Shares”) for $1.55 per Warrant Share. The Company also has
the right to redeem the Warrants for $0.001 per Warrant Share covered by the
Warrants if the Shares trade on the OTC Electronic Bulletin Board or similar
market above $5.25 per share for 20 consecutive trading days following the
second anniversary of the initial effective date of the registration statement
covering the resale of the Shares and Warrant Shares, based upon the closing bid
price for the Shares for each trading day and certain conditions are met (the
“Redemption Right”). Once the Redemption Right vests, the Company has
the right, but not the obligation, to redeem the Warrants for $0.001 per Warrant
Share covered by the Warrants upon 30 days written notice to the holders of the
Warrants.
Under the
terms of the Purchase Agreement and the Registration Rights Agreement, the
Company was required to prepare and file with the Securities and Exchange
Commission (the “Commission”) a registration statement covering the resale of
the Shares and the Warrant Shares. The Company agreed to prepare and
file a registration statement covering the resale no later than 30 days after
the Closing. The registration statement became effective October 23,
2007.
The
Company engaged Roth Capital Partners, LLC, as its exclusive agent to offer the
Shares and Warrants (the “Placement Agent”). The Placement Agent is
entitled to a fee equal to ten percent (10%) of the gross proceeds derived from
the Offering, of which the Placement Agent may, at its option, receive up to 2%
of its 10% fee in securities issued in the Offering. Further, the
Company agreed to pay the Placement Agent 5% of the exercise price of the
Warrants promptly following the Company’s receipt thereof. In
addition, the Company agreed to reimburse the Placement Agent for its
out-of-pocket expenses related to the Offering, including an up front payment of
$25,000 to cover such expenses, of which any unused amount would be netted
against the Placement Agent’s 10% fee.
As of
December 31, 2008, the total costs of this private placement were $1,235,223,
comprising of: commissions of $762,505; out-of-pocket costs of $25,000;
professional fees of $375,738 and direct travel costs of $71,980; and have been
recorded against share capital as a cost of financing.
The
Offering was conducted in reliance upon an exemption from registration under the
Securities Act of 1933, as amended (the “Securities Act”), including, without
limitation, that under Section 506 of Regulation D promulgated under the
Securities Act. The Units were offered and sold by the Company to
accredited investors in reliance on Section 506 of Regulation D of the
Securities Act.
Financial
Instruments — Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of trade accounts
receivable.
Concentrations
of credit risk with respect to trade receivables are normally limited due to the
number of customers comprising the Company’s customer base and their dispersion
across different geographic areas. At December 31, 2008 two customers
accounted for 69% of the Company’s trade accounts receivable. The
Company performs ongoing credit evaluations of its customers and normally does
not require collateral to support accounts receivable.
Purchases
— The Company has diversified its sources for product components and finished
goods and, as a result, the loss of a supplier would not have a material impact
on the Company’s operations. For the nine month period ended December
31, 2008, the Company had five suppliers who accounted for a total of 29% of
gross purchases. For the nine month period ended December 31, 2007,
the Company had five suppliers who accounted for a total of 55% of gross
purchases.
Revenues
— For the nine months ended December 31, 2008 the Company had five customers
that accounted for 55% of total revenues. Out of these five
customers, one accounted for 60% and another accounted for 11% of total
revenues. For the nine month period ended December 31, 2007 the
Company had five customers that accounted for 62% of total
revenues.
8.
|
ACCOUNTS RECEIVABLE AND
ALLOWANCE FOR DOUBTFUL
ACCOUNTS
|
A summary
of accounts receivable and allowance for doubtful accounts as of December 31,
2008 and March 31, 2008 is as follows:
|
|
December 31, 2008
|
|
|
March 31, 2008
|
|
Accounts
receivable, gross
|
|
$
|
2,640,961
|
|
|
$
|
1,935,101
|
|
Less:
allowance for doubtful accounts
|
|
|
(28,310
|
)
|
|
|
(32,181
|
)
|
Accounts
receivable, net
|
|
$
|
2,612,651
|
|
|
$
|
1,902,920
|
|
Inventories
are stated at the lower of cost (weighted average) or
market. Inventory costs include material, labor and manufacturing
overhead. Individual components of inventory are listed below as
follows:
|
|
December 31, 2008
|
|
|
March 31, 2008
|
|
Raw
materials
|
|
$
|
22,251
|
|
|
$
|
29,788
|
|
Components
|
|
|
1,105,195
|
|
|
|
970,101
|
|
Finished
goods
|
|
|
823,067
|
|
|
|
376,632
|
|
|
|
|
1,950,513
|
|
|
|
1,376,521
|
|
Less:
reserve for obsolescence
|
|
|
(13,910
|
)
|
|
|
(15,812
|
)
|
Net
inventory
|
|
$
|
1,936,603
|
|
|
$
|
1,360,709
|
|
Prepaid
expenses are summarized as follows:
|
|
December
31, 2008
|
|
|
March
31, 2008
|
|
Prepaid
materials and components
|
|
$
|
1,406,386
|
|
|
$
|
588,639
|
|
Prepaid
Belgium income taxes
|
|
|
-
|
|
|
|
79,060
|
|
Prepaid
consulting
|
|
|
11,367
|
|
|
|
62,237
|
|
VAT
payments in excess of VAT receipts
|
|
|
95,177
|
|
|
|
117,467
|
|
Royalties
|
|
|
34,775
|
|
|
|
39,530
|
|
Prepaid
trade show expenses
|
|
|
4,341
|
|
|
|
25,276
|
|
Prepaid
rent
|
|
|
831
|
|
|
|
10,812
|
|
Other
|
|
|
32,625
|
|
|
|
47,152
|
|
|
|
$
|
1,582,502
|
|
|
$
|
970,173
|
|
11.
|
PROPERTY AND
EQUIPMENT
|
Property
and equipment are summarized as follows:
|
|
December
31, 2008
|
|
|
March
31, 2008
|
|
Furniture
and Fixtures
|
|
$
|
216,741
|
|
|
$
|
182,079
|
|
Machinery
and Equipment
|
|
|
1,288,283
|
|
|
|
801,251
|
|
Tooling
|
|
|
188,450
|
|
|
|
254,450
|
|
|
|
|
1,693,474
|
|
|
|
1,237,780
|
|
Accumulated
depreciation
|
|
|
(776,213
|
)
|
|
|
(545,171
|
)
|
Property
& equipment, net
|
|
$
|
917,261
|
|
|
$
|
692,609
|
|
12.
|
LONG
TERM INVESTMENTS AND ADVANCES
|
Innovative Medical & Dental
Solutions, LLC (“IMDS, LLC”)
Effective
July 15, 2007 the Company entered into a Limited Liability Company Merger and
Equity Reallocation Agreement (the “Participation Agreement”) through its
subsidiary, Remedent N.V. Pursuant to the terms of the Participation
Agreement, the Company has acquired a 10% equity interest in IMDS, LLC in
consideration for $300,000 which was converted against IMDS
receivables.
The
agreement stipulates certain exclusive world wide rights to certain tooth
whitening technology, and the right to purchase at standard cost certain
whitening lights and accessories and to sell such lights in markets not served
by the LLC. The terms of the Participation Agreement also provide
that Remedent N.V. has the first right to purchase additional
equity. Parties to the Participation Agreement include two officers
of IMDS, LLC, and an individual who is both an officer and director of Remedent
Inc., and certain unrelated parties.
IMDS, LLC
is registered with the Secretary of the State of Florida as a limited liability
company and with the Secretary of the State of California as a foreign
corporation authorized to operate in California. IMDS, LLC is merging
with White Science World Wide, LLC, a limited liability company organized under
the laws of the State of Georgia. The merged companies are operating
as a single entity as IMDS, LLC, a Florida limited liability
company.
Soca Networks Singapore
(“Soca”)
Pursuant
to the terms of a letter of intent dated December 17, 2007, the Company has
agreed to purchase 20% of Soca for a total purchase price of
$750,000. Half of the purchase price has been advanced $375,000 to
Soca as a down payment, pending completion of the agreement
terms. The balance of $375,000 is to be paid through the issuance of
220,588 common shares of the Company’s common stock. The final
agreement is currently being negotiated and management expects to close the
agreement, and issue the 220,588 common shares within the first half of calendar
year 2009.
Teeth
Whitening Patents
In
October 2004, the Company acquired from the inventor the exclusive, perpetual
license to two issued United States patents which are applicable to several
teeth whitening products currently being marketed by the
Company. Pursuant to the terms of the license agreement, the Company
was granted an exclusive, worldwide, perpetual license to manufacture, market,
distribute and sell the products contemplated by the patents subject to the
payment of $65,000 as reimbursement to the patent holder for legal and other
costs associated with obtaining the patents, which was paid in October 2004, and
royalties for each unit sold subject to an annual minimum royalty of $100,000
per year. The Company is amortizing the initial cost of $65,000 for
these patents over a ten year period and accordingly has recorded $27,625 of
accumulated amortization for this patent as of December 31, 2008. The
Company accrues this royalty when it becomes payable to inventory therefore no
provision has been made for this obligation as of December 31, 2008
(2007-Nil).
Universal
Applicator Patent
In
September 2004, the Company entered into an agreement with Lident N.V.
(“Lident”), a company controlled by Mr. De Vreese, the Company’s Chairman, to
obtain an option, exercisable through December 31, 2005, to license an
international patent (excluding the US) and worldwide manufacturing and
distribution rights for a potential new product which Lident had been assigned
certain rights by the inventors of the products, who are unrelated parties,
prior to Mr. De Vreese association with the Company. The patent is an
Italian patent which relates to a single use universal applicator for dental
pastes, salves, creams, powders, liquids and other substances where manual
application could be relevant. The Company has filed to have the
patent approved throughout Europe. The agreement required the Company
to advance to the inventors through Lident a fully refundable deposit of
€100,000 subject to the Company’s due diligence regarding the enforceability of
the patent and marketability of the product, which, if viable, would be assigned
to the Company for additional consideration to the inventors of €100,000 and an
ongoing royalty from sales of products related to the patent equal to 3% of net
sales and, if not viable, the deposit would be repaid in full by
Lident. The consideration the Company had agreed to pay Lident upon
the exercise of the option is the same as the consideration Lident is obligated
to pay the original inventors. Consequently, Lident would not have
profited from the exercise of the option. Furthermore, at a meeting
of the Company’s Board of Directors on July 13, 2005, the Board accepted
Lident’s offer to facilitate an assignment of Lident’s intellectual property
rights to the technology to the Company in exchange for the reimbursement of
Lident’s actual costs incurred relating to the intellectual
property. Consequently, when the Company exercises the option, all
future payments, other than the reimbursement of costs would be paid directly to
the original inventors and not to Lident.
On
December 12, 2005, the Company exercised the option and the Company and the
patent holder agreed to revise the assignment agreement whereby the Company
agreed to pay €50,000 additional compensation in the form of prepaid royalties
instead of the €100,000 previously agreed, €25,000 of which had been paid by the
Company in September 2005 and the remaining €25,000 to be paid upon the
Company’s first shipment of a product covered by the patent. As of
December 31, 2008 the Company has not yet received the final
product. The patent is being amortized over five (5) years and
accordingly, the Company has recorded $73,297 of accumulated amortization for
this patent as of December 31, 2008.
On
October 8, 2004, our wholly owned subsidiary, Remedent N.V., obtained a
mixed-use line of credit facility with Fortis Bank, a Belgian bank, for
€1,070,000 (the “Facility”). The Facility was secured by a first lien
on the assets of Remedent N.V. The purpose of the Facility is to
provide working capital to grow our business and to finance certain accounts
receivable as necessary. Since opening the Facility in 2004, Remedent
N.V. and Fortis Bank have subsequently amended the Facility several times to
increase or decrease the line of credit. On May 3, 2005 the Facility
was amended to decrease the line of credit to €1,050,000. On March
13, 2006 the Facility was amended to increase the mixed-use line of credit to
€2,300,000, consisting of a €1,800,000 credit line based on the eligible
accounts receivable and a €500,000 general line of credit. The latest
amendment to the Facility, dated January 3, 2008, amended and decreased the
mixed-use line of credit to €2,050,000, to be used by Remedent N.V. and/or
Sylphar N.V. Each line of credit carries its own interest rates and
fees as provided in the Facility. Remedent N.V. and Sylphar N.V. are
currently only utilizing two lines of credit, advances based on account
receivables and the straight loan. As of December 31, 2008 and March
31, 2008, Remedent N.V. and Sylphar N.V. had in aggregate, $907,558 and $779,718
in advances outstanding, respectively, under this mixed-use line of credit
facility.
On June
15, 2005, the Company entered into two five year capital lease agreements for
manufacturing equipment totaling €70,296 (US $84,650). On October 24,
2006, the Company entered into another five year capital lease agreement for
additional manufacturing equipment totaling €123,367 (US
$148,559). On May 15, 2008, the Company entered into a third capital
lease agreement over a three year period for additional manufacturing
equipment totaling €63,395 (US $ 98,516).The leases require monthly payments of
principal and interest at 7.43% of €1,172 (US$1,630,52 at December 31, 2008) for
the first two leases and 9.72% of €2,056 (US$2,859,90 at December 31, 2008) and
provide for buyouts at the conclusion of the five year term of €2,820 (US$3,923)
or 4.0% of original value for the first two contracts and €4,933 (US $6,861) or
4.0 % of the original value for the second contract. The third lease
contract requires monthly payments of principal and interest at 9.40% of €1,761
(US $ 2,449,55 at December 31, 2008) and provides for buyout at the conclusion
of the three year term of €633,95 (US $ 881,82) or 1% of the original value of
this contract.
The net
book value as of December 31, 2008 and March 31, 2008 of the equipment subject
to the foregoing leases are $198,464 and $251,854,
respectively.
16.
|
DUE TO RELATED PARTIES AND
RELATED PARTY TRANSACTIONS
|
Borrowings
from employees and entities controlled by officers of the Company are,
unsecured, non-interest bearing, and due on demand.
Transactions
with related parties that are not otherwise disclosed elsewhere in these
financial statements consisted of the following:
Compensation:
During
the nine month periods ended December 31, 2008 and 2007 respectively, the
Company incurred $514,836 and $483,304 respectively, as compensation for all
directors and officers.
Sales
Transactions:
One of
the Company’s directors owns a minority interest in a client company, IMDS Inc.,
to which goods were sold during the nine months ended December 31, 2008 and 2007
totaling $87,463 and $29,524 respectively. Accounts receivable with
this customer as at December 31, 2008 and March 31, 2008 totaled $33,601 and
$80,523 respectively.
Other
Transactions:
In
connection with the restructuring of the OTC business, the Company sold fifty
percent (50%) of its interest in Remedent OTC to Robin List, a former Chief
Executive Officer, President and Director of the Company, in exchange for
723,000 restricted shares of common stock of the Company held by Mr. List
(“Exchanged Shares”), pursuant to a Share Purchase Agreement on December 10,
2008. The Exchanged Shares were returned to treasury. The
Exchanged Shares were valued at $1.15 per share, based on the average of the 52
week high and low bid, for an aggregate value of $831,450. As a
result, Mr. List and the Company equally own 50% of Remedent OTC with the
Company currently controlling Remedent OTC through its board representations
pursuant to the terms of a certain Voting Agreement entered into by the Company
and Mr. List concurrently with the Share Purchase Agreement. The
Voting Agreement provided that, the Company would initially have 2 board
representation and Mr. List would will have 1 board
representation. However upon the occurrence of a “Triggering Event”
(as defined in the Voting Agreement), the Company would have 1 board
representation and Mr. List would have 2 board representations.
All
related party transactions involving provision of services or tangible assets
were recorded at the exchange amount, which is the value established and agreed
to by the related parties reflecting arms length consideration payable for
similar services or transfers.
Accrued
liabilities are summarized as follows:
|
|
December
31, 2008
|
|
|
March
31, 2008
|
|
Accrued
employee benefit taxes and payroll
|
|
$
|
183,150
|
|
|
$
|
178,645
|
|
Accrued
Travel
|
|
|
13,220
|
|
|
|
17,667
|
|
Advances
and deposits
|
|
|
97,827
|
|
|
|
212,736
|
|
Commissions
|
|
|
268,687
|
|
|
|
130,875
|
|
Accrued
audit and tax preparation fees
|
|
|
2,607
|
|
|
|
4,000
|
|
Reserve
for warranty costs
|
|
|
20,865
|
|
|
|
23,718
|
|
Accrued
interest
|
|
|
1,459
|
|
|
|
984
|
|
Accrued
consulting fees
|
|
|
56,728
|
|
|
|
35,204
|
|
Accrued
VAT
|
|
|
15,219
|
|
|
|
-
|
|
Other
accrued expenses
|
|
|
383,739
|
|
|
|
177,908
|
|
|
|
$
|
1,043,501
|
|
|
$
|
781,737
|
|
18. CAPITAL
STOCK
On July
11, 2008, the Company issued 358,166 shares of restricted common stock as
partial payment of products and certain exclusivity rights pursuant
to the terms of the Distribution Agreement dated as of June 30, 2008,
which was filed on a Form 8-K on July 7, 2008. The value of the
shares issued was $569,483. The securities issued are exempt from the
registration requirements of the Securities Act of 1933, as amended, pursuant to
Sections 4(2), and Rule 506 of Regulation D of the Securities and Exchange
Commission and from various similar state exemptions.
On each
of November 7, 2008 and December 23, 2008 the Company issued 500,000 common
shares to each of the previous Glamtech shareholders. The 1,000,000
shares were valued at $625,000. (See Note 5.)
On
December 8, 2008 a total of 723,000 restricted common shares were returned to
treasury pursuant to the Company’s sale of 50% of its OTC
business. (See Note 3.)
19.
|
EQUITY COMPENSATION
PLANS
|
The Board
of Directors and stockholders approved the Nonstatutory Stock Option Plan (the
“2001 Plan”) and adopted it on May 29, 2001. The Company has reserved
250,000 shares of its common stock for issuance to the directors, employees and
consultants under the Plan. The Plan is administered by the Board of
Directors. Vesting terms of the options range from immediately to
five years.
Pursuant
to an Information Statement on Schedule 14C mailed on May 9, 2005 to all
stockholders of record as of the close of business on February 1, 2005 and
became effective June 3, 2005, the Company authorized the implementation of a
2004 Incentive and Nonstatutory Stock Option Plan (“2004 Plan”) reserving
800,000 shares of common stock for issuance to employees, directors and
consultants of the Company or any subsidiaries. This plan became
effective as of June 3, 2005 after the Company had completed a one for twenty
reverse split.
On August
17, 2007, pursuant to the terms of the Company’s 2004 Plan, the Company granted
to an employee 100,000 options to purchase the Company’s common stock at a price
of $1.50 per share. These options will vest over the next 3 years and
are exercisable for a period of 5 years. The Company valued the
foregoing options using the Black Scholes option pricing model using the
following assumptions: no dividend yield; expected volatility rate of 115%; risk
free interest rate of 4.75% and an average life of 5 years resulting in a value
of $1.24 per option granted. The value of these options will be
recognized on a straight-line basis over the next three years and accordingly a
value of $28,780 has been recorded in the year ended March 31,
2008.
On
September 21, 2007 the Company granted to employees and directors a total of
570,000 options to purchase the Company’s common stock at a price of $1.75 per
share. These options will vest over the next 3 years and are
exercisable for a period of 10 years. The Company valued the
foregoing options using the Black Scholes option pricing model using the
following assumptions: no dividend yield; expected volatility rate of 115%; risk
free interest rate of 4.75% and an average life of 7 years resulting in a value
of $1.47 per option granted. The value of these options will be
recognized on a straight-line basis over the next three years and accordingly a
value of $265,275 has been recorded in the nine months ended December 31,
2008 (2007 - $101,271).
A summary
of the option activity for the nine months ended December 31, 2008 pursuant to
the terms of the plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Weighted
Average
|
|
|
Outstanding
|
|
|
Weighted
Average
|
|
|
Outstanding
|
|
|
Weighted
Average
|
|
Options
outstanding , March 31, 2008
|
|
|
222,500
|
|
|
$
|
1.29
|
|
|
|
730,666
|
|
|
$
|
4.46
|
|
|
|
150,000
|
|
|
$
|
1.75
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Cancelled
or expired
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Options
outstanding, December 31, 2008
|
|
|
222,500
|
|
|
$
|
1.29
|
|
|
|
730,666
|
|
|
$
|
4.46
|
|
|
|
150,000
|
|
|
$
|
1.75
|
|
Options
exercisable December 31, 2008
|
|
|
222,500
|
|
|
$
|
1.29
|
|
|
|
383,999
|
|
|
$
|
4.46
|
|
|
|
—
|
|
|
|
—
|
|
Exercise
price range
|
|
$
|
1.00 to $4.00
|
|
|
|
|
|
|
$
|
1.50 to $4.00
|
|
|
|
|
|
|
$
|
1.75
|
|
|
|
|
|
Weighted
average remaining life
|
|
3.28 years
|
|
|
|
|
|
|
6.23 years
|
|
|
|
|
|
|
8.73 years
|
|
|
|
|
|
Shares
available for future issuance
|
|
|
27,500
|
|
|
|
|
|
|
|
69,334
|
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
A summary
of the Company’s equity compensation plans approved and not approved by
shareholders is as follows:
|
|
Number
of
securities
to be
issued
upon
exercise
of
outstanding
options,
warrants
and
right
|
|
|
Weighted-average
exercise
price of
outstanding
options
warrants
and rights
|
|
|
Number
of securities
remaining
available for
future
issuance under
equity
compensation
plans
(excluding
securities
reflected
in
column (a))
|
|
Equity
Compensation Plans approved by security holders
|
|
|
1,103,166
|
|
|
$
|
1.93
|
|
|
|
96,834
|
|
Equity
Compensation Plans not approved by security holders
|
|
|
297,298
|
|
|
$
|
1.50
|
|
|
NA
|
|
|
|
|
1,400,464
|
|
|
$
|
1.84
|
|
|
|
96,834
|
|
Prior to
January 1, 2006, the Company accounted for employee stock-based compensation
under the recognition and measurement principles of Accounting Principles Board
Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees,” and related
Interpretations, as permitted by SFAS No. 123, “Accounting for Stock-Based
Compensation”. Under the recognition principles of APB No. 25,
compensation expense related to restricted stock and performance units was
recognized in the financial statements. However, APB No. 25 generally
did not require the recognition of compensation expense for stock options
because the exercise price of these instruments was generally equal to the fair
value of the underlying common stock on the date of grant, and the related
number of shares granted were fixed at that point in time.
Effective
January 1, 2006, the Company adopted the fair value recognition provisions of
SFAS No. 123(R), “Share-Based Payment”. In addition to recognizing
compensation expense related to restricted stock and performance units, SFAS No.
123(R) also requires recognition of compensation expense related to the
estimated fair value of stock options. The Company adopted SFAS No.
123(R) using the modified-prospective-transition method. Under that
transition method, compensation expense recognized subsequent to adoption
includes: (a) compensation cost for all share-based payments granted prior to,
but not yet vested as of January 1, 2006, based on the values estimated in
accordance with the original provisions of SFAS No. 123, and (b) compensation
cost for all share-based payments granted subsequent to January 1, 2006, based
on the grant-date fair values estimated in accordance with the provisions of
SFAS No. 123(R). Consistent with the modified-prospective-transition
method, the Company’s results of operations for prior periods have not been
adjusted to reflect the adoption of FAS 123(R).
20.
|
COMMON STOCK WARRANTS AND OTHER
OPTIONS
|
As of
December 31, 2008, the Company has 10,638,405 warrants outstanding to purchase
the Company’s common stock that were not granted under shareholder approved
equity compensation plans at prices ranging between $1.20 and $3.00 per share
with expiration dates between August 2007 and August 2013 as
follows:
|
|
Outstanding
Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
Warrants
and options outstanding , March 31, 2008
|
|
|
7,260,026
|
|
|
$
|
1.67
|
|
Granted
|
|
|
3,378,379
|
|
|
|
1.48
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
Cancelled
or expired
|
|
|
—
|
|
|
|
—
|
|
Warrants
exercisable December 31, 2008
|
|
|
10,638,405
|
|
|
$
|
1.58
|
|
Exercise
price range
|
|
$
|
1.20 to $3.00
|
|
|
|
|
|
Weighted
average remaining life
|
|
3.29
Years
|
|
|
|
|
|
The
Company valued the warrants granted in the period at $4,323,207, using the Black
Scholes option pricing model using the following assumptions: no dividend yield;
expected volatility rate of 131%; risk free interest rate of 3.07% and an
average life of 5 years resulting in a value of $1.28 per option
granted.
The
Company’s only operating segment consists of dental products and oral hygiene
products. Since the Company only has one segment, no further segment
information is presented.
Customers
Outside of the United States
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
U.S. sales
|
|
$
|
7,045,496
|
|
|
$
|
316,208
|
|
Foreign
sales
|
|
|
4,203,690
|
|
|
|
4,137,691
|
|
|
|
$
|
11,249,186
|
|
|
$
|
4,453,899
|
|
Real
Estate Lease
The
Company leases its 26,915 square feet office and warehouse facility in Deurle,
Belgium from an unrelated party pursuant to a nine year lease commencing
December 20, 2001 at a base rent of $7,018 per month ($9,756 per month at
December 31, 2008). The minimum aggregate rent to be paid over the
remaining lease term based upon the conversion rate for the €at December 31,
2008 is $316,314.
Minimum
monthly lease payments for real estate, and all other leased equipment for the
next three years are as follows based upon the conversion rate for the (Euro) at
December 31, 2008.
March
31, 2009
|
|
$
|
211,655
|
|
March
31, 2010
|
|
|
67,607
|
|
March
31, 2011
|
|
|
37,052
|
|
Total:
|
|
$
|
316,314
|
|
Factoring
Agreement
On April
24, 2008, the Company entered into a Factoring Agreement (“Agreement”) with
First Community Financial, a division of Pacific Western Bank (“First
Community”) whereby First Community may purchase, from time to time, on a
limited recourse basis such of the Company’s accounts now existing or hereafter
created and arising out of the sale of goods or service by the
Company. The factoring credit facility limit is $1,000,000 and
amounts factored are subject to an interest rate of prime plus
2%. Security for the factoring credit facility is a first charge over
all the assets of the Company. The Agreement shall remain in effect
until October 16, 2008 and may be renewed for successive nine month
periods. At October 16, 2008 the Company decided not to renew the
Factoring Agreement.
OEM
Agreement
On June
30, 2008, the Company entered into an OEM Agreement (“Agreement”) with SensAble
Technologies, Inc., a corporation under the laws of Delaware (“SensAble”)
whereby the Company intends to integrate SensAble products and technology into
the Company’s system. The Agreement provides the Company with the
exclusive right to distribute certain SensAble products throughout the world for
a period of twelve months from the date of the Agreement. The Company
has the option and right to extend the initial twelve month exclusivity period
for another twelve months. The term of the Agreement will be for two
years and began on June 30, 2008.