UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 2011
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____.
Commission File No.
001-15975
REMEDENT, INC.
(Exact Name of Registrant as Specified
in Its Charter)
Nevada
|
|
86-0837251
|
(State or Other Jurisdiction
Of Incorporation or Organization)
|
|
(I.R.S. Employer Identification
Number)
|
|
|
|
Zuiderlaan 1-3 bus 8, 9000 Ghent, Belgium
|
|
N/A
|
(Address of Principal Executive Offices)
|
|
(Zip Code)
|
Registrant’s telephone number,
including area code
011 32 9 241 58 80
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements
for the past 90 days.
Yes
x
No
¨
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T ( § 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes
x
No
¨
Indicate by checkmark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act. (Check one):
Large accelerated filer
|
¨
|
Accelerated filer
|
¨
|
|
|
|
|
Non-accelerated filer
|
¨
|
Smaller reporting company
|
x
|
(Do not check if a smaller reporting company)
|
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
Yes
¨
No
x
As of February 8, 2012, there were 19,995,969 outstanding
shares of the registrant’s common stock, includes 723,000 shares of treasury stock.
REMEDENT, INC.
FORM 10-Q INDEX
|
|
Page Number
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|
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|
PART I – FINANCIAL INFORMATION
|
|
|
Item 1. Financial Statements
|
|
|
Condensed Consolidated Balance Sheets as of December 31, 2011 (Unaudited) and March 31, 2011
|
|
1
|
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2011 and December 31, 2010 (Unaudited)
|
|
2
|
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended December 31, 2011 and December 31, 2010 (Unaudited)
|
|
3
|
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2011 and December 31, 2010 (Unaudited)
|
|
4
|
Notes to Consolidated Financial Statements (Unaudited)
|
|
5
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
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24
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk
|
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28
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Item 4. Controls and Procedures
|
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28
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|
|
|
PART II – OTHER INFORMATION
|
|
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Item 1. Legal Proceedings
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28
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Item 1A. Risk Factors
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28
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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28
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Item 3. Defaults Upon Senior Securities
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|
28
|
Item 4. [Removed and Reserved.]
|
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28
|
Item 5. Other Information
|
|
28
|
Item 6. Exhibits
|
|
29
|
Signature Page
|
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30
|
PART I – FINANCIAL INFORMATION
Item 1.
REMEDENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
December 31, 2011
|
|
|
March 31, 2011
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,340,274
|
|
|
$
|
1,662,520
|
|
Accounts receivable, net of allowance for doubtful accounts of $10,152 at December 31, 2011 and $28,975 at March 31, 2011
|
|
|
1,090,581
|
|
|
|
2,764,651
|
|
Inventories, net
|
|
|
1,087,880
|
|
|
|
2,164,046
|
|
Prepaid expenses
|
|
|
914,585
|
|
|
|
762,953
|
|
Total current assets
|
|
|
4,433,320
|
|
|
|
7,354,170
|
|
PROPERTY AND EQUIPMENT, NET
|
|
|
879,770
|
|
|
|
1,401,735
|
|
INVESTMENT IN SYLPHAR
|
|
|
1,129,727
|
|
|
|
—
|
|
Patents, net
|
|
|
—
|
|
|
|
166,746
|
|
Goodwill (Note 3)
|
|
|
699,635
|
|
|
|
699,635
|
|
Total assets
|
|
$
|
7,142,452
|
|
|
$
|
9,622,286
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Current portion, long term debt
|
|
$
|
39,596
|
|
|
$
|
184,679
|
|
Line of credit
|
|
|
1,608,711
|
|
|
|
2,160,674
|
|
Short term loan
|
|
|
500,000
|
|
|
|
400,000
|
|
Accounts payable
|
|
|
991,319
|
|
|
|
1,744,253
|
|
Accrued liabilities
|
|
|
655,575
|
|
|
|
1,256,148
|
|
Deferred revenue (Note 20)
|
|
|
541,444
|
|
|
|
475,250
|
|
Due to related parties
|
|
|
79,789
|
|
|
|
95,354
|
|
Total current liabilities
|
|
|
4,416,434
|
|
|
|
6,316,358
|
|
Long term debt less current portion
|
|
|
1,303,695
|
|
|
|
273,557
|
|
Total liabilities
|
|
|
5,720,129
|
|
|
|
6,589,915
|
|
|
|
|
|
|
|
|
|
|
EQUITY:
|
|
|
|
|
|
|
|
|
REMEDENT, INC. 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 shares issued and outstanding at December 31, 2011 and March 31, 2011)
|
|
|
19,996
|
|
|
|
19,996
|
|
Treasury stock, at cost; 723,000 shares at December 31, 2011 and March 31, 2011
|
|
|
(831,450
|
)
|
|
|
(831,450
|
)
|
Additional paid-in capital
|
|
|
24,894,958
|
|
|
|
24,855,883
|
|
Accumulated deficit
|
|
|
(22,136,316
|
)
|
|
|
(21,113,118
|
)
|
Accumulated other comprehensive (loss) (foreign currency translation adjustment)
|
|
|
(1,716,889
|
)
|
|
|
(834,949
|
)
|
Obligation to issue shares
|
|
|
97,500
|
|
|
|
97,500
|
|
Total Remedent, Inc. stockholders’ equity
|
|
|
327,799
|
|
|
|
2,193,862
|
|
Non-controlling interest
|
|
|
1,094,524
|
|
|
|
838,509
|
|
Total stockholders’ equity
|
|
|
1,422,323
|
|
|
|
3,032,371
|
|
Total liabilities and equity
|
|
$
|
7,142,452
|
|
|
$
|
9,622,286
|
|
COMMITMENTS (Note 18)
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,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
2,102,338
|
|
|
$
|
3,248,396
|
|
|
$
|
8,413,610
|
|
|
$
|
9,786,708
|
|
Cost of sales
|
|
|
329,015
|
|
|
|
911,197
|
|
|
|
1,942,528
|
|
|
|
2,619,476
|
|
Gross profit
|
|
|
1,773,323
|
|
|
|
2,337,199
|
|
|
|
6,471,082
|
|
|
|
7,167,232
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
47,513
|
|
|
|
141,687
|
|
|
|
280,895
|
|
|
|
319,226
|
|
Sales and marketing
|
|
|
711,570
|
|
|
|
629,654
|
|
|
|
2,125,188
|
|
|
|
1,536,644
|
|
General and administrative
|
|
|
1,120,535
|
|
|
|
1,176,078
|
|
|
|
3,713,496
|
|
|
|
3,584,387
|
|
Depreciation and amortization
|
|
|
114,280
|
|
|
|
178,288
|
|
|
|
483,105
|
|
|
|
562,515
|
|
TOTAL OPERATING EXPENSES
|
|
|
1,993,898
|
|
|
|
2,125,707
|
|
|
|
6,602,684
|
|
|
|
6,002,772
|
|
INCOME (LOSS) FROM OPERATIONS
|
|
|
(220,575
|
)
|
|
|
211,492
|
|
|
|
(131,602
|
)
|
|
|
1,164,460
|
|
OTHER INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income
|
|
|
303,925
|
|
|
|
—
|
|
|
|
303,925
|
|
|
|
—
|
|
Interest expense
|
|
|
(117,512
|
)
|
|
|
(52,768
|
)
|
|
|
(345,600
|
)
|
|
|
(142,105
|
)
|
Interest income
|
|
|
133,410
|
|
|
|
11,218
|
|
|
|
232,188
|
|
|
|
123,605
|
|
TOTAL OTHER INCOME (EXPENSES)
|
|
|
319,823
|
|
|
|
(41,550
|
)
|
|
|
190,513
|
|
|
|
(19,040
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) BEFORE INCOME TAXES AND NON-CONTROLLING INTEREST
|
|
|
99,248
|
|
|
|
169,942
|
|
|
|
58,911
|
|
|
|
1,145,420
|
|
PROVISION FOR INCOME TAXES
|
|
|
(105,804
|
)
|
|
|
(91,393
|
)
|
|
|
(314,809
|
)
|
|
|
(140,568
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE NON-CONTROLLING INTEREST, NET OF TAX
|
|
|
(6,556
|
)
|
|
|
78,549
|
|
|
|
(255,898
|
)
|
|
|
1,004,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LESS: NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
|
|
257,656
|
|
|
|
61,808
|
|
|
|
767,303
|
|
|
|
474,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO REMEDENT, INC. Common Stockholders
|
|
$
|
(264,212
|
)
|
|
$
|
16,741
|
|
|
$
|
(1,023,201
|
)
|
|
$
|
530,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS) INCOME PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.03
|
|
Fully diluted
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.05
|
)
|
|
$
|
0.02
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
19,995,969
|
|
|
|
19,995,969
|
|
|
|
19,995,969
|
|
|
|
19,995,969
|
|
Fully diluted
|
|
|
19,995,969
|
|
|
|
30,108,762
|
|
|
|
19,995,969
|
|
|
|
33,989,738
|
|
The accompanying notes are an integral
part of these consolidated financial statements.
REMEDENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
|
|
For the three months ended
December 31,
|
|
|
For the nine months ended
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
Net (Loss) Income Attributable to Remedent Common Stockholders
|
|
$
|
(264,212
|
)
|
|
$
|
16,741
|
|
|
$
|
(1,023,201
|
)
|
|
$
|
530,156
|
|
OTHER COMPREHENSIVE INCOME (LOSS):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
(722,831
|
)
|
|
|
(59,479
|
)
|
|
|
(881,940
|
)
|
|
|
(81,239
|
)
|
Total Other Comprehensive income (loss)
|
|
|
(987,043
|
)
|
|
|
(42,738
|
)
|
|
|
(1,905,141
|
)
|
|
|
448,917
|
|
LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
|
|
—
|
|
|
|
(21,759
|
)
|
|
|
—
|
|
|
|
(24,902
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO REMEDENT Common Stockholders
|
|
$
|
(987,043
|
)
|
|
$
|
(64,497
|
)
|
|
$
|
(1,905,141
|
)
|
|
$
|
424,015
|
|
The accompanying notes are an integral
part of these consolidated financial statements.
REMEDENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(unaudited)
|
|
For the nine months ended
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(255,898
|
)
|
|
$
|
1,004,852
|
|
Adjustments to reconcile net income (loss) to net cash used by operating activities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
483,105
|
|
|
|
562,515
|
|
Inventory reserve
|
|
|
(17,523
|
)
|
|
|
(60,487
|
)
|
Allowance for doubtful accounts
|
|
|
(18,823
|
)
|
|
|
(32,695
|
)
|
Value of stock options issued to employees and consultants
|
|
|
39,075
|
|
|
|
100,657
|
|
Investment income
|
|
|
(303,925
|
)
|
|
|
—
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
821,672
|
|
|
|
(1,285,166
|
)
|
Inventories
|
|
|
231,279
|
|
|
|
120,596
|
|
Prepaid expenses
|
|
|
(269,756
|
)
|
|
|
(150,936
|
)
|
Accounts payable
|
|
|
(134,035
|
)
|
|
|
(132,374
|
)
|
Accrued liabilities
|
|
|
(326,397
|
)
|
|
|
248,092
|
|
Accrued and unpaid interest on debt
|
|
|
100,000
|
|
|
|
—
|
|
Due to related parties
|
|
|
(15,565
|
)
|
|
|
(173,130
|
)
|
Deferred revenue
|
|
|
1,066,194
|
|
|
|
—
|
|
Net cash provided by operating activities
|
|
|
1,399,403
|
|
|
|
201,924
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Cash divested on deconsolidation of Remedent OTC BV
|
|
|
(2,372,445
|
)
|
|
|
—
|
|
Purchases of patent rights
|
|
|
(101,759
|
)
|
|
|
(51,233
|
)
|
Purchases of equipment
|
|
|
(106,922
|
)
|
|
|
(284,451
|
)
|
Net cash used by investing activities
|
|
|
(2,581,126
|
)
|
|
|
(335,684
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Loan payable
|
|
|
1,000,000
|
|
|
|
—
|
|
Net (repayments of) capital lease note payable
|
|
|
(149,512
|
)
|
|
|
(128,516
|
)
|
Proceeds from line of credit
|
|
|
115,387
|
|
|
|
1,462,360
|
|
Net cash provided by financing activities
|
|
|
965,875
|
|
|
|
1,333,844
|
|
NET DECREASE IN CASH
|
|
|
(215,848
|
)
|
|
|
1,200,084
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(106,398
|
)
|
|
|
(76,240
|
)
|
CASH AND CASH EQUIVALENTS, BEGINNING
|
|
|
1,662,520
|
|
|
|
613,466
|
|
CASH AND CASH EQUIVALENTS, ENDING
|
|
$
|
1,340,274
|
|
|
$
|
1,737,310
|
|
Supplemental Information:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
127,852
|
|
|
$
|
82,216
|
|
Income taxes paid
|
|
$
|
—
|
|
|
$
|
91,393
|
|
The accompanying notes are an integral
part of these consolidated financial statements.
REMEDENT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(unaudited)
|
1.
|
DESCRIPTION OF THE COMPANY AND BASIS OF PRESENTATION
|
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 its facility in Beijing, China. The Company
distributes its products using both its own internal sales force and through the use of third party distributors.
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.
In these notes, the terms
“Remedent”, “Company”, “we”, “us” or “our” mean Remedent, Inc. and
all of its subsidiaries, whose operations are included in these consolidated financial statements.
The Company has conducted
a subsequent events review through the date the financial statements were issued, and has concluded that there were no subsequent
events requiring adjustments or additional disclosures to the Company's financial statements at December 31, 2011.
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Organization and
Principles of Consolidation
The accompanying consolidated
financial statements include the accounts of: Remedent N.V. (incorporated in Belgium) located in Ghent , Belgium, Remedent Professional,
Inc. and Remedent Professional Holdings, Inc. (both incorporated in California and inactive), Glamtech-USA, Inc. (a Delaware corporation
acquired effective August 24, 2008), its 50.98% owned subsidiary, Glamsmile (Asia) Limited, a company organized and existing under
the laws of Hong Kong, Beijing Glamsmile Technology Development Ltd., Beijing Glamsmile Trading Co., Ltd., Beijing Glamsmile Dental
Clinic Co., Ltd., and Shanghai Glamsmile Dental Clinic Co., Ltd., Remedent N.V.’s wholly owned subsidiary, GlamSmile
Rome SRL., an Italian private company located in Rome, Remedent N.V.’s 51% owned subsidiary, GlamSmile Deutschland GmbH,
a German private company located in Munich.
Remedent N.V.’s
50% owned subsidiary, Remedent OTC B.V. (a Dutch Holding company) which owns a 75% interest in Sylphar Holding B.V. (a Dutch
holding company) through which ownership Remedent N.V. ultimately has a 37.5% ownership interest in Sylphar N.V.,
a 100% owned company by Sylphar Holding BV, Sylphar USA, a 100% owned Nevada corporation by Sylphar Holding BV. and Sylphar
Asia Pte Ltd. , formerly Remedent Asia Pte Ltd. a 100% owned Singapore company owned by Sylphar Holding
BV, is accounted for using the equity method after September 30, 2011(see Note 3 – Long-term Investment).
Remedent, Inc. is a holding
company with headquarters in Ghent, Belgium. Remedent Professional, Inc. and Remedent Professional Holdings, Inc. have been dormant
since inception. The rebranded Sylphar Asia Pte. Ltd. (formerly 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 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 three and nine months ended December 31, 2011, are not necessarily indicative of the results
that may be expected for the year ended March 31, 2012. Accordingly, your attention is directed to footnote disclosures found
in the Annual Report on Form 10-K for the year ending March 31, 2011, and particularly to Note 2, which includes a summary
of significant accounting policies.
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, property and
equipment, 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.
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.
Revenues from product sales are recognized when
the product is shipped and title and risk of loss has passed to the customer, typically upon delivery and when the quantity and
price is fixed and determinable, and when collectability is reasonable assured.
Upfront fees are recognized upon the date of the
agreement (i.e. point of sale) because they relate solely to the sale of territories (that are sold in perpetuity), are non-refundable,
and are not contingent upon additional deliverables.
We have evaluated all deliverables
in our contracts (per ASC 605-25-5) ((a) territory & (b) manufacturing/marketing training & development fees) and determined
that they are separate, as follows:
|
·
|
Both (a) & (b) have value to our customers
on a standalone basis and can be sold by our customers separately.
|
|
·
|
Delivery or performance of the undelivered
item or items is considered probable and substantially in our control.
|
Our development fees/milestone
payments are recognized in accordance with the Milestone Method pursuant to FASB ASC 605. Revenues from milestones related
to an arrangement under which we have continuing performance obligations i.e. specifically scheduled training and development activities,
if deemed substantive, are recognized as revenue upon achievement of the milestone. Milestones are considered substantive if all
of the following conditions are met: (a) the milestone is non-refundable; (b) achievement of the milestone was not reasonably assured
at the inception of the arrangement; (c) substantive effort is involved to achieve the milestone; and (d) the amount of the milestone
appears reasonable in relation to the effort expended. If any of these conditions is not met, the milestone payment is deferred
and recognized as revenue as we complete our performance obligations.
We receive royalty revenues
under license agreements with third parties that sell products based on technology developed by us or to which we have rights.
The license agreements provide for the payment of royalties to us based on sales of the licensed product. We record these revenues
as earned monthly, based on reports from our licensees.
Goodwill
Goodwill is not amortized,
but is tested for impairment on an annual basis or whenever events or circumstances indicate that the carrying amount may not be
recoverable. These impairment tests are based upon a comparison of the fair value of the reporting units to their respective carrying
amount. If the carrying amount of the reporting unit exceeds its fair value, the goodwill impairment loss is measured as the excess
of the carrying amount of goodwill over its implied fair value. To December 31, 2011, management has not identified any impairment
of goodwill.
Fair Value of Financial Instruments
The Company’s financial
instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, line of credit, short
term and long-term debt. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities
approximate their respective fair values because of the short maturities of those instruments. The Company’s long-term debt
consists of its revolving credit facility, long-term capital lease obligations and long term loans. The carrying value
of the revolving credit facility approximates fair value because of its variable short-term interest rates. The fair
value of the Company’s long-term capital lease obligations and the long term loans are based on current rates for similar
financing.
Accounts Receivable and Allowance
for Doubtful Accounts
The Company sells professional
dental equipment to various companies, primarily to distributors located in Western Europe and the United States of America, and
China. 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 $112,844 at December 31, 2011 and $130,407 at March 31, 2011.
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.
Warranties
The Company typically warrants
its products against defects in material and workmanship for a period of 18 months from shipment.
A tabular reconciliation
of the Company’s aggregate product warranty liability for the reporting periods is as follows:
|
|
Nine months ended
December 31, 2011
|
|
|
Year ended
March 31, 2011
|
|
Product warranty liability:
|
|
|
|
|
|
|
|
|
Opening balance
|
|
$
|
21,260
|
|
|
$
|
20,238
|
|
Reductions for payments made
|
|
|
|
|
|
|
|
|
Accruals for product warranties issued in the period
|
|
|
(1,721
|
)
|
|
|
(11,620
|
)
|
Adjustments to liabilities for pre-existing warranties
|
|
|
—
|
|
|
|
12,642
|
|
Ending liability
|
|
$
|
19,539
|
|
|
$
|
21,260
|
|
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 $19,539 and $21,260 as of December 31, 2011 and March 31, 2011, respectively.
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.
On April 1, 2009, the Company
adopted changes issued by the FASB to the calculation of earnings per share. These changes state that unvested share-based payment
awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities
and shall be included in the computation of earnings per share pursuant to the two-class method for all periods presented. The
adoption of this change had no impact on the Company’s basic or diluted net loss per share because the Company has never
issued any share-based awards that contain non-forfeitable rights.
As of December 31, 2011 and
March 31, 2011, the Company had 19,995,969, shares of common stock issued and outstanding and 7,794,627 warrants outstanding. As
of December 31, 2011 and March 31, 2011, the Company had 2,100,000 and 2,157,500 options outstanding respectively. As
of December 31, 2011, and for the three and nine month periods then ended, all outstanding warrants and options were excluded from
the computation of earnings per share because their effect would have been anti-dilutive. Pursuant to ASC 206-10-50-1(c),
the fully diluted share calculation for the period ended December 31, 2011 excluded all but 1,165,000 options since all other warrants
and options were priced at more than the Company’s share trading price for the nine month period ended December 31, 2011.
Comprehensive Income (Loss)
Comprehensive income (loss)
includes all changes in equity except those resulting from investments by owners and distributions to owners, including 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 (losses) of $(881,940) and
$(81,239) for the nine months ended December 31, 2011 and 2010, respectively. These amounts have been recorded as a separate component
of stockholders’ equity (deficit).
New Accounting Pronouncements
Recently Adopted
In December 2011, the FASB
issued ASU 2011-11, “
Balance Sheet (Topic 210) – Disclosures about offsetting assets and liabilities
”.
ASU 2011-11 requires entities to disclose both gross and net information about both instruments and transactions eligible for offset
in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement.
This scope would include derivatives, sale and repurchase agreements and reverse sale and repurchase agreements, and securities
borrowing and securities lending arrangements. This standard is applicable for annual reporting periods beginning on or after January
1, 2013, and interim periods within those annual periods. Retrospective disclosures will be required for all periods presented.
The adoption of ASU 2011-11 is not expected to have an impact upon the Company’s consolidated financial statements.
In October 2009, the FASB
issued ASU 2009-13,
“Multiple-Deliverable Revenue Arrangements, (amendments to ASC Topic 605, Revenue Recognition)”
(“ASU 2009-13”). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices
of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue
allocation and require revenue to be allocated using the relative selling price method. The standard also expands the disclosure
requirements for multiple deliverable revenue arrangements. ASU 2009-13 should be applied on a prospective basis for revenue arrangements
entered into or materially modified in fiscal years beginning on or after June 15, 2010, which corresponds to the Company’s
fiscal year beginning April 1, 2011. The adoption of ASU 2009-13 has had no impact upon the Company’s consolidated
financial statements.
In October 2009, the FASB
issued ASU 2009-14,
Certain Revenue Arrangements that Include Software Elements – a consensus of the FASB Emerging Issues
Task Force
, which changes the accounting model for revenue arrangements that include both tangible products and software elements.
This new guidance removes from the scope of the software revenue recognition guidance in ASC 985-605, Software Revenue Recognition,
those tangible products containing software components and non-software components that function together to deliver the tangible
product’s essential functionality. In addition, this guidance requires that hardware components of a tangible product containing
software components always be excluded from the software revenue recognition guidance as well as provides further guidance on determining
which software, if any, relating to the tangible product also would be excluded from the scope of software revenue recognition
guidance. The guidance further identifies specific factors in determining whether the tangible product contains software that works
together with the non-software components of the tangible product to deliver the tangible product’s essential functions.
Guidance is also provided on how a vendor should allocate arrangement consideration to deliverables in an arrangement containing
both tangible products and software. The disclosures mandated in ASU 2009-13 are also required by this new guidance. ASU 2009-14
is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15,
2010, which corresponds to the Company’s fiscal year beginning April 1, 2011. The adoption of ASU 2010-14 has had no impact
upon the Company’s consolidated financial statements.
In April 2010, the FASB issued
ASU 2010-17
,” Revenue Recognition – Milestone Method”.
The amendments in this Update provide guidance
on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. A vendor
can recognize consideration that is contingent upon achievement of a milestone in its entirety as revenue in the period in which
the milestone is achieved only if the milestone meets all criteria to be considered substantive. ASU 2010-17 should be applied
on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June
15, 2010, which corresponds to the Company’s fiscal year beginning April 1, 2011. The adoption of ASU 2010-17
has had no impact upon the Company’s consolidated financial statements.
In December 2010, the FASB
issued ASU 2010-28 and updated the accounting guidance relating to the annual goodwill impairment test. The updated guidance requires
companies to perform the second step of the impairment test to measure the amount of impairment loss, if any, when it is more likely
than not that goodwill impairment exists when the carrying amount of a reporting unit is zero or negative. In considering whether
it is more likely than not that goodwill impairment exists, an entity shall evaluate whether there are adverse qualitative factors.
The updated guidance is effective for the Company beginning in the first quarter of fiscal year 2012. The adoption of ASU 2010-28
has had no impact upon the Company’s consolidated financial statements.
Not yet adopted
In May 2011, the FASB issued
ASU 2011-04 and updated the accounting guidance related to fair value measurements. The updated guidance results in a consistent
definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and International
Financial Reporting Standards (IFRS). The updated guidance is effective for the Company beginning in the fourth quarter of fiscal
year 2012. The Company does not expect ASU 2011-04 to have a material effect on the Company’s results of operations, financial
condition, and cash flows.
In June 2011, the FASB issued
ASU 2011-05 and updated the disclosure requirements for comprehensive income. The updated guidance requires companies to disclose
the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. The updated guidance does not affect
how earnings per share is calculated or presented. The updated guidance is effective for the Company beginning in the fourth quarter
of fiscal year 2012. The adoption of ASU 2011-05 is not expected to have a material effect on the Company’s consolidated
financial statements because the Company is already disclosing its comprehensive income as a single continuous statement. In December
2011 the FASB issued ASU 2011-12, “
Comprehensive Income (Topic 220)
” – to defer the adoption date of ASU
2011-05 to fiscal years beginning after December 15, 2011.
In September 2011, the FASB
issued ASU 2011-08, Testing Goodwill for Impairment (“ASU 2011-08”), which amends the guidance in ASC 350-20, Intangibles
– Goodwill and Other – Goodwill. Under ASU 2011-08, entities have the option of performing a qualitative
assessment before calculating the fair value of the reporting unit when testing goodwill for impairment. If the fair
value of the reporting unit is determined, based on qualitative factors, to be more likely than not less than the carrying amount
of the reporting unit, then entities are required to perform the two-step goodwill impairment test. ASU 2011-08 will
be effective for the Company’s fiscal year beginning April 1, 2012, with early adoption permitted. The adoption
of ASU 2011-08 is not expected to have a material effect on the Company’s consolidated financial statements.
|
3
.
|
LONG-TERM INVESTMENTS
|
REMEDENT OTC BV
In connection with the restructuring of the Company’s
OTC business in December 2008, the Company controlled Remedent OTC BV until September 30, 2011 through its board representations.
As agreed upon in the Voting Agreement, after September 30, 2011, the Company had one board representation and consequently no
longer controlled its investment in Remedent OTC BV. As such, the financials of Remedent OTC BV are no longer included in the quarterly
consolidated Financial Statements but accounted for through the equity method. After September 30, 2011, the Company still owned
50% of Remedent OTC BV. For the three months ended December 31, 2011, the Company recorded equity income of $303,925 in “Other
income ” for its portion of the net income recorded by Remedent OTC BV.
The effect of this change on the condensed consolidated
statements of operations for the three months and nine months ended December 31, 2011 and 2010, are discussed in the MD&A
section of this Form 10 Q.
The following tables represent the summary financial information of Remedent OTC BV as
derived from its financial statements and prepared under GAAP:
|
|
Nine month period ended
|
|
Nine month period ended
|
Operating data:
|
|
December 31, 2011
|
|
December 31, 2010
|
|
|
(Unaudited)
|
Revenues
|
|
$
|
2,465,876
|
|
|
$
|
3,879,682
|
|
Gross profit
|
|
|
1,620,363
|
|
|
|
2,341,232
|
|
Income (loss) from operations
|
|
|
95,257
|
|
|
|
243,366
|
|
Net income
|
|
$
|
105,982
|
|
|
$
|
256,423
|
|
ACQUISITION OF GLAMSMILE
(ASIA) LIMITED
Effective January 1, 2010 the
Company acquired 50.98% of the issued and outstanding shares of Glamsmile Asia Ltd. (“Glamsmile Asia”), a private Hong
Kong company, with subsidiaries in Hong Kong and Mainland China, in exchange for the following consideration:
|
1.
|
325,000 Euro (US$466,725). As of March 31, 2011 the full amount was paid.
|
|
2.
|
250,000 shares of common stock to be issued during the fiscal year ended March 31, 2011($97,500
was recorded as an obligation to issue shares as of March 31, 2010) As of December 31, 2011 the shares remain unissued. The
parties have agreed that the shares will be issued during fiscal year ended March 31, 2012.
|
|
3.
|
100,000 options on closing (issued);
|
|
4.
|
100,000 options per opened store at closing (issued);
|
|
5.
|
100,000 options for each additional store opened before the end of 2011 at the price of the opening
date of the store;
|
|
6.
|
Assumption of Glamsmile’s January 1, 2010 deficit of $73,302; and
|
|
7.
|
Repayment of the founding shareholder’s original advances in the amount of $196,599. The
balance of $196,599, recorded as due to related parties at March 31, 2010, is unsecured, non-interest bearing and has no specific
terms of repayment other than it will be paid out of revenues from Glamsmile, as working capital allows. During the
year ended March 31, 2011 a total of $101,245 was paid to the founding shareholder, leaving a balance due of $95,354 which was
paid to the founding shareholder on June 27, 2011.
|
All options reside under the
Company’s option plan and are five year options.
The Company acquired a 50.98%
interest in GlamSmile Asia in order to obtain a platform in the Chinese Market to expand and introduce our GlamSmile Asia concept
into the Chinese Market. In order to sell into the Chinese Market, an approval by Chinese Authorities is required, in the form
of licenses. As GlamSmile Asia was already the owner of such licenses prior to the acquisition, this was an important advantage.
We obtained control of GlamSmile Asia through the acquisition of the 50.98% interest and the appointment of our CEO as a Board
member of GlamSmile Asia.
In connection with this acquisition
the Company has recorded goodwill of $699,635.
|
(a)
|
Details of the acquisition date fair value transferred, and allocation thereof are as follows:
|
|
|
$
|
|
|
|
|
|
Common shares (250,000 at $0.39/share) (rate at December 31, 2009)
|
|
|
97,500
|
|
325,000 Euro (at 1.436077)
|
|
|
466,725
|
|
200,000 stock options (*)
|
|
|
62,108
|
|
Total consideration
|
|
|
626,333
|
|
|
|
|
|
|
Cash
|
|
|
167,288
|
|
Accounts receivable
|
|
|
27,836
|
|
Inventory
|
|
|
23,347
|
|
Equipment, net
|
|
|
76,647
|
|
Accounts payable
|
|
|
145,996
|
|
Accruals
|
|
|
25,446
|
|
Other payables
|
|
|
196,978
|
|
|
|
|
|
|
Net liability (sub-consolidated financial statements of GlamSmile Asia Ltd including the Mainland China Subsidiaries)
|
|
|
73,302
|
|
|
|
|
|
|
Goodwill
|
|
|
699,635
|
|
* The value of the stock
options was determined by using the Black-Scholes valuation model with a stock price of $0.39/share, an option price of $0.39/share,
an expected life of 5 years, a volatility of 112%, a risk free rate of 1.30%, and a dividend rate of zero.
(b) The acquisition
date fair value of the total consideration transferred was allocated amongst assets, liabilities and noncontrolling interest based
upon their fair value at the time of acquisition. We evaluated all current assets for collectability and because they
were current and there was no history of collection problems, determined that their carrying value was equal to their fair value. We
also evaluated all current liabilities and because there was no evidence of over or under accruals, we also determined that the
carrying value of the Company’s current liabilities was equal to fair value. Lastly, we evaluated the fair value
of Glamsmile’s equipment and because it was all recently acquired, i.e. within the past year, because there was no evidence
of impairment, or non-functionality, and because the recorded value of the equipment was approximately equal to its replacement
cost, we also determined that the carrying value of the equipment was equal to its fair value.
On March 25, 2011, the Company
entered into a Loan Agreement (the “Loan Agreement”) with an unrelated private individual pursuant to which the Company
borrowed $400,000 in exchange for a secured promissory note (“Promissory Note”) for a total repayment
amount of $500,000 (“Repayment Amount”) (subsequently paid on January 9, 2012). The Repayment Amount is
due on or by December 31, 2011 (the “Maturity Date”) and represents the total and only indebtedness due and in connection
with the Promissory Note, inclusive of interest. At December 31, 2011 an amount of $100,000 was added as accrued interest for the
period. As set forth in the Security Agreement entered into by the Company concurrently with the execution
of the Loan Agreement (“Security Agreement”), the Repayment Amount is secured by the Company’s right,
title or interest in the payment in the aggregate amount of $500,000, due to the Company by Den-Mat Holdings, LLC (“Den-Mat”)
on December 31, 2011 pursuant to Section 2.3(f) of that certain Amendment No. 1 to First Fit Crown Distribution
and License Agreement made as of February 16, 2010, by and among Company, Remedent N.V., a Belgian corporation and
Den-Mat.
|
5.
|
DISTRIBUTION AGREEMENTS
|
Den-Mat 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”). Pursuant to the Distribution Agreement, the Company 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 all French overseas territories
“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 (the “Territory”).
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);
|
|
(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 (received);
|
|
(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 or (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 the Company;
|
|
(vii)
|
certain milestone payments; and
|
|
(viii)
|
certain royalty payments.
|
The Company has received
$662,274 in royalty payments and $4,000,000 in milestone payments, subsequent to the initial payment of $2,425,000.
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”) (The warrants were issued
in the period ended December 31, 2008 and were valued at $4,323,207 based upon the Black-Scholes option pricing model utilizing
a market price on the date of grant of $1.48 per share, an annualized volatility of 131%, a risk free interest rate of 3.07% and
an expected life of five years;
|
|
(ii)
|
execute and deliver to Den-Mat a registration rights agreement covering the registration of the
Warrant Shares (the “Registration Rights Agreement”) which as of March 31, 2011 has not yet been filed (*); and
|
|
(iii)
|
cause its Chairman of the Board, Guy De Vreese, to execute and deliver to Den-Mat a non-competition
agreement.
|
(*) In 2009, the Company
and Den-Mat agreed that the shares underlying the warrants would be registered pursuant to a registration statement upon the earlier
occurrence of (a) Den-Mat’s demand for the shares to be registered, or (b) an initiation and filing of a registration statement
by other investors or the Company. As of December 31, 2011, neither event has occurred to trigger a registration statement. As
a result, the Company is not under default under the distribution agreement and there is no impact on the distribution agreement
or the accounting for the distribution agreement.
On June 3, 2009, the Distribution
Agreement was amended and restated (the “Amended Agreement”). The Amended Agreement modifies and clarifies certain
terms and provisions which among other things includes:
(1) the expansion of the
list of Excluded Markets to include Spain, Japan, Portugal, South Korea and South Africa for a period of time;
(2) clarification that Den-Mat’s
distribution and license rights are non-exclusive to market, sell and distribute the Products directly to consumers through retail
locations (“B2C Market”) in the Territory and an undertaking to form a separate subsidiary to and to issue warrants
to Den-Mat in the subsidiary in the event that the Company decides to commercially exploit the B2C Market in North America after
January 1, 2010;
(3) subject to certain exceptions,
a commitment from the Company to use Den-Mat as its supplier to purchase all of its, and its licensee’s, GlamSmile products
in the B2C Market from Den-Mat, with reciprocal commitment from Den-Mat to sell such products;
(4) modification of certain
defined terms such as “Guaranty Period,” “Exclusivity Period” and addition of the term “Contract
Period”; and
(5) the “Guaranty Period”
(as defined therein) is no longer a three year period but has been changed to the first three “Contract Periods”. The
first Contract Period commences on the first day of the Guaranty Period (which the Parties agreed has commenced as of April 1,
2009), and continues for fifteen (15) months or such longer period that would be necessary in order for Den-Mat to purchase a certain
minimum number of Units/Teeth as agreed upon in the Amended Agreement (“Minimum Purchase Requirement”) in the event
that the Company’s manufacturing capacity falls below a certain threshold. The second and each subsequent GlamSmile
Contract Period begins on the next day following the end of the preceding “Contract Period” and continues for twelve
(12) months or such longer period that would be necessary in order for Den-Mat to meet its Minimum Purchase Requirement in the
event that the Company’s manufacturing capacity falls below a certain threshold.
In August 2009, the Distribution
Agreement was further amended (the “August Amendment”). The August Amendment expands the Company’s products covered
under the Distribution Agreement to include the Company’s new Prego System Technology (“Prego System”), also
commonly known as “Glamstrip”. Under the Amendment, the $250,000 payment which was originally due upon the expiration
of the first Contract Period (as defined in the Distribution Agreement) is now due on the earlier occurrence of (i) sixty days
from August 11, 2009 or (ii) the performance of the Company’s live patient clinical demonstration of the Prego System to
be performed at Den-Mat’s reasonable satisfaction (received).
The August Amendment also
provides for (a) the royalty rate for products manufactured and sold by Den-Mat using the Prego System after the Guaranty Period
(as defined in the Distribution Agreement), (b) Den-Mat’s right to elect to manufacture or purchase from a third party manufacturer
any or all portion of the minimum purchase requirements under the Distribution Agreement provided however, that if Den-Mat fails
to purchase the minimum number of Units/Teeth as required during any month, Den-Mat may cure such default by paying the Company
a certain royalty on the difference between the minimum purchase requirement and the amount actual purchased by Den-Mat during
such month, with such royalties accruing and being due and payable upon the earlier occurrence of either (1) one hundred twenty days
from August 11, 2009 or (2) the successful performance of the Company’s live patient demonstration of the First Fit
Technology licensed to Den-Mat pursuant to the First Fit-Crown Distribution and License Agreement, to be performed at
Den-Mat’s reasonable satisfaction; and all shortfall payments thereafter being due and payable within 15 days after the end
of the month in which shortfall occurred, and (c) Den-Mat’s option to purchase a certain number of Prego Systems in lieu
of Trays during each of the first three Contract Periods pursuant to the terms, including price and conditions, set forth in the
Amendment so long as such option is exercised during the period commencing on August 11, 2009 and ending on the later of either
91 days or 31 days after the Company demonstrates to Den-Mat that it has the capacity to produce a certain number of Prego System
per Contract Period. Furthermore under the Amendment, if Den-Mat fails to purchase the required minimum Trays during any Contract
Period, such failure may be cured by payment equal to the difference between the aggregate purchase price that would have been
paid had Den-Mat purchased the required minimum and the aggregate purchase price actually paid for such Contract Year within 30
days after the end of such Contract Period. With the exception of the provisions amended by the Amendment, the Distribution Agreement
remains in full force and effect.
First Fit Distribution Agreement
On June 3, 2009, the Company
entered into the First Fit-Crown Distribution and License Agreement (the “First Fit Distribution Agreement”) with Den-Mat. Under
the terms of the First Fit Distribution Agreement, the Company appointed Den-Mat to be its sole and exclusive distributor to market,
license and sell certain products relating to the Company’s proprietary First Fit technology (the “First Fit Products”),
in the United States, Canada and Mexico (the “First Fit Territory”). In connection therewith, the Company
also granted Den-Mat certain non-exclusive rights to manufacture and produce the First Fit Products in the First-Fit Territory;
and a sole and exclusive transferable and sub-licensable right and license to use the Company’s intellectual property rights
relating to the First Fit Products to perform its obligations as a distributor (provided the Company retains the right to use and
license related intellectual property in connection with the manufacture of the First Fit Products for sale outside of the First
Fit Territory).
Consummation of the First
Fit Distribution Agreement is subject to: completion of Den-Mat’s due diligence; execution and delivery of Non-Competition
Agreements; and the delivery of the Development Payment and first installment of the License Payment (the “Development Payment”
and License Payment” are defined below).
Under the First Fit Distribution
Agreement, the Company granted such distribution rights, licensing rights and manufacturing rights, in consideration for the following: (i)
a non-refundable development fee of Four Hundred Thousand Dollars ($400,000) (the “Development Payment”) payable in
two installments of $50,000 each, one within seven days after the effective date of the First Fit Distribution Agreement, and another
$350,000 payment within twenty one days after the Effective Date ($400,000 received as of June 30, 2009); (ii) a non-refundable
license fee of $600,000 payable in three equal installments of $200,000 each, with the first installment payable on the Closing
Date, and with the second and third installments payable on the 30th and 60th day, respectively, after the Closing Date (received);
(iii) certain royalty payments based on the sales of the First Fit Products by Den-Mat or its sub-licensees; and (iv) certain minimum
royalty payments to maintain exclusivity.
Den-Mat’s rights as
an exclusive distributor and licensee will continue at least through the first Contract Period (defined below) and until the termination
of the First Fit Distribution Agreement. Den-Mat’s exclusivity ends at the end of any Contract Period in which
Den-Mat fails to make certain minimum royalty payments. In the event that such exclusivity is terminated, Den-Mat has
the option to either terminate the First Fit Distribution Agreement upon ninety (90) days written notice, or become a non-exclusive
distributor and licensee, in which event Den-Mat’s obligation to pay certain agreed upon royalties would continue. “Contract
Period” means the following periods: (A) the first eighteen months beginning on the first day of the month following
the month in which the Closing occurs, provided that if Den-Mat is not fully operational within sixty days after the Closing Date,
the first Contract Period will be extended by one day for each day after the sixtieth day until Den-Mat becomes fully operational;
(B) the subsequent twelve months; and (C) each subsequent twelve month period thereafter, in each case during which the First Fit
Distribution Agreement is in effect.
On March 29, 2010, a certain
Amendment No. 1 was made to the First Fit Distribution Agreement dated June 3, 2009. The terms of Amendment No. 1 are
as follows:
The total purchase price
for the First Fit IP consists of installment payments and royalty payments. The cash component of the purchase
price of the First Fit IP is $2,850,000 to be paid in the form of cash in the following installments: (a) $50,000 upon delivery
by Remedent to Den-Mat of a working prototype of the First Fit crown (received); (b) $525,000 on or before March 15, 2010 (received);
(c) $700,000 on June 30, 2010(received); and (d) $500,000 on December 31, 2010(received), June 30, 2011 (during the three
months ended June 30, 2011 the Company agreed to postpone receipt of the $500,000 due from Den-Mat on June 30, 2011 to be
received as follows: $250,000 at the end of September, 2011 (received) and $250,000 at the end of October, 2011(received)) and
December 31, 2011 (see Note 4). As of December 31, 2011 the Company’s accounts receivable includes $448,777 due
from Den-Mat.
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, 2011, five customers accounted for 78.4%
of the Company’s trade accounts receivables, and one customer accounted for 50.4%. 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 months ended December 31, 2011 the Company had five
suppliers who accounted for 25.2% of gross purchases. For the nine months ended December 31, 2010 the Company had five suppliers
who accounted for 26% of gross purchases.
Revenues — For
the nine months ended December 31, 2011 the Company had five customers that accounted for 25.9% of total revenues. For the nine
months ended December 31, 2010 the Company had five customers that accounted for 38.8% of total revenues.
|
7.
|
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
|
The Company’s
accounts receivable at period end were as follows:
|
|
December 31, 2011
|
|
|
March 31, 2011
|
|
Accounts receivable, gross
|
|
$
|
1,100,733
|
|
|
$
|
2,793,626
|
|
Less: allowance for doubtful accounts
|
|
|
(10,152
|
)
|
|
|
(28,975
|
)
|
Accounts receivable, net
|
|
$
|
1,090,581
|
|
|
$
|
2,764,651
|
|
Inventories at period end
are stated at the lower of cost (first-in, first-out) or net realizable value and consisted of the following:
|
|
December 31, 2011
|
|
|
March 31, 2011
|
|
Raw materials
|
|
$
|
60,412
|
|
|
$
|
72,305
|
|
Components
|
|
|
274,415
|
|
|
|
685,553
|
|
Finished goods
|
|
|
865,897
|
|
|
|
1,536,595
|
|
|
|
|
1,200,724
|
|
|
|
2,294,453
|
|
Less: reserve for obsolescence
|
|
|
(112,844
|
)
|
|
|
(130,407
|
)
|
Net inventory
|
|
$
|
1,087,880
|
|
|
$
|
2,164,046
|
|
Prepaid expenses
are summarized as follows:
|
|
December 31, 2011
|
|
|
March 31, 2011
|
|
Prepaid materials and components
|
|
$
|
494,098
|
|
|
$
|
469,784
|
|
Prepaid Belgium taxes
|
|
|
—
|
|
|
|
8,249
|
|
VAT payments in excess of VAT receipts
|
|
|
71,536
|
|
|
|
153,012
|
|
Prepaid trade show expenses
|
|
|
20,287
|
|
|
|
25,973
|
|
Prepaid royalties
|
|
|
17,675
|
|
|
|
—
|
|
Prepaid interest
|
|
|
—
|
|
|
|
—
|
|
Prepaid rent
|
|
|
164,043
|
|
|
|
11,907
|
|
Other
|
|
|
146,946
|
|
|
|
94,028
|
|
|
|
$
|
914,585
|
|
|
$
|
762,953
|
|
|
10.
|
PROPERTY AND EQUIPMENT
|
Property and equipment
are summarized as follows:
|
|
December 31, 2011
|
|
|
March 31, 2011
|
|
Furniture and Fixtures
|
|
$
|
957,091
|
|
|
$
|
985,926
|
|
Machinery and Equipment
|
|
|
2,159,587
|
|
|
|
2,894,888
|
|
Tooling
|
|
|
—
|
|
|
|
188,450
|
|
|
|
|
3,116,678
|
|
|
|
4,069,264
|
|
Accumulated depreciation
|
|
|
(2,236,908
|
)
|
|
|
(2,667,529
|
)
|
Property & equipment, net
|
|
$
|
879,770
|
|
|
$
|
1,401,735
|
|
The Company has a mixed-use
line of credit facility with BNP Paribas Fortis Bank, a Belgian bank (the “Facility”). The Facility is secured
by a first lien on the assets of Remedent N.V. On January 3, 2008, an amendment was made decreasing 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 and varies from the current prevailing bank rate.
The latest amendment to the
Facility, dated June 7, 2010, amended and split the line of credit to €1,250,000, to be used by Remedent NV and € 1,000,000
to be used Sylphar NV. Each line of credit carries its own interest rates and fees as provided in the Facility and vary from the
current prevailing bank rate of approximately 3.27%, for draws on the credit line, to 9.9% for advances on accounts receivable
concerning Remedent N.V. and similar for Sylphar N.V. Remedent N.V and Sylphar NV are currently only utilizing two lines of credit,
advances based on account receivables and the straight loan. As of December 31, 2011 and March 31, 2011, Remedent N.V. had in aggregate,
$1,608,711 and $2,160,674 in advances outstanding, respectively, under the mixed-use line of credit facilities.
Capital Lease Agreements:
On August 18, 2009, the Company
entered into a capital lease agreement over a three year period for additional manufacturing equipment totaling €170,756 (US
$222,427). On January 15, 2010, the Company entered into a capital lease agreement over a 5 year period for veneer manufacturing
equipment totaling € 251,903 (US $328,129).
The leases require monthly
payments of principal and interest at between 7.43% and 9.72% and provide for buyouts at the conclusion of the lease terms of between
1% and 4% of the original value of the contract.
In most cases, management
expects that in the normal course of business, leases will be renewed or replaced by other leases.
The net book value as of
December 31, 2011 and March 31, 2011 of the equipment subject to the foregoing leases are $313,153 and $458,236 respectively.
The following is a schedule
by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments
as of December 31, 2011:
Year ending March 31:
|
|
|
|
|
|
|
|
|
|
2012
|
|
$
|
42,493
|
|
2013
|
|
|
121,606
|
|
2014
|
|
|
82,805
|
|
2015 and 2016
|
|
|
83,509
|
|
Later years
|
|
|
—
|
|
Total minimum lease payments
|
|
|
330,413
|
|
Less: Amount representing estimated executory costs (such as taxes, maintenance, and insurance), including profit thereon, included in total minimum lease payments
|
|
|
—
|
|
Net minimum lease payments
|
|
|
330,413
|
|
Less: Amount representing interest (*)
|
|
|
17,260
|
|
Present value of minimum lease payments (**)
|
|
$
|
313,153
|
|
* Amount necessary to reduce net minimum
lease payments to present value calculated at the Company’s incremental borrowing rate at the inception of the leases.
** Reflected in the balance sheet as current and
non-current obligations under capital leases of $39,596 and $273,557 respectively.
Secured Debt Agreement
On June 3, 2011, the Company obtained a loan in
the principal amount of $1,000,000 (the “Loan”) from an unrelated private company, In connection with the Loan, the
Company issued a promissory note, with a simple interest rate of 5% per annum, secured by certain assets of the Company (the “Note”). The
maturity date of the Note is June 3, 2014. Interest of $50,000 per annum is payable in cash on an annual basis.
|
13.
|
DUE TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS
|
Transactions with
related parties not disclosed elsewhere in these financial statements consisted of the following:
Compensation:
During the nine month periods
ended December 31, 2011 and 2010 respectively, the Company incurred $497,561 and $560,207 respectively, as compensation for all
directors and officers.
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, 2011
|
|
|
March 31, 2011
|
|
Accrued employee benefit taxes and payroll
|
|
$
|
101,286
|
|
|
$
|
545,815
|
|
Accrued travel
|
|
|
9,770
|
|
|
|
26,468
|
|
Advances and deposits
|
|
|
78,669
|
|
|
|
374,511
|
|
Commissions
|
|
|
—
|
|
|
|
26,553
|
|
Accrued audit and tax preparation fees
|
|
|
6,000
|
|
|
|
21,586
|
|
Reserve for warranty costs
|
|
|
19,539
|
|
|
|
21,260
|
|
Reserve for income taxes
|
|
|
209,606
|
|
|
|
113,588
|
|
Accrued interest
|
|
|
3,642
|
|
|
|
2,704
|
|
Accrued consulting fees
|
|
|
131,372
|
|
|
|
19,935
|
|
Other accrued expenses
|
|
|
95,691
|
|
|
|
103,728
|
|
|
|
$
|
655,575
|
|
|
$
|
1,256,148
|
|
|
15.
|
EQUITY COMPENSATION PLANS
|
As of December 31, 2011,
the Company had three equity compensation plans approved by its stockholders (1) the 2001 Incentive and Non-statutory Stock Option
Plan (the “2001 Plan”), (2) the 2004 Incentive and Non-statutory Stock Option Plan (the “2004 Plan”); and
(3) the 2007 Equity Incentive Plan (the “2007 Plan”). The Company’s stockholders approved the 2001 Plan reserving
250,000 shares of common stock of the Company pursuant to an Information Statement on Schedule 14C filed with the Commission on
August 15, 2001. In addition, the Company’s 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,
the Company’s 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 the Company’s stockholders, the Company has 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 the Company.
The following table provides
aggregate information as of December 31, 2011 with respect to all compensation plans (including individual compensation arrangements)
under which equity securities are authorized for issuance.
|
|
2001 Plan
|
|
|
2004 Plan
|
|
|
2007 Plan
|
|
|
Other
|
|
|
|
Outstanding
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Outstanding
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Outstanding
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Outstanding
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, March 31, 2011
|
|
|
250,000
|
|
|
|
1.20
|
|
|
|
557,500
|
|
|
|
0.89
|
|
|
|
1,000,000
|
|
|
|
1.15
|
|
|
|
350,000
|
|
|
|
.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options expired
|
|
|
(32,500
|
)
|
|
|
.13
|
|
|
|
(25,000
|
)
|
|
|
1.80
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
Options outstanding, December 31, 2011
|
|
|
217,500
|
|
|
|
1.20
|
|
|
|
532,500
|
|
|
|
0.89
|
|
|
|
1,000,000
|
|
|
|
1.15
|
|
|
|
350,000
|
|
|
|
.97
|
|
Options exercisable December 31, 2011
|
|
|
208,433
|
|
|
|
1.20
|
|
|
|
532,500
|
|
|
|
1.65
|
|
|
|
931,665
|
|
|
|
1.04
|
|
|
|
300,000
|
|
|
|
.70
|
|
Exercise price range
|
|
$
|
1.00
to $2.00
|
|
|
|
|
|
|
$
|
0.50
- $1.75
|
|
|
|
|
|
|
$
|
0.50 - $1.75
|
|
|
|
|
|
|
$
|
.39
- 1.75
|
|
|
|
|
|
Weighted average remaining life
|
|
|
1.1
years
|
|
|
|
|
|
|
|
5.7
years
|
|
|
|
|
|
|
|
6.4 years
|
|
|
|
|
|
|
|
4.8
years
|
|
|
|
|
|
A summary of the Company’s equity compensation plans
approved and not approved by shareholders is as follows:
Plan Category
|
|
Number of
securities to
be
issued upon
exercise of
of
outstanding
options,
warrants
and rights
|
|
|
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
|
|
|
1,750,000
|
|
|
$
|
1.13
|
|
|
|
300,000
|
|
Equity Compensation Plans not approved by security holders
|
|
|
820,000
|
|
|
$
|
.97
|
|
|
|
NA
|
|
Total
|
|
|
2,570,000
|
|
|
$
|
1.08
|
|
|
|
300,000
|
|
For the nine month period ended December 31, 2011
the Company recognized $39,075 (2010 — $100,657) in compensation expense in the consolidated statement of operations.
|
16.
|
COMMON STOCK WARRANTS AND OTHER OPTIONS
|
As of December 31, 2011 and
March 31, 2011, the Company had warrants to purchase the Company’s common stock outstanding that were not granted under shareholder
approved equity compensation plans as follows:
|
|
Outstanding
Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
Warrants outstanding March 31, 2011 and December 31, 2011
|
|
|
7,794,627
|
|
|
|
1.50
|
|
Warrants exercisable December 31, 2011
|
|
|
7,794,627
|
|
|
$
|
1.50
|
|
Exercise price range
|
|
$
|
1.00 to $1.65
|
|
|
|
|
|
Weighted average remaining life
|
|
|
.97 Years
|
|
|
|
|
|
The Company’s only
operating segment consists of dental products and oral hygiene products sold by Remedent Inc., Remedent N.V., GlamSmile Deutschland
GmbH, GlamSmile Rome SRL and GlamSmile Asia Ltd.
|
|
Revenues
for the nine month
period ended
December 31, 2011
|
|
|
Revenues
for the nine month
period ended
December 31,
2010
|
|
|
|
Revenues (a)
|
|
|
Revenues (a)
|
|
United States
|
|
$
|
884,114
|
|
|
|
2,030,788
|
|
Europe
|
|
|
4,099,465
|
|
|
|
5,955,209
|
|
China
|
|
|
3,430,031
|
|
|
|
1,799,987
|
|
Singapore
|
|
|
—
|
|
|
|
724
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,413,610
|
|
|
|
9,786,708
|
|
|
|
Long-lived Assets
As of
December 31, 2011
|
|
|
Long-lived Assets
As of
March 31, 2011
|
|
United States
|
|
$
|
699,635
|
|
|
$
|
700,222
|
|
Europe
|
|
|
1,665,578
|
|
|
|
1,183,795
|
|
China
|
|
|
343,919
|
|
|
|
383,871
|
|
Singapore
|
|
|
-
|
|
|
|
228
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,709,132
|
|
|
$
|
2,268,116
|
|
(a) Revenues are attributed to country based on location
of customer.
Real Estate Lease:
The Company leases an office
facility of 2,045 square feet in Gent, Belgium to support the sales and marketing division of our veneer business, from an unrelated
party pursuant to a nine year lease commencing September 1, 2008. Additionally, to support and house our Research and Development
Division, as of October 15, 2009, an additional 2,290 square feet are being leased from the same unrelated party from which we
lease out sales and marketing division, at a base rent of €5,031 per month for the total location ($6,553 per month at
December 31, 2011).
The Company leases an office
facility of 1,991 square feet in Rome, Italy to support the sales and marketing division of our veneer business, from an unrelated
party pursuant to a six year lease commencing July 1, 2011, at a base rent of €6,500 per month for the total location
($8,467 per month at December 31, 2011).
Real Estate Lease and All
Other Leased Equipment:
Minimum monthly lease payments
for real estate, and all other leased equipment are as follows based upon the conversion rate for the (Euro) at December 31, 2011:
March 31, 2012
|
|
$
|
108,519
|
|
March 31, 2013
|
|
|
449,750
|
|
March 31, 2014
|
|
|
399,126
|
|
March 31, 2015
|
|
|
343,535
|
|
March 31, 2016
|
|
|
248,367
|
|
After five years
|
|
|
302,432
|
|
Total:
|
|
$
|
1,851,729
|
|
|
19.
|
FINANCIAL INSTRUMENTS
|
The FASB ASC topic 820 on fair value
measurement and disclosures establishes three levels of inputs that may be used to measure fair value: quoted prices in active
markets for identical assets or liabilities (referred to as Level 1), observable inputs other than Level 1 that are observable
for the asset or liability either directly or indirectly (referred to as Level 2), and unobservable inputs to the valuation methodology
that are significant to the measurement of fair value of assets or liabilities (referred to as Level 3).
The carrying values and fair values of our financial instruments
are as follows:
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
March 31, 2011
|
|
|
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Level
|
|
|
value
|
|
|
Value
|
|
|
Level
|
|
|
Value
|
|
|
value
|
|
Cash and cash equivalents
|
|
|
1
|
|
|
$
|
1,340,740
|
|
|
$
|
1,340,740
|
|
|
|
1
|
|
|
$
|
1,662,520
|
|
|
$
|
1,662,520
|
|
Accounts receivable
|
|
|
2
|
|
|
$
|
1,090,581
|
|
|
$
|
1,090,581
|
|
|
|
2
|
|
|
$
|
2,764,651
|
|
|
$
|
2,764,651
|
|
Long term investments and advances
|
|
|
3
|
|
|
$
|
1,879,727
|
|
|
$
|
1,129,727
|
|
|
|
3
|
|
|
$
|
750,000
|
|
|
$
|
—
|
|
Line of credit
|
|
|
2
|
|
|
$
|
1,608,711
|
|
|
$
|
1,608,711
|
|
|
|
2
|
|
|
$
|
2,160,674
|
|
|
$
|
2,160,674
|
|
Short term debt
|
|
|
2
|
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
|
|
2
|
|
|
$
|
400,000
|
|
|
$
|
400,000
|
|
Deferred revenue
|
|
|
2
|
|
|
$
|
541,444
|
|
|
$
|
541,444
|
|
|
|
2
|
|
|
$
|
475,250
|
|
|
$
|
475,250
|
|
Accounts payable
|
|
|
2
|
|
|
$
|
991,319
|
|
|
$
|
991,319
|
|
|
|
2
|
|
|
$
|
1,744,252
|
|
|
$
|
1,744,252
|
|
Accrued liabilities
|
|
|
2
|
|
|
$
|
655,575
|
|
|
$
|
655,575
|
|
|
|
2
|
|
|
$
|
1,256,148
|
|
|
$
|
1,256,148
|
|
Due to related parties
|
|
|
2
|
|
|
$
|
79,789
|
|
|
$
|
79,789
|
|
|
|
2
|
|
|
$
|
95,354
|
|
|
$
|
95,354
|
|
Long term debt
|
|
|
2
|
|
|
$
|
1,303,695
|
|
|
$
|
1,303,695
|
|
|
|
2
|
|
|
$
|
458,236
|
|
|
$
|
458,236
|
|
The following method was used to estimate
the fair values of our financial instruments:
The carrying amount of level 1 and level
2 financial instruments approximates fair value because of the short maturity of the instruments.
Financial assets are considered Level
3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at
least one significant model assumption or input is unobservable. Level 3 financial assets also include certain investment securities
for which there is limited market activity such that the determination of fair value requires significant judgment or estimation.
The Company reviews the fair value hierarchy
classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels
for certain securities within the fair value hierarchy. The Company’s policy is to recognize transfers into and out of levels
within the fair value hierarchy at the end of the fiscal quarter in which the actual event or change in circumstances that caused
the transfer occurs. There were no significant transfers between Level 1, Level 2, or Level 3 during the nine months ended December
31, 2011. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance
of the unobservable inputs to the overall fair value measurement.
20. DEFERRED REVENUE
In September 2010, we entered into a license agreement with Excelsior Medical (HK) (“EM” and the
“EM License Agreement”). Under the EM License Agreement, we granted EM an exclusive license to certain Asian territories
in exchange for $500,000 which was received and recognized during the year ended March 31, 2011.
The Company received a further $500,000
from EM as an advance payment for veneers. The $500,000 advance, less taxes withheld, has been recorded as deferred
revenue of $475,250. Upon delivery of veneers the COGS will be recorded and the revenue recognized. As of December 31,
2011 the veneers have not yet been delivered.
During the Quarter ending December 31,
2011, we entered into two additional and new Veneer License agreements with different parties. Under the different license agreements,
we granted exclusive licenses to certain a territories in exchange for $39,078, which were recognized during the quarter ending
December 31, 2011.
Further to these and earlier license
contracts, we received advance payments for veneers, totaling $149,799. Upon delivery of veneers the COGS is recorded and the revenue
recognized. At the end of the quarter, ending December 31, 2011, $90,726 for veneers was not yet delivered. As such, the revenue
was not recognized and was classified as deferred revenue.
21. NON-CONTROLLING INTERESTS
Following is a continuity of non-controlling interests:
Non-controlling interests, March 31, 2011
|
|
$
|
838,509
|
|
Net income attributable to non-controlling interests
|
|
|
767,303
|
|
Deconsolidation of Remedent OTC BV
|
|
|
(511,288
|
)
|
Non-controlling interests, December 31, 2011:
|
|
$
|
1,094,524
|
|
22. SUBSEQUENT EVENTS
Effective as of January 11, 2012, the
Company entered into a Rescission Agreement with Excelsior Medical (HK) (“Excelsior”) and Asia Best Healthcare Co.,
Ltd., pursuant to which the parties agreed to rescind the Exclusive B2C Distribution Agreement dated September 29, 2010 (“Distribution
Agreement”), which granted Excelsior certain distribution rights to market veneers and trays in certain Asian territories
in exchange for a license fee of $500,000. In addition, under the Distribution Agreement, Excelsior made an advance payment of
$500,000 to the Company for veneers to be marketed thereunder. Under the Rescission Agreement, the Company agreed to repay a total
of $1,000,000 it received under the Distribution Agreement, plus a simple interest rate of 5%, beginning on June 30, 2012, according
to the following payment schedule: (i) $250,000 to be paid no later than June 30, 2012, (ii) $250,000 plus interest on June 30,
2012, (iii) $250,000 plus interest on December 31, 2012, and (iv) $250,000 plus interest on June 30, 2013. The Company also agreed
to secure such obligations owed to Excelsior with certain collateral of the Company.
On January 28, 2012, the Company entered
into a Preference A Shares and Preference A-1 Shares Purchase Agreement (“Share Purchase Agreement”) with Glamsmile
Dental Technology Ltd., a Cayman Islands company and a subsidiary of the Company (“Glamsmile Dental”), Glamsmile (Asia)
Limited, a company organized and existing under the laws of Hong Kong and a substantially owned subsidiary of Glamsmile Dental,
Beijing Glamsmile Technology Development Ltd., Beijing Glamsmile Trading Co., Ltd., Beijing Glamsmile Dental Clinic Co., Ltd.,
and Shanghai Glamsmile Dental Clinic Co., Ltd., Gallant Network Limited, a shareholder of Glamsmile Dental (“Gallant”),
and IDG-Accel China Growth Fund III L.P. (“IDG Growth”), IDG-Accel China III Investors L.P.(“IDG Investors”)
and Crown Link Group Limited (“Crown”)(“IDG Growth, IDG Investors and Crown collectively referred to as the “Investors”),
pursuant to which the Investors agreed to (i) purchase from the Company an aggregate of 2,857,143 shares of Preference A-1 Shares
of Glamsmile Dental, which represents all of the issued and outstanding Preference A-1 Shares of Glamsmile Dental, for an aggregate
purchase price of $2,000,000, and (ii) purchase from Glamsmile Dental an aggregate of 5,000,000 shares of Preference A Shares for
an aggregate purchase price of $5,000,000.
Under the terms of the Share Purchase
Agreement, the Company agreed (a) to indemnify the Investors and their respective affiliates for losses arising out of a breach,
or inaccuracy or misrepresentation in any representation or warranty made by the Company or a breach or violation of a covenant
or agreement made by the Company for up to $1,500,000, and (b) to transfer 500,000 shares of Glamsmile Dental owned by the Company
to the Investors in the event of breach of certain covenants by the Company. In connection with the Share Purchase Agreement, the
Company also agreed to enter into an Investor’s Rights Agreement, Right of First Refusal and Co-Sale Agreement, and Voting
Agreement with the parties. In addition, in connection with the contemplated transactions in the Share Purchase Agreement on January
20, 2012, the Company entered into a Distribution, License and Manufacturing Agreement with Glamsmile Dental pursuant to which
the Company appointed Glamsmile Dental as the exclusive distributor and licensee of Glamsmile Veneer Products bearing the “Glamsmile”
name and mark in the B2C Market in the People’s Republic of China (including Hong Kong and Macau) and Republic of China (Taiwan)
and granted related manufacturing rights and licenses in exchange for the original issuance of 2,857,143 shares of Preference A-1
Shares of Glamsmile Dental and $250,000 (the receipt of which was acknowledged as an off set to payment of certain invoices of
Glamsmile (Asia) Limited).
On February 10, 2012, the sale of the Preference A-1 Shares and the Preference A Shares was completed. As
a result of the closing, the equity ownership of Glamsmile Dental, on an as converted basis, is as follows: 31.4% by the Investors,
39.2 % by Gallant, and 29.4% by the Company. Mr. De Vreese, our chairman, will remain as a director of Glamsmile Dental along with
Mr. David Lok, who is the Chief Executive Officer and director of Glamsmile Dental and principal of Gallant. The Investors have
a right to appoint one director of Glamsmile Dental, and accordingly the Board of Directors of Glamsmile Dental will consists of
Mr. De Vreese, Mr. Lok and a director appointed by the Investors.
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
The discussion contained herein is for
the three and nine months ended December 31, 2011 and December 31, 2010. The following discussion should be read in conjunction
with the Company’s consolidated financial statements and the notes to the consolidated financial statements included elsewhere
in this Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2011. 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. Factors that could cause or contribute to any differences are discussed in “Risk
Factors” and elsewhere in the Company’s annual report on Form 10-K filed on July 14, 2011 with the Securities and Exchange
Commission. Except as required by applicable law or regulation, the Company undertakes no obligation to revise or update
any forward-looking statements contained in this Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2011.
The information contained in this Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2011 is not a complete
description of the Company’s business or the risks associated with an investment in the Company’s common stock. Each
reader should carefully review and consider the various disclosures made by the Company in this Quarterly Report on Form 10-Q and
in the Company’s other filings with the Securities and Exchange Commission.
Overview
We specialize in the research, development,
and manufacturing of oral care and cosmetic dentistry products. 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
distribute our products using both our own internal sales force and through the use of third party distributors.
In connection with the restructuring
of the Company’s OTC business in December 2008, the Company controlled Remedent OTC BV until September 30, 2011 through
its board representations. As agreed upon in the Voting Agreement, after September 30, 2011, the Company had one board representation
and consequently no longer controlled its investment in Remedent OTC BV. As such, the financials of Remedent OTC BV are no longer
included in the quarterly consolidated Financial statementsbut are accounted for through the equity method. After September 30,
2011, the Company still owned 50% of Remedent OTC BV. For the three months ended December 31, 2011, the Company recorded equity
income of $303,925 in “Other income ” for its portion of the net income recorded by Remedent OTC BV.
Results of Operations
Detail of results as a percentage of sales*:
|
|
For the three months ended
December 31,
|
|
For the nine months ended
December 31,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
NET SALES
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
COST OF SALES
|
|
|
15.65
|
%
|
|
|
28.05
|
%
|
|
|
23.09
|
%
|
|
|
26.77
|
%
|
GROSS PROFIT
|
|
|
84.35
|
%
|
|
|
71.95
|
%
|
|
|
76.91
|
%
|
|
|
73.23
|
%
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
2.26
|
%
|
|
|
4.36
|
%
|
|
|
3.34
|
%
|
|
|
3.26
|
%
|
Sales and marketing
|
|
|
33.85
|
%
|
|
|
19.38
|
%
|
|
|
25.26
|
%
|
|
|
15.70
|
%
|
General and administrative
|
|
|
53.30
|
%
|
|
|
36.20
|
%
|
|
|
44.14
|
%
|
|
|
36.63
|
%
|
Depreciation and amortization
|
|
|
5.44
|
%
|
|
|
5.49
|
%
|
|
|
5.74
|
%
|
|
|
5.75
|
%
|
TOTAL OPERATING EXPENSES
|
|
|
94.85
|
%
|
|
|
65.44
|
%
|
|
|
78.48
|
%
|
|
|
61.34
|
%
|
INCOME (LOSS) FROM OPERATIONS
|
|
|
(10.50
|
)%
|
|
|
6.51
|
%
|
|
|
(1.57
|
)%
|
|
|
11.89
|
%
|
Other income (expense)
|
|
|
15.21
|
%
|
|
|
(1.28
|
)%
|
|
|
2.26
|
%
|
|
|
(0.19
|
)%
|
NET INCOME (LOSS)
|
|
|
4.71
|
%
|
|
|
5.23
|
%
|
|
|
.69
|
%
|
|
|
11.70
|
%
|
INCOME TAXES
|
|
|
(5.03
|
)%
|
|
|
(2.81
|
)%
|
|
|
(3.74
|
)%
|
|
|
(1.44
|
)%
|
Net income (loss) attributable to Non-controlling interest
|
|
|
12.26
|
%
|
|
|
1.90
|
%
|
|
|
9.12
|
%
|
|
|
4.85
|
%
|
LOSS ATTRIBUTABLE TO REMEDENT SHAREHOLDERS
|
|
|
(12.58
|
)%
|
|
|
0.53
|
%
|
|
|
(12.17
|
)%
|
|
|
5.42
|
%
|
______________
*Note that above figures are not comparable due to the
equity method used as Remedent OTC BV and its subsidiaries are accounted for using the equity method since September 30, 2011,
while previously the financials of Remedent OTC BV and its subsidiaries were fully included in the financial statements of Remedent
Inc.
Net Sales
We experienced a
sales decrease for the three months ended December 31, 2011 of $1,146,058 or 35.3% to $2,102,338 as compared to $3,248,396 for
the three months ended December 31, 2010. We experienced a sales decrease for the nine months ended December 31, 2011 of $1,373,098
or 14% to $8,413,610 as compared to $9,786,708 for the nine months ended December 31, 2010. The decrease in sales
was mainly because of the de-consolidation of Remedent OTC BV. As we no longer control the board since October 1, 2011, we used
the equity method to record our investment for the quarter ended December 31, 2011. As a consequence, the related sales from Remedent
OTC BV for the three months are no longer part of the reported total sales for the quarter, resulting in a decrease of sales.
Cost of Sales
Our cost of sales decreased for the three
months ended December 31, 2011 by $582,182 or 63.9% to $329,015 as compared to $911,197 for the three months ended December 31,
2010. Cost of sales, as a percentage of net sales, has decreased to 15.65% in the quarter ended December 31, 2011 as compared to
28.05% in the quarter ended December 31, 2010. Our cost of sales for the nine months ended December 31, 2011 decreased
by $676,948 or 25.8% to $1,942,528 as compared to $2,619,476 for the nine months ended December 31, 2010. The decrease in Cost
of Sales was mainly because of the de-consolidation of Remedent OTCBV as explained above.
Cost of sales, as a percentage of net sales, has decreased to 23.09% in the nine months ended December 31,
2011 as compared to 26.77% in the nine months ended December 31, 2010. Cost of sales as a percentage of sales has decreased
due to continued optimization of our production process which enables us to deliver improved quality at a reduced cost. We continue
to improve our processes in order to further decrease costs, without compromising quality.
Gross Profit
Our gross profit decreased by $563,876
or 24.1%, to $1,773,323 for the three month period ended December 31, 2011 as compared to $2,337,199 for the three month period
ended December 31, 2010. Our gross profit as a percentage of sales increased to 84.35% in the three months ended December 31, 2011
as compared to 71.95% for the three months ended December 31, 2010. Our gross profit decreased by $696,150 or 9.7%,
to $6,471,082 for the nine month period ended December 31, 2011 as compared to $7,167,232 for the nine month period ended December
31, 2010. Our gross profit as a percentage of sales increased to 76.91% in the nine months ended December 31, 2011 as compared
to 73.23% for the nine months ended December 31, 2010. The increase in gross profit as a percentage of sales is the
result of our improved production process as explained above.
Operating Expenses
Research and Development
.
Our research and development expenses decreased by $94,174 or 66.5% to $47,513 for the three months ended December 31, 2011 as
compared to $141,687 for the three months ended December 31, 2010. Our research and development expenses decreased
by $38,331 or 12% to $280,895 for the nine months ended December 31, 2011 as compared to $319,226 for the nine months ended December
31, 2010. The decrease in Research and Development is mainly because of the de-consolidation of Remedent OTC BV.
Sales and marketing costs
. Our
sales and marketing costs increased by $81,916 or 13%, to $711,570 for the three months ended December 31, 2011 as compared to
$629,654 for the three months ended December 31, 2010. The increase is largely due to the cost of our marketing efforts with respect
to our new Asian GlamSmile Sales Facility in Shanghai and our start-up of marketing and sales efforts for our new Italian Studio
located in Rome.
Our sales and marketing costs increased
by $588,544 or 38.3%, to $2,125,188 for the nine months ended December 31, 2011 as compared to $1,536,644 for the nine months ended
December 31, 2010. The increase is largely due to market efforts associated with our new Asian GlamSmile sales facility in Shanghai
and our start-up of marketing and sales efforts for our new Italian Studio located in Rome.
General and administrative costs
.
Our general and administrative costs for the three months ended December 31, 2011 and 2010 were $1,120,535 and $1,176,078 respectively,
representing a decrease of $55,543, or 4.7%. Our general and administrative costs for the nine months ended December 31, 2011
and 2010 were $3,713,496 and $3,584,387 respectively, representing an increase of $129,109, or 3.6%. The Company’s general
and administrative costs have increased primarily because of increased costs associated with our Asian GlamSmile facilities and
the start-up costs for our Italian Studio located in Rome.
Depreciation and amortization
. Our
depreciation and amortization decreased $64,008 or 35.9%, to $114,280 for the three months ended December 31, 2011 as compared
to $178,288 for the three months ended December 31, 2010. Our depreciation and amortization decreased $79,410 or 14.1%,
to $483,105 for the nine months ended December 31, 2011 as compared to $562,515 for the nine months ended December 31, 2010. The
decrease is largely due to the complete amortization of previous investments in machinery and equipment.
Other income (expense)
.
Our other income (expense) was $319,823 for the three months ended
December 31, 2011 as compared to $(41,550) for the three months ended December 31, 2010, for an increase in net other income of
$361,373. Our other income (expense) was $190,513 for the nine months ended December 31, 2011 as compared to $(19,040)
for the nine months ended December 31, 2010, an increase in net other income of $209,553. The increase in net other income
is largely because of the inclusion of investment income of $303,925 in the three months ended December 31, 2011, offset by increased
interest expense of $64,744 and $203,495, in the three and nine months ended December 31, 2011 respectively.
Internal and External Sources of Liquidity
As of December 31, 2011, we had current
assets of $4,433,320 compared to $7,354,170 at March 31, 2011. Our current assets decreased by $2,920,850 primarily because of
a decrease in cash and cash equivalents of $322,246, a decrease in accounts receivable of $1,674,850, and a decrease in inventories
of $1,076,166, offset by an increase in prepaid expenses of $152,412. Current liabilities at December 31, 2011 were $4,416,434
as compared to $6,316,358 at March 31, 2011. The decrease in current liabilities of $1,899,924 was primarily as a result
of a decrease in accounts payable of $752,934, a decrease in accrued liabilities of $600,573, a decrease in line of credit of $551,963
and a decrease in the current portion of long-term debt of $145,083.
As of December 31, 2011, we had cash
and cash equivalents of $1,340,274.
On January 28, 2012 we entered into
a Preference A Shares and Preference A-1 Shares Purchase Agreement (“Share Purchase Agreement”) with Glamsmile Dental
Technology Ltd., a Cayman Islands company and a subsidiary of the Company (“Glamsmile Dental”), Glamsmile (Asia) Limited,
a company organized and existing under the laws of Hong Kong and a substantially owned subsidiary of Glamsmile Dental, Beijing
Glamsmile Technology Development Ltd., Beijing Glamsmile Trading Co., Ltd., Beijing Glamsmile Dental Clinic Co., Ltd., and Shanghai
Glamsmile Dental Clinic Co., Ltd., Gallant Network Limited, a shareholder of Glamsmile Dental (“Gallant”), and IDG-Accel
China Growth Fund III L.P. (“IDG Growth”), IDG-Accel China III Investors L.P.(“IDG Investors”) and Crown
Link Group Limited (“Crown”)(“IDG Growth, IDG Investors and Crown collectively referred to as the “Investors”),
pursuant to which the Investors agreed to (i) purchase from the Company an aggregate of 2,857,143 shares of Preference A-1 Shares
of Glamsmile Dental, which represents all of the issued and outstanding Preference A-1 Shares of Glamsmile Dental, for an aggregate
purchase price of $2,000,000, and (ii) purchase from Glamsmile Dental an aggregate of 5,000,000 shares of Preference A Shares
for an aggregate purchase price of $5,000,00. On February 10, 2012, we closed on the transaction and received $2,000,000 for the
sale of our Preference A-1 shares.
We anticipate that we will need to raise
additional funds to satisfy our working capital requirements and implement our business strategy to expand our direct to consumer
business model. We intend to continue to look for opportunities to expand the number of GlamSmile Studios in China and Europe. We will
continue to review our expected cash requirements, make all efforts to collect any aged receivables, and take appropriate cost
reduction measures to ensure that we have sufficient working capital to fund our operations. In the event additional needs
for cash arise, we may seek to raise additional funds from a combination of sources including issuance of debt or equity securities.
Additional financing may not be available on terms favorable to us, or at all. Any additional financing activity could be dilutive
to our current stockholders. If adequate funds are not available or are not available on acceptable terms, our ability
to take advantage of unanticipated opportunities or respond to competitive pressures could be limited.
We are currently investing in new Glamsmile studios in Wenzhou
and Brussels. We have opened studios in Shanghai and Rome and expect further studio openings within the next fiscal
year.
Cash and Cash equivalents
Our balance sheet at December 31,
2011 reflects cash and cash equivalents of $1,340,274 as compared to $1,662,520 as of March 31, 2011, a decrease of
$322,246. The decrease of cash and cash equivalents is primarily as a result of cash provided in operations of $1,399,403 and
from a loan of $1,000,000, offset by a divesture of $2,372,445 in cash from the September 30, 2011 deconsolidation of the
Remedent OTC BV.
Operations
Net cash provided by operations was $1,399,403
for the nine months ended December 31, 2011 as compared to net cash provided by operations of $201,924 for the nine months ended
December 31, 2010. The increase in net cash provided by operations for the nine months ended December 31, 2011 as compared to the
nine months ended December 31, 2010 is primarily as a result of the deconsolidation of Remedent OTC BV and our success in the Asian
market, combined with the success of our Service and License strategy and our Renewed Veneers Sales strategy, which have been very
well received.
Investing activities
Net cash used in investing activities,
net of a cash divestiture of $2,372,445 on the deconsolidation of Remedent OTC BV, totaled $208,681 for the nine months ended December
31, 2011 as compared to net cash used in investing activities of $335,684 for the nine months ended December
31, 2010. Cash used in the nine months ended December 31, 2011 was mainly for additional equipment for our new planned GlamSmile
Studios. Cash used in the nine months ended December 31, 2010 was mainly for machinery and related software to support our
increasing number of veneer designers.
Financing activities
Net cash provided by financing activities
totaled $965,875 for the nine months ended December 31, 2011, as compared to $1,333,884 for the nine months ended December 31,
2010. The decrease in net cash provided by financing activities in the nine month period ended December 31, 2011 of
$367,969 was primarily as a result of the deconsolidation of Remedent OTC BV.
During the nine months ended December
31, 2011 and December 31, 2010, we recognized a (decrease) in cash and cash equivalents of $(106,398) and $(76,240), respectively,
from the effect of exchange rates between the Euro and the US Dollar.
Off-Balance Sheet Arrangements
At December 31, 2011, we did not have
any transactions, obligations or relationships that could be considered off-balance sheet arrangements.
Item 3. Quantitative and
Qualitative Disclosures About Market Risk
Not Applicable.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures
designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the required time periods and
that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial
Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated,
can only provide reasonable assurance of achieving the desired control objective, and management is required to exercise its judgment
in evaluating the cost-benefit relationship of possible controls and procedures.
Management conducted an evaluation,
under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness
of the design and operation of our disclosure controls and procedures as of December 31, 2011. Based on this evaluation,
the Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were effective
as of December 31, 2011.
Changes in Internal Control Over Financial Reporting
There have been no material changes
in our internal controls over financial reporting identified in connection with the evaluation of disclosure controls
and procedures discussed above that occurred during the quarter ended December 31, 2011 or subsequent to that date that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
To the best knowledge of management, there are
no material legal proceedings pending against the Company.
Item 1A. Risk Factors
Not Applicable.
Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon
Senior Securities
None.
Item 4. [Removed and Reserved]
Item 5. Other Information
None.
Item 6. Exhibits
EXHIBIT INDEX
Exhibit No
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Description
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31.1*
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Certifications of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act
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31.2*
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Certifications of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act
|
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32.1*
|
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Certifications of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act
|
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32.2*
|
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Certifications of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act
|
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101.INS**
|
|
XBRL Instance Document
|
|
|
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101.SCH**
|
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XBRL Taxonomy Extension Schema
|
|
|
|
101.CAL**
|
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XBRL Taxonomy Extension Calculation Linkbase
|
|
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101.DEF**
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XBRL Taxonomy Extension Definition Linkbase
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101.LAB**
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XBRL Taxonomy Extension Label Linkbase
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101.PRE**
|
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XBRL Taxonomy Extension Presentation Linkbase
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* Filed herewith
**XBRL (Extensible Business Reporting Language)
information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of
the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934,
as amended, and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
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REMEDENT, INC.
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Date:
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February 20, 2012
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By:
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/s/ Guy De Vreese
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Name:
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Guy De Vreese
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Title:
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Chief Executive Officer
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(Principal Executive Officer)
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Date:
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February 20, 2012
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By:
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/s/ Stephen Ross
|
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Name:
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Stephen Ross
|
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Title:
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Chief Financial Officer
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(Principal Accounting Officer)
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