As
filed with the Securities and Exchange Commission on October 23, 2007
Registration No. 333-144745
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT
NO. 3
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
REMEDENT, INC.
(Name of small business issuer in its charter)
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Nevada
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3843
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86-0837251
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(State or jurisdiction of
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(Primary Standard Industrial
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(I.R.S. Employer
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incorporation or organization)
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Classification Code Number)
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Identification No.)
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Xavier de Cocklaan 42, 9831 Deurle, Belgium
011-329-321-70-80
(Address and telephone number of principal executive offices)
Xavier de Cocklaan 42, 9831 Deurle, Belgium
(Address of principal place of business)
Robin List
Chief Executive Officer
Xavier de Cocklaan 42, 9831 Deurle, Belgium
011-329-321-70-80
(Name, address and telephone number of agent for service)
Copies to:
Scott E. Bartel, Esq.
Kevin F. Barrett, Esq.
Bullivant Houser Bailey PC
1415 L Street, Suite 1000
Sacramento, California 95814
Telephone: (916) 930-2500
Approximate date of proposed sale to the public:
From time to time after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act of 1933,
check the following box.
þ
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b)
under the Securities Act, please check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.
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If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
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If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
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If delivery of the Prospectus is expected to be made pursuant to Rule 434, please check the
following box.
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CALCULATION OF REGISTRATION FEE
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Proposed maximum
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Proposed maximum
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Amount of
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Title of each class of
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Amount of shares
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offering price per
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aggregate offering
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registration
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securities to be registered
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to be Registered
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share
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price
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fee
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Common Stock
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5,600,000
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$
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1.65
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(1)
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$
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9,240,000
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$
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283.67
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Common Stock
underlying warrants
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4,200,000
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(2)
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$
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1.65
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(3)
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$
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6,930,000
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$
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212.75
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Total
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9,800,000
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$
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16,170,000
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$
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496.42
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(4)
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(1)
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Calculated in accordance with Rule 457(c) of the Securities Act of 1933, as amended
(Securities Act). Estimated for the sole purpose of calculating the registration fee and
based upon the average of the bid and ask price per share of our common stock on July 16, 2007
as quoted on the Over-The-Counter Bulletin Board.
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(2)
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Represents the number of shares of common stock offered for resale following the exercise of
warrants.
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(3)
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Calculated in accordance with Rule 457(c) of the Securities
Act of 1933, as amended (Securities Act). Estimated for
the sole purpose of calculating the registration fee and based upon
the average of the bid and ask price per share of our common stock on
July 16, 2007, close in time to the date of the initial filing, as
quoted on the Over-The-Counter Bulletin Board.
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(4)
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Fee $483.53 previously paid.
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Remedent, Inc. hereby amends this registration statement on such date or dates as may be necessary
to delay its effective date until it shall file a further amendment that specifically states that
this registration statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the registration statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.
SUBJECT
TO COMPLETION, DATED OCTOBER 23, 2007
PROSPECTUS
9,800,000 Shares
REMEDENT, INC.
Common Stock
This Prospectus relates to the sale or other disposition of 5,600,000 shares of common stock,
$.001 par value, by the Selling Stockholders listed under Selling Stockholders on page 39 or
their transferees. This Prospectus also covers the sale or other disposition of 4,200,000 shares of
our common stock by the Selling Stockholders or their transferees upon the exercise of outstanding
warrants. We will receive gross proceeds of $6,510,000 if all of the warrants are exercised for
cash by the Selling Stockholders. We will not receive any proceeds from the sale or other
disposition of any common stock by the Selling Stockholders or their transferees.
Our common stock trades on the Over-The-Counter Bulletin Board, under the symbol REMI. On
October 19, 2007, the last reported sale price for our common stock
was $3.05. There is no public
market for the warrants.
The Selling Stockholders may, from time to time, sell, transfer or otherwise dispose of any or
all of their shares of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the prevailing market price, at
varying prices determined at the time of sale or at negotiated prices. See Plan of Distribution.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE RISK FACTORS BEGINNING ON PAGE
4 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The information in this Prospectus is not complete and may be changed. We may not sell these
securities until the registration statement filed with the Securities and Exchange Commission
becomes effective. This Prospectus is not an offer to sell these securities and we are not
soliciting an offer to buy these securities in any state where the offer or sale is not permitted
or would be unlawful prior to registration or qualification under the securities laws of any such
state.
The date of this Prospectus is
, 2007.
TABLE OF CONTENTS
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Page
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34
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39
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39
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39
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40
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40
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40
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F-1
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II-1
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II-1
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II-1
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II-1
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II-3
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II-6
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EXHIBIT 10.37
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EXHIBIT 23.1
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You should rely only on the information contained in this Prospectus. We have not authorized anyone
to provide you with different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the information provided by this
Prospectus is accurate as of any date other than the date on the front cover page of this
Prospectus.
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed information and the
financial statements appearing elsewhere in this Prospectus of Remedent, Inc. (the Company, we,
us, our). This Prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set forth under Risk
Factors and elsewhere in this Prospectus.
Our Business
We are one of the leading providers of cosmetic dentistry products in Europe, including a full
line of professional dental and retail Over-The-Counter teeth whitening products. We manufacture
many of our products in our facility in Deurle, Belgium. We distribute our products using both our
own internal sales force and third party distributors. As a result of this approach, we have
established dealers in 35 countries encompassing, Europe, Asia, Latin America, the Pacific Rim and
the Middle East.
For the last three fiscal years, substantially all of our revenue has been generated by our
Belgian subsidiary, Remedent N.V. Although we have always had effective control over our
subsidiary through common officers and directors, we have owned only twenty two percent (22%) of
our subsidiary until June 3, 2005, at which time we acquired the remaining seventy eight percent
(78%) of our subsidiary through the issuance of 7,715,703 post-split shares of our common stock, in
the aggregate, to Robin List, our Chief Executive Officer, and Lausha, N.V., a company controlled
by Guy De Vreese, our Chairman.
Some of the more significant developments in our business this year included the following:
Introduced our proprietary veneer technology, GlamSmile, into the Belgian market;
Continued to advance our sales and distribution channels for our new teeth whitening
products, iWhite and MetaTray
®
, in Europe and reorganized our sales strategy in the United States
from a direct sales strategy to an indirect sales strategy using distributors;
Introduced our Reme)Sense Tray and Foam Strips product to address the remedy for sensitive
teeth;
In June 2007, we raised $7 million in additional equity capital to fund our efforts to
expand our sales and distribution channels primarily for our GlamSmile veneer product.
Our principal executive offices are located at Xavier de Cocklaan 42, 9831 Deurle, Belgium.
Our telephone number is 011-32-9-321-7080. Our website is at
http://www.remedent.be
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Offering Summary
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Common Stock covered hereby (the Offering)
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9,800,000
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Common Stock outstanding after the Offering
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22,796,245
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Use of Proceeds
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We will not receive any
proceeds from the Offering.
Proceeds we may receive from
the exercise of warrants will
be used for working capital.
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Risk Factors
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The securities covered hereby
involve a high degree of risk
and immediate substantial
dilution. See Risk Factors.
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Over-The-Counter Bulletin Board Symbol
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REMI
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1
Summary of Financial Information
The following table sets forth certain summary financial data. The summarized financial data
for the three months ended June 30, 2007 and 2006 and for the years ended March 31, 2007 and March
31, 2006 have been derived from our unaudited and audited consolidated financial statements
respectively, which are included elsewhere in this Prospectus.
You should read the following information with the more detailed information contained in
Managements Discussion and Analysis of Financial Condition and Results of Operations, and our
financial statements and accompanying notes included elsewhere in this Prospectus.
Consolidated Statements of Operations Data
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For the three months ended
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June 30,
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June 30,
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2007
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2006
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(Unaudited)
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(Unaudited)
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Net sales
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$
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1,244,657
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$
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1,295,639
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Gross profit
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579,229
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745,662
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Income (loss) from operations
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(363,516
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(840,492
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Net income (loss)
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$
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(390,953
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$
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(839,730
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Income (loss) per share
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Basic and fully diluted
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$
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(0.03
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$
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(0.07
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Weighted average shares outstanding
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Basic and fully diluted
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13,611,630
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12,898,178
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Consolidated Balance Sheet Data
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June 30, 2007
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(Unaudited)
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Cash and cash equivalents
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$
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6,893,709
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Total assets
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$
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10,771,334
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Total current liabilities
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$
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4,221,969
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Total liabilities and stockholders equity (deficit)
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$
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6,395,035
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Consolidated Statements of Operations Data
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For the years ended
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March 31,
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March 31,
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2007
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2006
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(Audited)
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(Audited)
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Net sales
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$
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6,676,365
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$
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7,393,948
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Gross profit
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3,333,649
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3,581,485
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Income (loss) from operations
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(1,394,988
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(3,881,222
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Net income (loss)
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$
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(1,496,049
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$
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(3,887,302
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Income (loss) per share
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Basic and fully diluted
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$
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(0.12
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$
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(0.35
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Weighted average shares outstanding
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Basic and fully diluted
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12,971,795
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11,122,754
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Consolidated Balance Sheet Data
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March 31, 2007
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March 31, 2006
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(Audited)
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(Audited)
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Cash and cash equivalents
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$
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126,966
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$
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332,145
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Total assets
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$
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4,377,966
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$
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5,062,944
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Total current liabilities
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$
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3,489,530
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$
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3,044,573
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Total liabilities and stockholders equity (deficit)
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$
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4,377,966
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$
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5,062,944
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2
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical information, this Prospectus contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (the Exchange Act), including statements regarding
the growth of product lines, optimism regarding the business, expanding sales and other statements.
Words such as expects, anticipates, intends, plans, believes, sees, estimates and variations of
such words and similar expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and involve certain risks and uncertainties
that are difficult to predict. Actual results could vary materially from the description contained
herein due to many factors including continued market acceptance of our products. In addition,
actual results could vary materially based on changes or slower growth in the oral care and
cosmetic dentistry products market; the potential inability to realize expected benefits and
synergies; domestic and international business and economic conditions; changes in the dental
industry; unexpected difficulties in penetrating the oral care and cosmetic dentistry products
market; changes in customer demand or ordering patterns; changes in the competitive environment
including pricing pressures or technological changes; technological advances; shortages of
manufacturing capacity; future production variables impacting excess inventory and for the
reasons, among others, described within the various sections of this Prospectus, specifically the
section entitled Risk Factors on page 3. We undertake no obligation to release publicly any
updated information about forward-looking statements to reflect events or circumstances occurring
after the date of this Prospectus or to reflect the occurrence of unanticipated events.
Each forward-looking statement should be read in context with, and with an understanding of,
the various disclosures concerning our business made elsewhere in this Prospectus, as well as other
public reports filed by us with the United States Securities and Exchange Commission. Readers
should not place undue reliance on any forward-looking statement as a prediction of actual results
of developments.
The risks described below are the ones we believe are most important for you to consider,
these risks are not the only ones that we face. If events anticipated by any of the following risks
actually occur, our business, operating results or financial condition could suffer and the trading
price of our common stock could decline.
RISK FACTORS
Investment in our common stock involves risk. You should carefully consider the risks we
describe below before deciding to invest. The market price of our common stock could decline due to
any of these risks, in which case you could lose all or part of your investment. In assessing these
risks, you should also refer to the other information included in this Prospectus, including our
consolidated financial statements and the accompanying notes. You should pay particular attention
to the fact that we are a holding company with substantial operations in Belgium and are subject to
legal and regulatory environments that in many respects differ from that of the United States. Our
business, financial condition or results of operations could be affected materially and adversely
by any of the risks discussed below and any others not foreseen. This discussion contains
forward-looking statements.
Risks Relating To Our Business
We have a history of losses and we could suffer losses in the future.
With the exception of a small profit of $16,149 on revenue of $5,234,855 for the fiscal year
ended March 31, 2004, we have incurred substantial losses. Our losses were $1,963,806 on revenue of
$733,853 for the fiscal year ended March 31, 2002; $1,006,374 on revenue of $1,969,144 for the
fiscal year ended March 31, 2003; $103,428 on revenues of $7,072,300 for the fiscal year ended
March 31, 2005; $3,887,302 on revenues of $7,393,948 for the year ended March 31, 2006 and
$1,496,049 on revenues of $6,676,365 for the fiscal year ended March 31, 2007. Losses for the
three month period ended June 30, 2007 were $390,953 on revenues of $1,244,657.
Although we have experienced significant growth in our revenues since 2002, we cannot assure
you that we will attain sustainable profitability on a quarterly or annual basis in the future. We
expect to continue to incur increasing cost of revenues, research and development expenses, sales
and marketing and general and administrative expenses commensurate with our growth in revenue. In
order to achieve and sustain profitability, we will need to generate and sustain increased
revenues.
3
Our quarterly sales and operating results have fluctuated and may continue to fluctuate in future
periods which may cause the price of our common stock to decline.
Our quarterly sales and operating results have fluctuated and are likely to continue to vary
from quarter to quarter due to a number of factors, many of which are not within our control.
Factors that might cause quarterly fluctuations in our sales and operating results include, but are
not limited by the following:
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variation in demand for our products, including variation due to seasonality;
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our ability to research, develop, introduce, market and gain market acceptance of new
products and product enhancements in a timely manner;
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Our ability to control costs;
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The size, timing, rescheduling or cancellation of orders from distributors;
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The introduction of new products by competitors;
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long sales cycles and fluctuations in sales cycles;
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The availability and reliability of components used to manufacture our products;
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changes in our pricing policies or those of our suppliers and competitors, as well as
increased price competition in general;
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The risks and uncertainties associated with our international business;
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costs associated with any future acquisitions of technologies and businesses;
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developments concerning the protection of our proprietary rights; and
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general global economic, political, international conflicts, and acts of terrorism.
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In addition, our research and development expenses for the year ended March 31, 2007 were $341,764
compared to $1,153,897 for the year ended March 31, 2006, which is a decrease of $812,133, or 337%,
over the prior fiscal year. The principal reason for this decrease was the result of a settlement
agreement and release reached with an individual who had been assisting in development of our
MetaTray
®
and iWhite
®
products. As consideration for past services performed by this individual and
the release of any and all claims under this individuals prior agreements with us, we (i) issued
two hundred thousand (200,000) shares of our restricted common stock pursuant to the terms and
conditions of a Stock Purchase Agreement, and; (ii) issued to this individual options to purchase
150,000 shares of our common stock. Due to a subsequent Settlement Agreement and Release with this
individual (Settlement Agreement), it was agreed that the prior agreement was terminated and we
agreed to pay this individual $65,000 in settlement of all accounts which was recorded as an
expense as of the date of the Settlement Agreement and he in turn agreed to the cancellation of his
options to purchase 150,000 shares of our common stock in exchange for certain product rights that
we elected not to pursue.
The government extensively regulates our products and failure to comply with applicable regulations
could result in fines, suspensions, seizure actions, product recalls, injunctions and criminal
prosecutions.
Before most medical devices can be marketed in the United States, they are required by the
United States Food and Drug Administration (FDA) to secure either clearance of a pre-market
notification pursuant to Section 510(k) of the Federal Food, Drug and Cosmetic Act (FDC Act) (a
510(k) Clearance) or approval of a pre-market approval application (PMA). Obtaining approval of
a PMA application can take several years. In contrast, the process of obtaining 510(k) Clearance
generally requires a submission of substantially less data and generally involves a shorter review
period. As discussed more specifically under the subsection title Regulatory Issue, most Class I
and Class II devices enter the market via the 510(k) Clearance procedure, while new Class III
devices ordinarily enter the market via the more rigorous PMA procedure. Approval of a PMA
application for a new medical device
4
usually requires, among other things, extensive clinical data on the safety and effectiveness
of the device. PMA applications may take years to be approved after they are filed. In addition to
requiring clearance or approval for new medical devices, FDA rules also require a new 510(k) filing
and review period, prior to marketing a changed or modified version of an existing legally marketed
device, if such changes or modifications could significantly affect the safety or effectiveness of
that device. The FDA prohibits the advertisement or promotion of any approved or cleared device for
uses other than those that are stated in the devices approved or cleared application.
We have received approval from the FDA to market our RemeCure dental curing lamp in the United
States. We submitted our application for approval on FDA Form 510(k) on October 30, 2002 and
received FDA approval for this product on January 9, 2003. None of our other products have FDA
approval for marketing in the United States. However, we believe that our products, GlamSmile,
iWhite
®
and MetaTray
®
do not require a 510(k) submission because the products fall within an
exemption under the 510(k) regulation.
International sales of medical devices are also subject to the regulatory requirements of each
country. In Europe, the regulations of the European Union require that a device have a CE Mark, a
mark that indicates conformance with European Union laws and regulations before it can be sold in
that market. The regulatory international review process varies from country to country. We rely
upon our distributors and sales representatives in the foreign countries in which we market our
products to ensure we comply with the regulatory laws of such countries. Failure to comply with the
laws of such country could have a material adverse effect on our operations and, at the very least,
could prevent us from continuing to sell products in such countries.
We may not have effective internal controls if we fail to remedy any deficiencies we may identify
in our system of internal controls.
In preparation for the annual report of management regarding our evaluation of our internal
controls that is required to be included in our annual report for the year ended March 31, 2008 by
Section 404 of the Sarbanes-Oxley Act of 2002, we will need to assess the adequacy of our internal
control, remediate any weaknesses that may be identified, validate that controls are functioning as
documented and implement a continuous reporting and improvement process for internal controls. We
may discover deficiencies that require us to improve our procedures, processes and systems in order
to ensure that our internal controls are adequate and effective and that we are in compliance with
the requirements of Section 404 of the Sarbanes-Oxley Act. If the deficiencies are not adequately
addressed, or if we are unable to complete all of our testing and any remediation in time for
compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the SEC rules under
it, we would be unable to conclude that our internal controls over financial reporting are designed
and operating effectively, which could adversely affect our investor confidence in our internal
controls over financial reporting.
The loss of or a substantial reduction in, or change in the size or timing of, orders from
distributors could harm our business
.
Our international sales are principally comprised of sales through independent distributors,
although we sell products in certain European countries through direct sales representatives. A
significant amount of our sales may consist of sales through distributors. The loss of a
substantial number of our distributors or a substantial reduction in, cancellation of or change in
the size or timing of orders from our current distributors could harm our business, financial
condition and results of operations. The loss of a key distributor could affect our operating
results due to the potential length of time that might be required to locate and qualify a new
distributor or to retain direct sales representatives for the territory.
We do not have long term commitments from our suppliers and manufacturers.
We may experience shortages of supplies and inventory because we do not have long-term
agreements with our suppliers or manufacturers. The success of our Company is dependent on our
ability to provide our customers with our products. Although we manufacture most of our products,
we are dependent on our suppliers for component parts which are necessary for our manufacturing
operations. In addition, certain of our present and future products and product components are (or
will be) manufactured by third party manufacturers. Since we have no long-term contracts or other
contractual assurances with these manufacturers for continued supply, pricing or access to
component parts, no assurance can be given that such manufacturers will continue to supply us with
adequate quantities of products at acceptable levels of quality and price. While we believe that we
have good relationships with our suppliers and our manufacturers, if we are unable to extend or
secure manufacturing services or to obtain component parts or finished products from one or more
manufacturers on a timely basis and on acceptable terms, our results of operations could be
adversely affected.
5
We face intense competition, and many of our competitors have substantially greater resources than
we do.
We operate in a highly competitive environment. In addition, the competition in the market for
teeth whitening products and services may intensify in the future as we enter into the United
States market. There are numerous well-established companies and smaller entrepreneurial companies
based in the United States with significant resources who are developing and marketing products and
services that will compete with our products. In addition, many of our current and potential
competitors have greater financial, technical, operational and marketing resources. These resources
may make it difficult for us to compete with them in the development and marketing of our products,
which could harm our business.
Our success will depend on our ability to update our technology to remain competitive.
The dental device and supply industry is subject to technological change. As technological
changes occur in the marketplace, we may have to modify our products in order to become or remain
competitive. While we are continuing our research and development in new products in efforts to
strengthen our competitive advantage, no assurances can be given that we will successfully
implement technological improvements to our products on a timely basis, or at all. If we fail to
anticipate or respond in a cost-effective and timely manner to government requirements, market
trends or customer demands, or if there are any significant delays in product development or
introduction, our revenues and profit margins may decline which could adversely affect our cash
flows, liquidity and operating results.
We depend on market acceptance of the products of our customers. If our products do not gain market
acceptance, our ability to compete will be adversely affected.
We launched our MetaTray
®
products in August 2005, iWhite
®
in March 2006, GlamSmile in the
fall of 2006 and the Reme)sense Tray and Foam Strips in the three months ending March 31, 2007. Our
success will depend in large part on our ability to successfully market our line of products and
our ability to receive all regulatory approvals. Although we intend to differentiate our products
from our competitors by targeting different channels of distribution, no assurances can be given
that we will be able to successfully market our products or achieve consumer acceptance. Moreover,
failure to successfully develop, manufacture and commercialize our products on a timely and
cost-effective basis will have a material adverse effect on our ability to compete in our targeted
market segments. In addition, medical and dental insurance policies generally do not cover teeth
whitening procedures, including our products, which may have an adverse impact upon the market
acceptance of our products.
Failure to meet customers expectations or deliver expected performance of our products could
result in losses and negative publicity, which will harm our business
.
If our products fail to perform in the manner expected by our customers, then our revenues may
be delayed or lost due to adverse customer reaction, negative publicity about us and our products,
which could adversely affect our ability to attract or retain customers. Furthermore, disappointed
customers may initiate claims for substantial damages against us, regardless of our responsibility
for such failure.
If product liability lawsuits are successfully brought against us, we may incur substantial
liabilities and may be required to limit commercialization of our products.
Although we have not been a party to any product liability lawsuits and are currently not
aware of any anticipated product liability claims with respect to our products, the nature of our
business exposes us to product liability lawsuits arising out of the commercialization of our
products. In the future, an individual may bring a liability claim against us if one of our
products causes, or merely appears to have caused, an injury. If we cannot successfully defend
ourselves against the product liability claim, we may incur substantial liabilities. Regardless of
merit or eventual outcome, liability claims may result in:
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decreased demand for our products;
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injury to our reputation;
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costs of related litigation;
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6
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substantial monetary awards to customers;
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product recalls;
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loss of revenue; and
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the inability to commercialize our products.
|
We may have difficulty managing our growth.
We have been experiencing significant growth in the scope of our operations and the number of
our employees. This growth has placed significant demands on our management as well as our
financial and operational resources. In order to achieve our business objectives, we anticipate
that we will need to continue to grow. If this growth occurs, it will continue to place additional
significant demands on our management and our financial and operational resources, and will require
that we continue to develop and
improve our operational, financial and other internal controls. Further, to date our business has
been primarily in Europe and were we to launch sales and distribution in the United States, we
would further increase the challenges involved in implementing appropriate operational and
financial systems, expanding manufacturing capacity and scaling up production, expanding our sales
and marketing infrastructure and capabilities and providing adequate training and supervision to
maintain high quality standards. The main challenge associated with our growth has been, and we
believe will continue to be, our ability to recruit and integrate skilled sales, manufacturing and
management personnel. Our inability to scale our business appropriately or otherwise adapt to
growth would cause our business, financial condition and results of operations to suffer.
It may be difficult to enforce a United States judgment against us, our officers and directors, or
to assert United States securities laws claims in Belgium and to serve process on substantially all
our of our directors and officers and these experts.
A majority of our directors and our executive officers are nonresidents of the United States.
A substantial portion of our assets and all or a substantial portion of the assets of these
officers and directors and experts are located outside of the United States. As a result, it may be
difficult to effect service of process within the United States with respect to matters arising
under the United States securities laws or to enforce, in the United States courts, judgments
predicated upon civil liability under the United States securities laws. It also may be difficult
to enforce in Belgium, in original actions or in actions for enforcement of judgment of United
States courts, civil liabilities predicated upon United States securities laws.
If we are unable to protect our intellectual property rights or our intellectual property rights
are inadequate, our competitive position could be harmed or we could be required to incur expenses
to enforce our rights
.
Our future success will depend, in part, on our ability to obtain and maintain patent
protection for our products and technology, to preserve our trade secrets and to operate without
infringing the intellectual property of others. In part, we rely on patents to establish and
maintain proprietary rights in our technology and products. While we hold licenses to a number of
issued patents and have other patent applications pending on our products and technology, we cannot
assure you that any additional patents will be issued, that the scope of any patent protection will
be effective in helping us address our competition or that any of our patents will be held valid if
subsequently challenged. Other companies also may independently develop similar products, duplicate
our products or design products that circumvent our patents.
In addition, if our intellectual property rights are inadequate, we may be exposed to
third-party infringement claims against us. Although we have not been a party to any infringement
claims and are currently not aware of any anticipated infringement claim, we cannot predict whether
third parties will assert claims of infringement against us, or whether any future claims will
prevent us from operating our business as planned. If we are forced to defend against third-party
infringement claims, whether they are with or without merit or are determined in our favor, we
could face expensive and time-consuming litigation. If an infringement claim is determined against
us, we may be required to pay monetary damages or ongoing royalties. In addition, if a third party
successfully asserts an infringement claim against us and we are unable to develop suitable
non-infringing alternatives or license the infringed or similar intellectual property on reasonable
terms on a timely basis, then our business could suffer.
7
If we are unable to meet customer demand or comply with quality regulations, our sales will suffer
.
We manufacture many of our products at our Deurle, Belgium production facilities. In order to
achieve our business objectives, we will need to significantly expand our manufacturing
capabilities to produce the systems and accessories necessary to meet demand. We may encounter
difficulties in scaling-up production of our products, including problems involving production
capacity and yields, quality control and assurance, component supply and shortages of qualified
personnel. In addition, our manufacturing facilities are subject to periodic inspections by foreign
regulatory agencies. Our success will depend in part upon our ability to manufacture our products
in compliance with regulatory requirements. Our business will suffer if we do not succeed in
manufacturing our products on a timely basis and with acceptable manufacturing costs while at the
same time maintaining good quality control and complying with applicable regulatory requirements.
We are dependent on Guy De Vreese, our Chairman, and/or Robin List, our Chief Executive Officer,
and any loss of such key personnel could result in the loss of a significant portion of our
business.
Our success is highly dependent upon the key business relations and expertise of Guy De
Vreese, our Chairman, and/or Robin List, our Chief Executive Officer. Unlike larger companies, we
rely heavily on a small number of officers to conduct a large portion of our business. The loss of
service of our Chairman and/or Chief Executive Officer along with the loss of their numerous
contacts and relationships in the industry would have a material adverse effect on our business. We
do not have employment agreements with Guy De Vreese or Robin List.
Substantially all of our assets are secured under a credit facility with Fortis Bank, a bank
located outside of the United States, and in the event of default under the credit facility we may
lose all of our assets.
On October 8, 2004, our wholly owned subsidiary, Remedent N.V., obtained a mixed-use line of
credit facility with Fortis Bank, a Belgian bank, for
1,070,000 (the Facility). The Facility
was secured by a first lien on the assets of Remedent N.V. The purpose of the Facility is to
provide working capital to grow our business and to finance certain accounts receivable as
necessary. Since opening the Facility in 2004, Remedent N.V. and Fortis Bank have subsequently
amended the Facility several times to increase or decrease the line of credit. On May 3, 2005 the
Facility was amended to decrease the line of credit to
1,050,000. On March 13, 2006 the
Facility was amended to increase the mixed-use line of credit to
2,300,000, consisting of a
1,800,000 credit line based on the eligible accounts receivable and a
500,000 general line
of credit. The latest amendment to the Facility, dated September 1, 2006, amended and decreased the
mixed-use line of credit to
2,050,000. Each line of credit carries its own interest rates and
fees as provided in the Facility. Remedent N.V. is currently only utilizing two lines of credit,
advances based on account receivables and the straight loan. As of March 31, 2007 and March 31,
2006, Remedent N.V. had, in the aggregate, $1,530,276 and $605,200 advances outstanding,
respectively, under this mixed-use line of credit facility. As of June 30, 2007 Remedent N.V. had,
in the aggregate, $1,011,087 advances outstanding under this mixed-use line of credit facility.
We may not be able to secure additional financing to meet our future capital needs.
We anticipate needing significant capital to introduce new products, further develop our
existing products, increase awareness of our brand names and expand our operating and management
infrastructure as we grow sales in Europe, Asia and South America and potentially launch sales and
distribution activities in the United States. We may use capital more rapidly than currently
anticipated. Additionally, we may incur higher operating expenses and generate lower revenue than
currently expected, and we may be required to depend on external financing to satisfy our operating
and capital needs. We may be unable to secure additional debt or equity financing on terms
acceptable to us, or at all, at the time when we need such funding. If we do raise funds by issuing
additional equity or convertible debt securities, the ownership percentages of existing
stockholders would be reduced, and the securities that we issue may have rights, preferences or
privileges senior to those of the holders of our common stock or may be issued at a discount to the
market price of our common stock which would result in dilution to our existing stockholders. If we
raise additional funds by issuing debt, we may be subject to debt covenants, such as the debt
covenants under our secured credit facility, which could place limitations on our operations
including our ability to declare and pay dividends. Our inability to raise additional funds on a
timely basis would make it difficult for us to achieve our business objectives and would have a
negative impact on our business, financial condition and results of operations.
8
Our results of operations may be adversely impacted by currency fluctuations.
We currently have operations in Belgium and distributors in Europe, the Middle East, South
America and Asia. A significant portion of our revenue is in currencies other than United States
dollars, primarily in Euros. Because our financial statements are reported in United States
dollars, fluctuations in Euros against the United States dollar may cause us to recognize foreign
currency transaction gains and losses, which may be material to our operations and impact our
reported financial condition and results of operations.
Substantially all of our operations are located outside of the United States, substantially all of
our sales are generated outside of the United States and substantially all of our assets are
located outside of the United States, subjecting us to risks associated with international
operations.
Our operations
are primarily in Belgium and 92% of our sales for the fiscal year end March 31,
2007 were generated from customers outside of the United States, compared to 94% of our sales for
the fiscal year ended March 31, 2006. The international nature of our business subjects us to the
laws and regulations of the jurisdictions in which we operate and sell our products. In addition,
we are subject to risks inherent in international business activities, including:
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difficulties in collecting accounts receivable and longer collection periods,
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changes in overseas economic conditions,
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fluctuations in currency exchange rates,
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potentially weaker intellectual property protections,
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changing and conflicting local laws and other regulatory requirements,
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political and economic instability,
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war, acts of terrorism or other hostilities,
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potentially adverse tax consequences,
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difficulties in staffing and managing foreign operations, or
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tariffs or other trade regulations and restrictions.
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If we cannot build and maintain strong brand loyalty our business may suffer.
We believe that the importance of brand recognition will increase as more companies produce
competing products. Development and awareness of our brands will depend largely on our ability to
advertise and market successfully. If we are unsuccessful, our brands may not be able to gain
widespread acceptance among consumers. Our failure to develop our brands sufficiently would have a
material adverse effect on our business, results of operations and financial condition.
Risks Relating To Our Common Stock
There is a limited public trading market for our common stock.
Our Common Stock presently trades on the Over the Counter Bulletin Board under the symbol
REMI. We cannot assure you, however, that such market will continue or that you will be able to
liquidate your shares acquired in this offering at the price you paid or otherwise. We also cannot
assure you that any other market will be established in the future. The price of our common stock
may be highly volatile and your liquidity may be adversely affected in the future.
The
potential sale of the shares being offered in this Prospectus, and
those offered in a prior prospectus, may cause the market price
of our common stock to drop significantly, even if our business is doing well.
This Prospectus is offering 9,800,000 shares for sale, which includes 5,600,000 shares of common
stock and 4,200,000 shares of our common stock also held by the Selling Security Holders, or their
transferees, upon the exercise of outstanding warrants. Further, current Selling Security Holder Special Situations Private Equity Fund, L.P. previously offered for resale 3,333,334 shares of our common stock in a prospectus dated October 28, 2005.
In total, the current Selling Security Holders have registered for resale, in this Prospectus, and in the 2005 prospectus, 13,133,334 shares of our common stock.
This total of 13,133,334 shares offered by the Selling Security Holders represents approximately 151% of the outstanding shares held by non-affiliates. (Shares held by non-affiliates are 8,723,517.)
Average daily trading volume for September 2007 was approximately
20,973 shares. This total of 13,133,334 shares offered for resale by
the Selling Share Holders, in this Prospectus and in the 2005 prospectus, represents approximately 62,620% of daily trading volume. Sales of
substantial amounts of our common stock in the public market, or the perception that these sales may occur, could materially
adversely affect the prevailing market price of our common stock and our ability to raise capital
through an offering of our equity securities. Although the Selling Security Holders have
represented that their intention is to be long term investors, there can be no assurance that they
will hold their shares for any length of time.
9
The ownership of our stock is highly concentrated in our management.
As of October 11, 2007, our present directors and executive officers, and their respective
affiliates beneficially owned approximately 35.99% of our outstanding common stock, including
underlying options that were exercisable or which would become exercisable within 60 days of
October 11, 2007. As a result of their ownership, our directors and executive officers and their
respective affiliates collectively are able to significantly influence all matters requiring
shareholder approval, including the election of directors and approval of significant corporate
transactions. This concentration of ownership may also have the effect of delaying or preventing a
change in control.
We have a substantial number of shares authorized but not yet issued.
Our Articles of Incorporation authorize the issuance of up to 50,000,000 shares of common
stock and 10,000,000 shares of preferred stock. Our Board of Directors has the authority to issue
additional shares of common stock and preferred stock and to issue options and warrants to purchase
shares of our common stock and preferred stock without stockholder approval. Future issuance of
common stock and preferred stock could be at values substantially below current market prices and
therefore could represent further substantial dilution to our stockholders. In addition, the Board
could issue large blocks of voting stock to fend off unwanted tender offers or hostile takeovers
without further shareholder approval.
We have historically not paid dividends and do not intend to pay dividends.
We have historically not paid dividends to our stockholders and management does not anticipate
paying any cash dividends on our common stock to our stockholders for the foreseeable future. The
Company intends to retain future earnings, if any, for use in the operation and expansion of our
business.
Our stock may be governed by the penny stock rules, which impose additional requirements on
broker-dealers who make transactions in our stock.
SEC rules require a broker-dealer to provide certain information to purchasers of securities
traded at less than $5.00, which are not traded on a national securities exchange or quoted on the
NASDAQ Stock Market. Since our common stock is not currently traded on an exchange, if the future
trading price of our common stock is less than $5.00 per share, our common stock will be considered
a penny stock, and trading in our common stock will be subject to the requirements of Rules 15g-1
through 15g-9 under the Securities Exchange Act of 1934 (the Penny Stock Rules). The Penny Stock
Rules require a broker-dealer to deliver a standardized risk disclosure document prepared by the
SEC that provides information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer must also give bid and offer quotations and broker and salesperson
compensation information to the prospective investor orally or in writing before or with the
confirmation of the transaction. In addition, the Penny Stock Rules require a broker-dealer to make
a special written determination that the penny stock is a suitable investment for the purchaser and
receive the purchasers written agreement to the transaction before a transaction in a penny stock.
These requirements may severely limit the liquidity of securities in the secondary market because
few broker-dealers may be likely to undertake these compliance activities. Therefore, unless an
exemption is available from the Penny Stock Rules, the disclosure requirements under the Penny
Stock Rules may have the effect of reducing trading activity in our common stock, which may make it
more difficult for investors to sell.
USE OF PROCEEDS
We will not receive any proceeds from the disposition of the common stock covered hereby.
Assuming no adjustments to the exercise price for anti-dilution protection, we will receive gross
proceeds of approximately $6,510,000 in the event that all of the outstanding warrants are
exercised for cash. Any proceeds from the cash exercise of warrants will be used for working
capital purposes, in particular, the launching of our GlamSmile product. Despite the existence of
the warrants, it is possible that none will be exercised and we will not receive any proceeds
therefrom. The warrants will be exercised only if the price of the common stock justifies the
exercise prior to their expiration.
10
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
Our common stock is traded on the Over-The-Counter Bulletin Board under the symbol REMI. As
of October 11, 2007, there were 18,596,245 shares of our common stock issued and outstanding and
approximately 223 stockholders of record, not including beneficial owners whose shares are held by
banks, brokers and other nominees. As of October 11, 2007, 7,735,067 shares of our common stock
were reserved for issuance upon the exercise of outstanding options and warrants.
The following table shows the range of the high and low bid for our common stock as reported
by the Over-The-Counter Bulletin Board for the time periods indicated:
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Bid Prices
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High
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Low
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Quarter ended June 30, 2005
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$
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3.00
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$
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0.94
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Quarter ended September 30, 2005
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$
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4.00
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$
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1.78
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Quarter ended December 31, 2005
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$
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4.00
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$
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2.46
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Quarter ended March 31, 2006
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$
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2.75
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$
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2.43
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Quarter ended June 30, 2006
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$
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2.75
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$
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1.80
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Quarter ended September 30, 2006
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$
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2.10
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$
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1.40
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Quarter ended December 31, 2006
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$
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1.80
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$
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0.95
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Quarter ended March 31, 2007
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$
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2.05
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$
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1.39
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Quarter ended June 30, 2007
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$
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1.85
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$
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1.40
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Quarter ended September 30, 2007
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$
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1.95
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$
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1.40
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Bid quotations represent interdealer prices without adjustment for retail markup, markdown
and/or commissions and may not necessarily represent actual transactions.
Dividend Policy
We have paid no dividends on our common stock since our inception and may not do so in the
future.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
In addition to historical information, this section contains forward-looking statements,
including statements regarding the growth of product lines, optimism regarding the business,
expanding sales and other statements. Words such as expects, anticipates, intends, plans, believes,
sees, estimates and variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future performance and involve
certain risks and uncertainties that are difficult to predict. Actual results could vary materially
from the description contained herein due to many factors including continued market acceptance of
our products. In addition, actual results could vary materially based on changes or slower growth
in the oral care and cosmetic dentistry products market; the potential inability to realize
expected benefits and synergies; domestic and international business and economic conditions;
changes in the dental industry; unexpected difficulties in penetrating the oral care and cosmetic
dentistry products market; changes in customer demand or ordering patterns; changes in the
competitive environment including pricing pressures or technological changes; technological
advances; shortages of manufacturing capacity; future production variables impacting excess
inventory and other risk factors listed in the section of this Prospectus entitled Risk Factors
and from time to time in our Securities and Exchange Commission filings under risk factors and
elsewhere.
Each forward-looking statement should be read in context with, and with an understanding of,
the various disclosures concerning our business made elsewhere in this Prospectus, as well as other
public reports filed by us with the Securities and Exchange Commission. Readers should not place
undue reliance on any forward-looking statement as a prediction of actual results of developments.
Except as required by applicable law or regulation, we undertake no obligation to update or revise
any forward-looking statement contained in this Prospectus. This section should be read in
conjunction with our consolidated financial statements.
The discussion and financial statements contained herein are for the fiscal years ended March
31, 2006 and 2007 and for the three month periods ended June 30, 2007 and 2006. The following
discussion regarding our financial statements should be read in conjunction with the financial
statements included in this Prospectus.
11
Overview
We design, develop, manufacture and distribute cosmetic dentistry products. Leveraging our
knowledge of regulatory requirements regarding dental products and managements experience in the
needs of the professional dental community, we have developed a family of teeth whitening products
for both professional and Over-The-Counter use, that are distributed in Europe, Asia and the
United States. We manufacture many of our products in its facility in Deurle, Belgium as well as
outsourced manufacturing in China. We distribute our products using both our own internal sales
force and through the use of third party distributors. As a result of this approach, we have
established dealers in 35 countries encompassing, Europe, Asia, Latin America, the Pacific Rim and
the Middle East.
For the fiscal years ending March 31, 2003 through 2007 and for the three month period ended
June 30, 2007, substantially all of our revenue has been generated by our Belgian subsidiary,
Remedent N.V., which had experienced substantial growth in its revenues.
Our products can be generally classified into the following categories: professional dental
products and Over-The Counter teeth whitening products. In the fall of 2006, we launched a
proprietary veneer technology product line called GlamSmile. GlamSmile veneers are ultra thin
claddings made from a mixture of a hybrid composite and porcelain materials which are attached to
the front of the patients teeth. Because GlamSmile veneers are so thin, the dentist does not need
to remove healthy tooth structure leaving the patients healthy tooth structure intact results in
several important benefits: (i) no local anesthesia is required to prepare the teeth; (ii) reduced
(if any) tooth sensitivity post-procedure; and (iii) the process is reversible. In addition, in the
three months ended March 31, 2006, a variation of our MetaTray
®
product named iWhite
®
was
introduced to our global retail distribution network. We introduced MetaTray in August 2005, our
next generation of products targeted for the professional dentist market. MetaTray is a completely
self-contained whitening system that can be administered by dentists.
During the second half of the fiscal year ended March 31, 2006, we established sales offices
in Singapore to service the Asian market. In conjunction with the establishment of the office in
Singapore, we formed a wholly owned subsidiary, Remedent Asia Pte Ltd. Although sales in Singapore
have taken time to materialize, we believe progress is being made in establishing market share in
this region.
In June 2007, we completed a private placement of 5,600,000 shares of our common stock at
$1.25 per share and warrants to purchase up to 4,200,000 shares of common stock at an exercise
price of $1.55 per share to certain institutional and accredited investors for an aggregate
purchase price of $7,000,000, of which we received gross proceeds of approximately $6,200,000.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis for Presentation
Our financial statements have been prepared on an accrual basis of accounting, in conformity
with accounting principles generally accepted in the United States of America. These principles
contemplate the realization of assets and liquidation of liabilities in the normal course of
business. The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue from product sales when persuasive evidence of a sale exists:
that is, a product is shipped under an agreement with a customer; risk of loss and title has passed
to the customer; the fee is fixed or determinable; and collection of the resulting receivable is
reasonably assured. Sales allowances are estimated based upon historical experience of sales
returns.
Impairment of Long-Lived Assets
Long-lived assets consist primarily of property and equipment and patents. The recoverability
of long-lived assets is evaluated by an analysis of operating results and consideration of other
significant events or changes in the business environment. If impairment exists, the carrying
amount of the long-lived assets is reduced to its estimated fair value, less any costs associated
with the final settlement. As of March 31, 2007 and
June 30, 2007, we believed there was no impairment of our
long-lived assets.
12
Pervasiveness of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires the Company to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. On an on-going basis, the Company evaluates estimates and judgments,
including those related to revenue, bad debts, inventories, fixed assets, intangible assets, stock
based compensation, income taxes, and contingencies. Estimates are based on historical experience
and on various other assumptions that the Company believes reasonable in the circumstances. The
results form the basis for making judgments about the carrying vales of assets and liabilities that
are not readily apparent from other sources. Actual results could differ from those estimates.
Accounts Receivable and Allowance for Doubtful Accounts
The Company sells professional dental equipment to various companies, primarily to
distributors located in Western Europe. The terms of sales vary by customer, however, generally are
2% 10 days, net 30 days. Accounts receivable is reported at net realizable value and net of
allowance for doubtful accounts. The Company uses the allowance method to account for uncollectible
accounts receivable. The Companys estimate is based on historical collection experience and a
review of the current status of trade accounts receivable.
Research and Development Costs
We expense research and development costs as incurred.
Inventories
We purchase certain of our products in components that require assembly prior to shipment to
customers. All other products are purchased as finished goods ready to ship to customers.
We write down inventories for estimated obsolescence to estimated market value based upon
assumptions about future demand and market conditions. If actual market conditions are less
favorable than those projected, then additional inventory write-downs may be required.
Patents
Patents consist of the costs incurred to purchase patent rights and are reported net of
accumulated amortization. Patents are amortized using the straight-line method over a period based
on their contractual lives.
Conversion of Foreign Currencies
The reporting currency for our consolidated financial statements is the U.S. dollar. The
functional currency for our European subsidiary, Remedent N.V. is the Euro. The functional currency
for Remedent Professional, Inc. is the U.S. dollar. The functional currency for Remedent Asia Pte
Ltd is the Singapore dollar. We translate foreign currency statements to the reporting currency in
accordance with FASB 52. The assets and liabilities whose functional currency is other that the
U.S. dollar are included in the consolidation by translating the assets and liabilities at the
exchange rates applicable at the end of the reporting period. The statements of income are
translated at the average exchange rates during the applicable period. Translation gains or losses
are accumulated as a separate component of stockholders equity.
Stock Based Compensation
In December 2004, the Financial Accounting Standards Board issued SFAS No. 123R, Share-Based
Payment. Subsequently, the Securities and Exchange Commission (SEC) provided for a phase-in
implementation process for SFAS No. 123R, which required adoption of the new accounting standard no
later than January 1, 2006. SFAS No. 123R requires accounting for stock options using a
fair-value-based method as described in such statement and recognize the resulting compensation
expense in our financial statements.
13
Prior to January 1, 2006, we accounted for employee stock options using the intrinsic value
method under APB No. 25, Accounting for Stock Issued to Employees and related Interpretations,
which generally results in no employee stock option expense. We adopted SFAS No. 123R on January 1,
2006 and do not plan to restate financial statements for prior periods. We plan to continue to use
the Black-Scholes option valuation model in estimating the fair value of the stock option awards
issued under SFAS No. 123R. The adoption of SFAS No. 123R has a material impact on our results of
operations. For the year ended March 31, 2007, equity compensation in the form of stock options and
grants of restricted stock totaled $221,959. For the year ended March 31, 2006, equity compensation
in the form of stock options totaled $113,709. For the three months
ended June 30, 2007 the Company recognized $nil (2006 $113,709) in
stock based compensation expense.
Recent Accounting Pronouncements
In February 2006, the Financial Accounting Standard Board (FASB) issued SFAS No. 155,
Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and
140
. This Statement resolves issues addressed in Statement 133 Implementation Issue No. D1,
Application of Statement 133 to Beneficial Interest in Securitized Financial Assets. This
pronouncement will be effective on the fiscal year beginning after September 15, 2006. Currently,
the Company does not have any derivative instruments or participate in any hedging activities, and
therefore the adoption of SFAS No. 155 is not expected to have a material impact on the Companys
financial position or results of operations.
In March 2006, the Financial Accounting Standard Board (FASB) issued SFAS No. 156,
Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140
. This
Statement requires recognition of servicing a financial asset by entering into a servicing contract
in certain situations. This pronouncement will be effective on the fiscal year beginning after
September 15, 2006. Currently, the Company does not have any servicing asset or liability, and
therefore the adoption of SFAS No. 156 is not expected to have a material impact on the Companys
financial position or results of operations.
In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No.
48,
Accounting for Uncertainty in Income Taxes an interpretation of FASB No. 109
(FIN 48).
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a companys financial
statements in accordance with SFAS No. 109 and provides guidance on recognizing, measuring,
presenting and disclosing in the financial statements tax positions that a company has taken or
expected to take on a tax return. FIN 48 is effective for the Company as of April 1, 2007. The
Company is currently evaluating the impact that the adoption of FIN 48 will have on its financial
position and results of operations.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measures
. This Statement defines
fair value, establishes a framework for measuring fair value in generally accepted accounting
principles (GAAP), expands disclosures about fair value measurements, and applies under other
accounting pronouncements that require or permit fair value measurements. SFAS No. 157 does not
require any new fair value measurements. However, the FASB anticipates that for some entities, the
application of SFAS No. 157 will change current practice. SFAS No. 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007, which for the Company is the
fiscal year beginning April 1, 2008. The Company is currently evaluating the impact of SFAS No. 157
but does not expect that it will have a material impact on its financial statements.
In September 2006, the FASB issued SFAS No. 158,
Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans
. This Statement requires an employer to recognize the over
funded or under funded status of a defined benefit post retirement plan (other than a multiemployer
plan) as an asset or liability in its statement of financial position, and to recognize changes in
that funded status in the year in which the changes occur through comprehensive income. SFAS No.
158 is effective for fiscal years ending after December 15, 2006. The implementation of SFAS No.
158 did not have any impact on the Companys financial position and results of operations.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets
and Financial Liabilities
. This Statement permits entities to choose to measure many financial
assets and financial liabilities at fair value. Unrealized gains and losses on items for which the
fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007. The Company is currently assessing the impact of SFAS No.
159 on its financial position and results of operations.
In September 2006, the SEC issued Staff Accounting Bulletin (SAB) No. 108,
Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements
. SAB No. 108 addresses how the effects of prior year uncorrected misstatements should
be considered when quantifying misstatements in current year financial statements. SAB
14
No. 108 requires companies to quantify misstatements using a balance sheet and income
statement approach and to evaluate whether either approach results in quantifying an error that is
material in light of relevant quantitative and qualitative factors. SAB No. 108 is effective for
periods ending after November 15, 2006. The implementation of SAB No. 108 did not have any impact
on the Companys financial position and results of operations.
Results of Operations For the Three Months Ended June 30, 2007 Compared with the Three Months Ended
March 31, 2006
The following table presents our consolidated statements of loss, as a percentage of sales,
for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
NET SALES
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
COST OF SALES
|
|
|
53.46
|
%
|
|
|
57.55
|
%
|
|
|
|
GROSS PROFIT
|
|
|
46.54
|
%
|
|
|
42.45
|
%
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
2.36
|
%
|
|
|
9.67
|
%
|
Sales and marketing
|
|
|
8.29
|
%
|
|
|
29.84
|
%
|
General and administrative
|
|
|
59.81
|
%
|
|
|
64.63
|
%
|
Non cash restructuring expense
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Depreciation and amortization
|
|
|
5.27
|
%
|
|
|
3.18
|
%
|
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
75.74
|
%
|
|
|
107.32
|
%
|
|
|
|
INCOME (LOSS) FROM OPERATIONS
|
|
|
(29.21
|
)%
|
|
|
(64.87
|
)%
|
|
|
|
Other income (expense)
|
|
|
(29.21
|
)%
|
|
|
(64.87
|
)%
|
|
|
|
INCOME (LOSS) BEFORE INCOME
|
|
|
|
|
|
|
|
|
TAXES AND MINORITY INTEREST
|
|
|
(31.41
|
)%
|
|
|
(64.81
|
)%
|
Minority interest
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Income tax benefit (expense)
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
|
NET INCOME (LOSS)
|
|
|
(31.41
|
)%
|
|
|
(64.81
|
)%
|
|
|
|
Net Sales
We experienced a sales decrease for the three months ended June 30, 2007 of $50,982, or 4%, to
$1,244,657 as compared to $1,295,639 for the three months ended June 30, 2006.
At the end of March 2007, the Company announced at the IDS, one of the important Worldwide Dental
Shows, which took place in Koln (Germany), that the Company was currently working on an updated
version of the Remecure. The Launch of the new unit is scheduled for the second half of 2007. The
main reason for the decrease in net sales for the three months ended June 30, 2007 is mostly
attributable to reduced sales of the Remecure product line. It is our belief that the market is
anticipating the launch of the updated version and therefore, over recent months, has been
conservative in placing new orders.
Cost of Sales
Our cost of sales decreased for the three months ended June 30, 2007 by $80,234, or 11%, to
$665,428 as compared to $745,662 for the three months ended June 30, 2006. Accordingly, cost of
sales, as a percentage of net sales, decreased from 58% for the quarter
15
ended June 30, 2006 to 53% for the quarter ended June 30, 2007. Cost of sales has decreased both
because of a decrease in sales and improved cost efficiencies.
We have re-organized our production process and have increased our in-house manufacturing resulting
in lower costs than our previously outsourced third party manufacturing. We continue to closely
monitor and look for new strategies to optimize and improve our current processes in order to
decrease our costs.
Gross Profit
Our gross profit increased by $29,252 or 5%, to $ 597,229 for the three month period ended June 30,
2007 as compared to $549,977 for the three month period ended June 30, 2006. Our gross profit as a
percentage of sales increased by 5% from 42% to 47% compared to the three months ended June 30,
2006 and the three months ended June 30, 2007. The increase in gross profit is the result of the
decrease in cost of sales as discussed above.
Results of Operations For the Fiscal Year Ended March 31, 2007 Compared to Fiscal Year Ended March
31, 2006
Comparative details of results of operations for the years ended March 31, 2007 and 2006 as a
percentage of sales are as follows:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
NET SALES
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
COST OF SALES
|
|
|
50.07
|
%
|
|
|
51.56
|
%
|
|
|
|
GROSS PROFIT
|
|
|
49.93
|
%
|
|
|
48.44
|
%
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
5.12
|
%
|
|
|
15.61
|
%
|
Sales and marketing
|
|
|
13.31
|
%
|
|
|
16.26
|
%
|
General and administrative
|
|
|
49.26
|
%
|
|
|
57.28
|
%
|
Non-cash restructuring
|
|
|
0.00
|
%
|
|
|
10.33
|
%
|
Depreciation and amortization
|
|
|
3.14
|
%
|
|
|
1.45
|
%
|
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
70.83
|
%
|
|
|
100.93
|
%
|
|
|
|
INCOME (LOSS) FROM OPERATIONS
|
|
|
(20.89
|
)%
|
|
|
(52.49
|
)%
|
|
|
|
Other income (expense)
|
|
|
(1.51
|
)%
|
|
|
(1.01
|
)%
|
INCOME (LOSS) BEFORE INCOME TAXES
|
|
|
(22.41
|
)%
|
|
|
(53.50
|
)%
|
Income tax benefit (expense)
|
|
|
0.00
|
%
|
|
|
(0.93
|
)%
|
|
|
|
NET INCOME (LOSS)
|
|
|
(22.41
|
)%
|
|
|
(52.57
|
)%
|
|
|
|
Net Sales
Net sales decreased by approximately 10% to $6,676,365 in the year ended March 31, 2007 as
compared to $7,393,948 in the year ended March 31, 2006. The decrease in sales was due to the less
than anticipated acceptance of our Meta tray products in the United States market utilizing this
direct sales approach to which we had to transition to a strategy similar to our Distributor
Assisted Marketing programs as utilized in Europe. The decrease is also the result of the character
of the OTC market as the original sell-ins of the products in the 3 months ending March 31, 2006
has now been replaced by re-orders in the 3 months ending March 31, 2007, which are by nature at
lesser volumes than the original sell-ins. Finally, over the last year ending March 31, 2007 the
Company re-organized its Dental Sales Team which had, however minor, an impact on the dental sales.
By the end of the fiscal year, ending March 31, 2007, this re-organization was completed.
Cost of Sales
Cost of sales decreased approximately 12 % to $3,342,716 in the year ended March 31, 2007 as
compared to $3,812,463 in the year ended March 31, 2006. The decrease in cost of sales is
attributable to the decrease in sales for the current fiscal year. Accordingly, cost of sales, as a
percentage of net sales, decreased from 52% for the year ended March 31, 2006 to 50% for the year
ended March 31, 2007.
Although we have experienced an increase in certain of our raw materials costs, we achieved a
status quo, and even a slight decrease in our overall cost of sales, due to an increase in our
in-house manufacturing capacity which is at a lower cost compared to outsourced third party
manufacturing. Finally, we have completed negotiations with new suppliers of raw materials, to
reduce the
16
dependence on some existing key suppliers and as a result have obtained more advantageous raw
material pricing for comparable and improved quality. We closely monitor and are continuously
looking for new strategies to optimize and improve our cost efficiencies.
Gross Profit
Our gross profit decreased by $247,836 or 7%, to $3,333,649 for the fiscal year ended March
31, 2007 as compared to $3,581,485 for the year ended March 31, 2006 as a result of decreased
sales. However, our gross profit as a percentage of sales increased by 2% from 48 % to 50 %
compared to the year ended March 31, 2006 and the year ended March 31, 2007. The increase in gross
profit is the result of the decrease in cost of sales as discussed above.
Operating Expenses
Research and Development
. Our research and development expenses decreased $95,893 to $29,389
for the three months ended June 30, 2007 as compared to $125,282 for the three months ended June
30, 2006, a decrease of 77%. The principal reason for this decrease is the earlier than
anticipated termination of the agreement for consultancy services with respect to the development
of our Meta Tray and iWhite products. As a result, these costs have decreased by the $75,000 paid
in the same period in 2006.
Our research and development expenses decreased $812,133 to $341,764 for the year ended March
31, 2007 as compared to $1,153,897 for the year ended March 31, 2006, a decrease of 337%. The
principal reason for this decrease is the earlier than anticipated completion of consultancy
services with respect to the development of our MetaTray and iWhite products. Terms of the January
1, 2006 consultancy agreement provided for a monthly fee of $25,000, the immediate grant of 200,000
shares of the Companys restricted common stock, and the grant of 150,000 options to purchase
shares of the Companys common stock which are fully vested.
Sales and marketing costs
. Our sales and marketing costs decreased $283,334 or 73%, to $103,241
for the three months ended June 30, 2007 as compared to $386,575 for the three months ended June
30, 2006. The reason for this decrease is largely due to the costs related to our sales office
located in Los Angeles, California which was re-organized during the second half of the fiscal year
ended March 31, 2007. We have changed our US sales strategy from direct to indirect. Rather than
create our own distribution channels we intend to establish relationships with companies that have
existing distribution channels. We believe an indirect distribution approach will be more cost
effective for the US market.
Our sales and marketing costs decreased $313,335 or 26%, to $888,810 for the year ended March
31, 2007 as compared to $1,202,145 for the year ended March 31, 2006. The reason for this decrease
is largely due to the costs related to our sales office located in Los Angeles, California which
was re-organized during the second half of the fiscal year ending March 31, 2007. We have changed
our US sales strategy from direct to indirect. Rather than create our own distribution channels we
intend to establish relationships with companies that have existing distribution channels. We
believe that this change in strategy will result in a higher contribution from our U.S. efforts.
General and administrative costs
. Our general and administrative costs for the three months
ended June 30, 2007 and 2006 were $744,481 and $837,351, respectively, representing a decrease of
$92,870 or 11%. The decrease in general and administrative costs for the three months ended June
30, 2007 as compared to the prior year is the result of improving the cost effectiveness of our
business in general and on a continuous basis. As a second major issue, the change in sales
strategy concerning our Los Angeles Office resulted in a decrease of general and administrative
costs, due to the internal re-organization, which was completed at the end of October 2006.
Our general and administrative costs for the year ended March 31, 2007 and 2006 where
$3,288,723 and $4,235,292, respectively, representing a decrease of $946,569 or 22%. The decrease
in general and administrative costs for the year ended March 31, 2007 as compared to the prior year
is the result of improving our cost effectiveness of our business in general on a continuous basis.
For the year ended March 31, 2006, costs were involved concerning the private placement which took
place during mid 2005, resulting in an additional non-cash cost of approximately $764,151 to MDB
Capital Group LLC, costs that did not re-occur during the year ended March 31, 2007. Finally, the
change in sales strategy concerning our Los Angeles Office resulted in a decrease of general and
administrative costs, due to the internal re-organization that was completed.
17
Depreciation and amortization
. Our depreciation and amortization increased $24,372 or 59%, to
$65,634 for the three months ended June 30, 2007 as compared to $41,262 for the three months ended
June 30, 2006. The increase is mostly due to the investment in a semi-automatic production machine
for the production of our foam strips, which will allow us to significantly increase our production
capacity. This investment allows us increased production capacity through significantly reduced
production times. It has also reduced manufacturing costs. Secondly, investments have been made in
updating and modernizing our Dental Lab, in order to bring it to a higher professional level. With
the investments made, our lab now has the capacity to provide a higher level of support for our
sales team, especially with respect to the launch of our veneers.
Our depreciation and amortization increased $102,118 or 95%, to $209,340 for the year ended
March 31, 2007 as compared to $107,222 for the year ended March 31, 2006. The increase is mostly
due to the investment in a semi-automatic production machine for the production of our foam strips,
which will allow us to significantly increase our production capacity. This investment allowed us
to streamline and improve production significantly with resultant increases in capacity and quality
as well as decreased costs. Secondly, initial investments have been made in updating and
modernizing our Dental Lab, to bring it to a higher professional Level. With the investments we
have made to date, our lab is now ready to support the first cases of veneers and provide a higher
level of support for the sales team.
Net
interest expense.
Net interest expense was $28,829 for the three months ended June 30, 2007 as compared to $24,015
for the three months ended June 30, 2006, an increase of $4,814, or 20%. The main reason for the
increase is the increased utilization of our available bank credit line.
Net
interest expense was $176,344 for the year ended March 31, 2007 as compared to $124,195 for the year ended
March 31, 2006, an increase of $52,149. Included in interest expense for the year ended March 31,
2006 is $100,000 of non-cash interest equal to the value of the beneficial conversion feature on a
$100,000 note payable that was converted to common stock on June 3, 2005. Not including the
$100,000 non cash interest described in the preceding sentence, interest expense increased by the
end of the year ended March 31, 2007 by $152,149 from $24,195 for the year ended March 31, 2006 to
$176,344 for the year ended March 31, 2007 as a result of increased utilization of our available
bank credit line.
Liquidity and Capital Resources
Cash and Cash equivalent
Our balance sheet at June 30, 2007 reflects cash and cash equivalents of $6,893,709 as compared to
$126,966 as of March 31, 2007, an increase of $6,766,743. The increase of cash and cash equivalents
is due to the completion of the Private Placement which was finalized at the end of the quarter
ending June 30, 2007.
Net cash provided by operations increased by $1,446,696 resulting in net cash provided by
operations of $1,298,484 for the three months ended June 30, 2007 as compared to net cash provided
from operations of $148,476 for the three months ended June 30, 2006. The increase in net cash
provided by operations for the three months ended June 30, 2007 as compared to the three months
ended June 30, 2006 is primarily attributable to an increase in accounts payable and accrued
liabilities of $1,200,000 with respect to accrued costs of the Companys June 2007 private
placement.
Our balance sheet at March 31, 2007 reflects cash and cash equivalents of $126,966 as compared
to $332,145 as of March 31, 2006, a decrease of $205,179. Net cash used by operations was $659,307
for the year ended March 31, 2007 as compared to net cash used by operations of $3,013,455 for the
year ended March 31, 2006, a decrease year to year of $2,354,148 in cash used by operations. This
decrease in cash used by operations is attributable primarily to the decrease in net loss from
$3,887,302 in fiscal 2006 to $1,496,049 in fiscal 2007, a decrease of $2,391,253. Also, cash used
in operations was affected significantly by significant changes in accounts receivables and
inventories. During the year ended March 31, 2007 accounts receivable and inventory provided
$870,014 and $476,814 in cash. While during the year ended March 31, 2006 both accounts receivable
and inventory used approximately $1.9 million in operating cash as a result of significant
increases in inventory and accounts receivable as of March 31, 2006 both of which were attributable
to initial shipments of the iWhite products to our new distributors in March 2006 as well as
inventories of iWhite and MetaTray products to be shipped in the June 2006 quarter.
18
Investing activities
Net cash used in investing activities totaled $50,364 for the three months ended June 30, 2007 as
compared to net cash used in investing activities of $69,642 for the three months ended June 30,
2006. The decrease in net cash used in investing activities for the three months ended June 30,
2007 is attributable to a decrease in investments in office equipment as staffing levels in all
three locations, Belgium, Los Angeles, Ca. and Singapore stabilized or, in the case of our Los
Angeles location, decreased.
Net cash used by investing activities was $315,104 for the year ended March 31, 2007 as
compared to net cash used by investing activities of $344,974 for the year ended March 31, 2006.
Cash used in investing activities in the year ended March 31, 2007 was for equipment purchases, net
of equipment acquired through capital lease of $157,503, totaling $385,866 attributable to the
investment in our production facility (new electric cabling, upgraded compressors and related
costs), investments made to full file ISO 9001 and 13485 Medical Device Certificate demands (Air
conditioned warehouse capability, chemical resistant floor in production facility and related
costs), initial investments in a basic Dental Lab, additional investments for molding and office
equipment and construction works in our Belgium HQ as a result of our increased staffing in
Belgium; which was partially offset by a return of $70,762 of cash used to secure a credit card
merchant account facility in the United States. Cash used in investing activities in the year ended
March 31, 2006 was primarily for equipment purchases, net of equipment acquired through capital
leases of $85,231, totaling $276,324 attributable to the purchase of manufacturing equipment
related to our expansion of our in house manufacturing capability and office equipment as a result
of our increased staffing in all three locations, Belgium; Los Angeles, Ca; and Singapore.
Financing activities
Net cash provided by financing activities totaled $5,511,867 for the three months ended June 30,
2007 as compared to net cash provided in financing activities of $63,468 for the three months ended
June 30, 2006. The increase in net cash provided from financing activities in the three month
period ended June 30, 2007 is primarily attributable to the net cash proceeds received by the
Company from a Private Placement, which took place at the end of the quarter ended June 30, 2007,
with net proceeds totaling $6,045,294 offset by the partial repayment of our existing Credit Line
in the amount of $522,226.
Net cash provided by financing activities totaled $939,988 for the year ended March 31, 2007
as compared to net cash provided by financing activities of $3,649,111 for the year ended March 31,
2006. The decrease in net cash provided from financing activities is primarily because we completed
a private placement in 2006 the net proceeds of which totaled $3,200,081. Net advances under our
credit line for the year ended March 31, 2007 were $837,180 versus net advances received in the
year ended March 31, 2006 of $599,913.
On October 8, 2004, our wholly owned subsidiary, Remedent N.V., obtained a mixed-use line of
credit facility with Fortis Bank, a Belgian bank, for
1,070,000 (the Facility). The Facility
was secured by a first lien on the assets of Remedent N.V. The purpose of the Facility is to
provide working capital to grow our business and to finance certain accounts receivable as
necessary. Since opening the Facility in 2004, Remedent N.V. and Fortis Bank have subsequently
amended the Facility several times to increase or decrease the line of credit. On May 3, 2005 the
Facility was amended to decrease the line of credit to
1,050,000. On March 13, 2006 the
Facility was amended to increase the mixed-use line of credit to
2,300,000, consisting of a
1,800,000 credit line based on the eligible accounts receivable and a
500,000 general line
of credit. The latest amendment to the Facility, dated September 1, 2006, amended and decreased the
mixed-use line of credit to
2,050,000. Each line of credit carries its own interest rates and
fees as provided in the Facility. Remedent N.V. is currently only utilizing two lines of credit,
advances based on account receivables and the straight loan. As of
June 30, 2007, March 31, 2007 and March 31,
2006, Remedent N.V. had, in the aggregate, $1,011,087, $1,530,276 and $605,200 advances outstanding,
respectively, under this mixed-use line of credit facility.
During the next twelve months, cash raised from our recent private placement (which occurred
in June 2007, subsequent to our year ended March 31, 2007) will be used to finance our current
liabilities, reduce the Facility at Fortis Bank and fund our future investments, largely related to
our GlamSmile product.
During the years ended March 31, 2007 and March 31, 2006, we recognized a (decrease)/increase
in cash and cash equivalents of $(170,756) and $1,021, respectively, from the effect of exchange
rates between the Euro and the US Dollar.
Off-Balance Sheet Arrangements
At June 30, 2007, we did not have any transactions, obligations or relationships that could be
considered off-balance sheet arrangements.
19
DESCRIPTION OF BUSINESS
Introduction
We are one of the leading manufacturers of cosmetic dentistry products in Europe. Leveraging
our knowledge of regulatory requirements regarding dental products and managements 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 and retail
Over-The-Counter teeth whitening products that are distributed in Europe, Asia and the United
States. We manufacture many of our products at our facility in Deurle, Belgium as well as
outsourced manufacturing in China. We distribute our products using both our own internal sales
force and through the use of third party distributors.
Some of the more significant developments in our business this year included the following:
Introduced our proprietary veneer technology, GlamSmile, into the Belgian market;
Continued to advance our sales and distribution channels for our new teeth whitening
products, iWhite and MetaTray
®
, in Europe and reorganized our sales strategy in the United
States from a direct sales strategy to an indirect sales strategy using distributors;
Introduced our Reme)Sense Tray and Foam Strips product to address the remedy for
sensitive teeth;
In June 2007, we raised $7 million in additional equity capital to fund our efforts to
expand our sales and distribution channels primarily for our GlamSmile veneer product.
We were originally incorporated under the laws of Arizona in September 1996 under the name
Remedent USA, Inc. In October 1998, we were acquired by Resort World Enterprises, Inc., a Nevada
corporation (RWE) in a share exchange, and RWE immediately changed its name to Remedent USA, Inc.
In June 2005, we formed Remedent Asia Pte Ltd, a wholly owned subsidiary formed under the laws of
Singapore.
Prior to June 3, 2005 we controlled Remedent N.V., a corporation formed under the laws of
Belgium, through common officers and directors, but only owned 22% of its outstanding shares. In
February and December 2004, in an action taken by written consent of the holders of a majority of
the issued and outstanding shares of our common stock, our stockholders authorized the acquisition
of the remaining 78% of our subsidiary, Remedent N.V., which we did not own, in exchange for
7,715,703 post-split shares of our common stock in a transaction involving Messrs. Guy De Vreese
and Robin List, our Chairman and Chief Executive Officer respectively. On June 3, 2005, we
consummated the acquisition of Remedent N.V. and issued 7,715,703 post- split shares of its
restricted common stock to the Lausha N.V., a company controlled by Guy De Vreese, and to Robin
List in exchange for all of the issued and outstanding shares of Remedent N.V. owned by Lausha N.V.
and Robin List. As a result of this acquisition, Remedent N.V. became our wholly owned subsidiary.
Current Products and Business Strategy
Products
Our products can be generally classified into the following categories: professional dental
products and Over-The-Counter teeth whitening products.
Professional Dental Products
GLAMSMILE
. In the fall of 2006, we launched our proprietary veneer technology, GlamSmile.
Cosmetic dentistry is a rapidly growing segment of dental practices within the United States and
Europe, with increasing demand for veneers and bonding procedures. Our GlamSmile veneers are ultra
thin claddings made from a mixture of a hybrid composite and porcelain materials which are attached
to the front of the patients teeth. Because GlamSmile veneers are so thin, the dentist does not
need to remove healthy tooth structure leaving the patients healthy tooth structure intact results
in several important benefits:
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no local anesthesia is required to prepare the teeth;
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reduced (if any) tooth sensitivity post-procedure; and
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the process is reversible.
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At the initial doctor visit, an impression is made of the patients teeth. During the second
visit, the hybrid composite veneers, which are computer generated as a single unit, are then ready
to be installed. The single-unit feature enables dentists with minimal training to apply up to ten
teeth in one 30 45 minute visit. This minimizes the risk of failure and allows more dentists to
offer GlamSmile veneers as part of their dental practice.
With traditional bonding, a dentist adheres a composite material directly on the tooth which
lasts about 3 to 6 years and tends to discolor. Porcelain veneers, though a more lasting solution
(ten years or more), require a significantly more invasive procedure to install, which is
irreversible, requires a very high level of training and skill from the dentist and can cost from
$700 to $2,000 per tooth.
In the fall of 2006, we opened our initial GlamSmile Lab in Ghent. As a temporary solution,
the lab was integrated at the same address as the office of Evelyne Jacquemyns, a dentist in Ghent
who is a related person to Guy De Vreese, our Chairman. It was agreed that we could use the office
of Ms. Jacquemyns from time to time for demonstration purposes in relation to our GlamSmile
veneers, at no cost. At current, we are in negotiations to finalize renting a larger location at
the same address of the current dental practice, where the initial GlamSmile Lab will be moved. We
incurred $63,835 in cost related to the build out of the initial GlamSmile Lab. Additional
investments are planned to support the growth of sales of our GlamSmile veneers.
GlamSmile veneers are currently only offered in Europe but we intend to bring the GlamSmile
product to United States. We plan to establish a distributor network similar to the one established
in Europe, to market the GlamSmile product in the United States.
REMEWHITE IN OFFICE WHITENING SYSTEM
. One of our first dental products that we developed for
the professional dental community was the RemeCure plasma curing light (described below).
Leveraging on our early success with the RemeCure light, we introduced the RemeWhite In Office
Whitening System. Based upon the initial RemeCure light, a new light, called the RemeCure CL-15,
was developed featuring new enhancements to the hardware and software enabling this light to be
fully automated thereby eliminating the need for the dentist to hold the light during whitening
treatments. In addition, a proprietary gel was formulated to be used with the system as well as a
time saving method to apply the gel. An additional benefit of the RemeWhite system is the repeat
sales of the gel to users of the system providing ongoing revenue streams that we anticipate will
continue to grow annually.
REMEWHITE HOME MAINTENANCE KIT
. In 2004, the RemeWhite Home Maintenance Kit was introduced and
sold by dentists to their patients, featuring 16 pre-filled trays with a level of whitening agent
safe for home use yet stronger than most Over-The-Counter products.
METATRAY
. In August 2005, we introduced MetaTray
®
, our next generation of products targeted
for the professional dentist market. MetaTray is a completely self-contained whitening system that
can be administered by dentists that:
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Does not require chair time.
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Incorporates all the benefits of heat and light for activating gel.
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Introduces a proprietary gel delivery system that eliminates dripping and running while
enhancing protection for surrounding gums and tissue.
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The MetaTray kit consists of a proprietary, reusable mouthpiece that has embedded in the
mouthpiece both a heating element and an electroluminescent mesh that are powered by a rechargeable
9 volt power source providing heat and light similar to that which is delivered to the teeth by
conventional dental lights.
The system also introduced a proprietary foam strip that is unique in the manner in which it
releases peroxide to the tooth surface without dripping or running. The MetaTray kit is easy to
handle, to store, and to discard. It works by a gradual release. As the mouth is producing more
saliva the saliva is absorbed by the foam and is pushing the peroxide out of the foam in a
chemical reaction. This also prolongs the release of peroxide allowing for a more gradual treatment
thus minimizing irritation to the gums and surrounding tissue. Most importantly, since the MetaTray
kit can be used at home by the patient, foam strips with the appropriate concentration of
peroxide can be provided by the dentist thereby generating a continuing revenue stream for the
dentist while achieving high levels of patient satisfaction.
21
REMECURE
. The RemeCure plasma curing light uses plasma arc technology instead of LED- and
laser technology which provides high-energy power over the complete spectrum. This allowed RemeCure
plasma curing light to be used in various applications such as: (1) curing dental composite
materials in only seconds and; (2) for single appointment, in-office whitening in less than forty
minutes.
Over-The-Counter Products
CLEVERWHITE
. In July 2003 we launched our first product developed for distribution through
Over-The-Counter retail outlets, specifically pharmacies. CleverWhite featured a unique
non-peroxide formula, thereby overcoming the European Union regulatory ban on Over-The-Counter
sales of peroxide compounds, the active ingredient typically found in all United States teeth
whitening products. Combining a mouth tray with a unique gel delivery system that requires no
mixing, no syringes or even filling the tray, CleverWhite utilized pre-filled pouches that are
placed in the mouth tray and activated once in the mouth with no dripping or other discomfort often
associated with tray based whitening systems.
CLEVERWHITE DAY & NIGHT
. Capitalizing on the CleverWhites initial success, we launched our
second Over-The-Counter product in the fourth quarter of calendar year 2004. CleverWhite Day &
Night sticks offer a portable, easy to use, whitening solution at what we believe to be a very
affordable price.
IWHITE
. In 2006, we introduced a variation of our MetaTray
®
product named iWhite
®
. iWhite
features a mouthpiece similar to that used in the MetaTray products. However, the iWhite mouthpiece
only uses the electroluminescent mesh and not the heating element thereby reducing the power
requirements to a 3V battery. iWhite also features a lower concentrations of the whitening agent,
to allow it to be sold in most over-the-counter distribution channels.
REME)SENSE TRAY AND FOAM STRIPS
. The Reme)sense Tray and Foam Strips were launched in the 3
months ending March 31, 2007 and are a remedy to treat sensitive teeth. Reme)sense provides fast
and long lasting results for sensitive teeth. The foam strips, which are placed in the tray for a
treatment, are soft and comfortable while providing total precision in their application, thanks to
the indication of the teeth numbers in the Reme)sense tray. The Reme)sense kit with 8 foam strips
will protect up to 4 months against sensitive teeth with one treatment of 10 minutes per month.
Distribution
Duplicating the model we learned in the professional dental segment, our retail strategy has
been to focus on product development and marketing and to rely on our distributor network assisted
by our internally developed marketing programs for servicing our customers in each market.
Starting in Belgium and the Netherlands, our products have been introduced utilizing our
Distributor Assisted Marketing programs. We implement our program by first identifying an
established dealer in each market with a well developed sales force familiar with sales of capital
equipment to the professional dentist community. Second, we develop aggressive lead generation
programs and other marketing techniques which served as a blue print for the dealers to implement.
The combination of a well-trained dealer force and dealer-assisted marketing and lead generation
programs has proven to be far more effective than utilizing a direct sales approach, which is much
slower and more costly to establish. This process has been repeated for both the professional
dentist and retail, over the counter markets in each country. As a result of this approach, in just
four years we have established dealers in 35 countries encompassing, Europe, Asia, Latin America,
the Pacific Rim and the Middle East.
On December 21, 2005, we entered into an agreement with Pierre Fabre Medicament S.A., a
corporation organized under the laws of France (Pierre Fabre). Pursuant to the agreement,
commencing on January 1, 2006, Pierre Fabre became our sole and exclusive distributor of the
iWhite
®
and MetaTray
®
product in France, Guadeloupe, Guiana, Martinique, Mayotte, New Caledonia,
French Polynesia, La Reunion, St. Bartholomew, St. Martin, St. Pierre and Miquelon, Wallis and
Futuna. The agreement requires Pierre Fabre to order minimum quantities of the products, and if
Pierre Fabre fails to sell the minimum quantities of the products within the first eighteen (18)
months of the agreement, we will have a right to terminate the agreement on a product-by-product
basis upon one (1) month prior written notice. The term of the agreement is for an initial three
(3) years and will automatically be extended for successive
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two (2) year terms unless terminated by six (6) months written notice. The agreement grants
Pierre Fabre a first option right to expand the territory under the agreement to include Cyprus,
Morocco, Tunisia, Algeria and South Africa.
On February 15, 2006, we entered into an agreement with Chefaro Pharma Italia S.R.L, a
corporation organized under the laws of Italy (Chefaro Italia). Pursuant to the agreement,
commencing on March 1, 2006, Chefaro Italia became our sole and exclusive distributor of the
iWhite
®
products in Italy, Vatican City, and Republic of San Marino (Territory). The agreement
requires Chefaro Italia to order minimum quantities of the products and, if Chefaro Italia fails to
sell these minimum quantities within any given year, we will have a right to terminate the
agreement upon one (1) month prior written notice. The term of the agreement is for an initial
three (3) years and will automatically be extended for successive two (2) year terms unless
terminated by six (6) months written notice. The Agreement also grants Chefaro Italia a right of
first refusal to market, sell and distribute other of our products on terms mutually agreeable if
we intend to market, sell and distribute such products in the Territory.
On March 29, 2006, we entered into an agreement with Dream Life, Inc., a California
corporation (Dream Life). Effective as of March 22, 2006, we granted Dream Life sole and
exclusive distribution rights of the MetaTray
®
products in China, Korea, Vietnam, Mongolia and
Thailand. The agreement requires Dream Life to order 10,000 units per quarter or 40,000 units per
year with minimum orders of no less than 2,000 units. In the event that Dream Life fails to sell
the minimum quantity in any calendar year we have the right to terminate the agreement with sixty
(60) days notice after the close of the calendar year in which Dream Life failed to sell the
minimum quantity. Dream Life would have thirty (30) days to cure the default or we, at our option,
may terminate the Agreement. We have also granted to Dream Life a right of first offer with respect
to any new products in the MetaTray family of products that we develop. The term of the agreement
is for an initial two (2) years and will automatically be extended for successive two (2) year
terms unless terminated by three (3) months written notice.
On October 1, 2007, we entered in to an agreement with Savant Distribution Limited, a limited
company incorporated under the laws of England and Wales.
Effective October 1, 2007, we granted Savant Distribution exclusive distribution rights of the
Remesense products in the United Kingdom and the Republic of Ireland. The term of the agreement is
for an initial three (3) years and will automatically be extended for successive five (5) year
terms unless terminated by at least six months notice prior to the end of the initial three year
term, or respectively the additional period.
Locations
During the second half of the fiscal year ended March 31, 2006, we established sales offices
in Los Angeles, California to service the United States market and in Singapore to service the
Asian market. In conjunction with the establishment of the office in Singapore, we formed a wholly
owned subsidiary Remedent Asia Pte Ltd. Although sales in Singapore have taken time to materialize,
we believe progress is being made in establishing market share in this region.
In connection with our United States based office, on October 12, 2005, we entered into an
Employment Agreement with an individual in the United States for an initial term of three (3)
years. At the time of his hire, it was contemplated that he would be based in our California office
managing our worldwide sales, as well as establishing a customer in United States market for our
MetaTray
®
products. In July 2006, we terminated the Employment Agreement pursuant to an Employment
Severance Agreement. As of July 2006, we no longer have a U.S.-based Vice President of Sales.
Accordingly, we have encountered less than anticipated acceptance of our products in the United
States market utilizing this direct sales approach and anticipate that we will have to transition
to a strategy similar to our Distributor Assisted Marketing programs as utilized in Europe.
Manufacturing
Initially, all of the manufacturing related to the above products was conducted through third
party manufacturers under our supervision thereby minimizing demands on capital resources.
Beginning in 2003, parts of the manufacturing and the majority of the final assembly of our
products were brought in-house, thereby improving control over product quality while significantly
reducing product costs. These efforts were expanded significantly during the fiscal year ended
March 31, 2006, in particular with regard to the expansion of in-house manufacturing capabilities
for our gel products and foam strips. In December 2005, our manufacturing facility became ISO
9001:2000 certified and ISO 13485:2003 certified which includes the certification for the
manufacture of medical devices. In connection with the expansion of our manufacturing facilities in
Belgium, we experienced some delays which were contributing factors in delaying the launch of our
iWhite
®
and MetaTray
®
products. However, with the addition of new production and quality assurance
management personnel we anticipate continual improvement and cost efficiency in our manufacturing
processes in the coming fiscal year.
The mouthpieces for our iWhite and MetaTray products are manufactured in China using a
contract manufacturer and shipped to our facility in Belgium for insertion of the foam strips.
23
Research and Development
During the year ended March 31, 2007 we continued our research and development activities to
improve the quality and performance of our existing products, investigated and developed new
product opportunities and worked to obtain regulatory approvals on a country by country basis of
recently developed products.
On February 10, 2006, we issued to an individual as consideration for past services performed
and the release of any and all claims under prior agreements, the right to purchase 150,000 shares
of the Companys common stock at an exercise price of $2.60 per share for a term of five (5) years
pursuant to the terms and conditions of a Stock Option Agreement. The 150,000 options had been
valued in accordance with the Black-Scholes pricing model utilizing an historic volatility factor
of 1.55, a risk free interest rate of 4.5% and an expected life for the options of five years,
resulting in a value of $2.41 per option granted for a total for the options of $361,500. The value
of this option grant was recorded as of December 31, 2005 as a research and development expense. In
November 2006, we entered into a Settlement Agreement and Release (Settlement Agreement) with
this individual pursuant to which the prior agreement was terminated. In connection with the
Settlement Agreement, we agreed to pay this individual $65,000 in settlement of all accounts which
was recorded as an expense as of the date of the Settlement Agreement and he in turn agreed to the
cancellation of his options to purchase 150,000 shares of our common stock in exchange for certain
product rights that we elected not to pursue.
Accordingly, research and development expenses were $341,764 for the year ended March 31, 2007
as compared to $1,153,897 for the year ended March 31, 2006.
New Product Development
Universal Applicator
. On December 12, 2005, we exercised an option to license an international
patent, excluding the US market, (See
Intellectual Property
below) and worldwide manufacturing and
distribution rights for a product which relates to a single use universal applicator for dental
pastes (such as a finger brush for cleaning teeth), salves, creams, powders, liquids and other
substances where manual application could be relevant. We are developing several products for
distribution that would be covered by this patent.
Intellectual Property
In October 2004, we acquired from the inventor the exclusive, perpetual license to two issued
United States patents which are applicable to the MetaTray
®
kit. Pursuant to the terms of the
license agreement, we were granted an exclusive, worldwide, perpetual license to manufacture,
market, distribute and sell the products contemplated by the patents subject to the payment of
$65,000 as reimbursement to the patent holder for legal and other costs associated with obtaining
the patents, which was paid in October 2004, and royalties for each unit sold subject to an annual
minimum royalty of $100,000 per year. We anticipate that these patents will provide protection
against potential competition for the MetaTray product within the United States and we intend to
pursue worldwide applications for these patents.
We have filed two patent applications in the European Union, United States and Australia
related to the GlamSmile product and four patents applications in the European Union and United
States related to the MetaTray and iWhite products which are pending, including patent applications
related to the foam strip technology utilized in these products.
In September 2004, we entered into an agreement with Lident N.V. (Lident), a company
controlled by our Chairman, to obtain an option, exercisable through December 31, 2005, to license
an international patent (excluding the US) and worldwide manufacturing and distribution rights for
a potential new product for which Lident had been assigned certain rights by the inventors of the
products, who are unrelated parties, prior to our Chairmans association with us. The patent is an
Italian patent which relates to a single use universal applicator for dental pastes, salves,
creams, powders, liquids and other substances where manual application could be relevant. We filed
to have the patent approved throughout Europe. The agreement required we advance to the inventors
through Lident a fully refundable deposit of #100,000 subject to our due diligence regarding the
enforceability of the patent and marketability of the product, which, if viable, would be assigned
to us for additional consideration to the inventors of
100,000 and an ongoing royalty from
sales of products related to the patent equal to 3% of net sales and, if not determined not viable,
the
100,000 deposit would be repaid in full by Lident. The consideration we had agreed to pay
Lident upon the exercise of the option is the same as the consideration Lident is obligated to pay
the original inventors. Consequently, Lident would not have profited from the exercise of the
option. Furthermore, at a meeting of our Board of Directors on July 13, 2005, the Board accepted
Lidents offer to facilitate an assignment of Lidents intellectual property rights to the
technology to us in exchange for the reimbursement of Lidents actual costs incurred relating to
the intellectual property. Consequently, once we exercise the option, all future payments, other
than the
24
reimbursement of costs would be paid directly to the original inventors and not to Lident. On
December 12, 2005, we exercised the option and the patent holder agreed to revise the assignment
agreement whereby we agreed to pay
50,000 additional compensation in the form of prepaid
royalties instead of the #100,000 previously agreed,
25,000 of which had been paid by us in
September 2005 and the remaining
25,000 to be paid upon our first shipment of a product covered
by the patent. The patent is being amortized over five (5) years.
We also have ongoing research and development efforts to improve and expand our current
technology and to develop new teeth whitening products. We intend to continue to apply for patents
when we believe it is in our interest to do so and as advised by patent counsel. We rely and will
continue to rely on trade secrets, know-how and other unpatented proprietary information in our
business. Certain of our key employees and consultants are required to enter into confidentiality
and/or non-competition agreements to protect our confidential information.
We also own the rights to registered trademarks and service marks in several foreign countries
including, but not limited to, CleverWhite, iWhite and MetaTray, and we have filed
applications to register these and other trademarks and service marks in several foreign countries.
Major Customers
For the year ended March 31, 2007 we had two customers that accounted for 35% and 10%,
respectively, of total revenues. For the year ended March 31, 2006, we had two customers whose
sales were 33% of total revenues.
For
the three month period ended June 30, 2007 the Company had five
customers that accounted for 32% of total revenues. For the three
months ended June 30, 2006 the Company had one customer that
accounted for 29.4% of total revenues.
Competition
International markets including Europe, Asia and Latin America have followed the United
States lead in expanding offerings in the areas of teeth whitening. Leading the way in both the
professional dentist and retail segments has been United States based companies seeking to expand
their distribution. Impeding these efforts has been the inability of many of these companies to
fully understand the differences from both a distribution and a regulatory standpoint that apply in
each of the European and Asian markets. Notwithstanding the formation of the European Union and its
efforts to standardize regulatory and business practices throughout Europe, these practices in
reality vary widely from country to country. In addition, unlike the United States market where
pharmacies and supermarkets have become homogenized as to retail product offerings and pricings,
most companies in Europe need to distinguish between the locally owned pharmacy and the supermarket
chains with regard to product brands and pricing offered. As our strategy, we have not targeted our
Over-The-Counter products at the supermarket channels in Europe, where our products would face
price competition from United States whitening products such as Crest Whitestrips, but rather at
the specialty pharmacy market that still thrives throughout Europe. As a result, we believe that
our products are able to maintain higher perceived value within their target market.
Competition in the professional dentist products comes primarily from the larger United States
based competitors including Brite-Smile, Rembrandt (now a subsidiary of Gillette Company, Inc.),
Discuss Dental, Inc. and Zoom. All of these companies offer light and whitening solutions to the
professional dentist community. Despite our competitions advantage with respect to size, resources
and name recognition, we have continued to maintain market share in this highly competitive segment
for the following reasons:
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Better combined pricing strategy than the competition when considering net cost for
whitening materials and initial cost of light.
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Dual purpose light to maximize value of initial investment.
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Ease of use from automated functionality of light, speed and gel application method.
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Superior gel formulation which maximizes performance while minimizing sensitivity.
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Home maintenance kit for improved patient satisfaction.
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In addition, we believe our MetaTray products offer dentists a highly differentiated
alternative to conventional whitening treatments that will allow dentist quality results for their
patients, better utilization of chair time for their dental practices and, as a result, higher
profit margins related to the whitening segment of their business.
Regulatory Issues
As we market dental products which are legally defined to be medical devices, we are
considered to be a medical device manufacturer and as such we are subject to the regulations of,
among other governmental entities, the United States Food and Drug Administration (the FDA) and
the corresponding agencies of the states and foreign countries in which we sell our products. These
regulations govern the introduction of new medical devices, the observance of certain standards
with respect to the manufacture and labeling of medical devices, the maintenance of certain records
and the reporting of potential product problems and other matters. A failure to comply with such
regulations could have material adverse effects on our business.
The Federal Food, Drug and Cosmetic Act (FDC Act) regulates medical devices in the United
States by classifying them into one of three classes based on the extent of regulation believed
necessary to ensure safety and effectiveness. Class I devices are those devices for which safety
and effectiveness can reasonably be ensured through general controls, such as device listing,
adequate labeling, pre-market notification and adherence to the Quality System Regulation (QSR)
as well as medical device reporting, labeling and other regulatory requirements. Some Class I
medical devices are exempt from the requirement of pre-market approval or clearance. Class II
devices are those devices for which safety and effectiveness can reasonably be ensured through the
use of special controls, such as performance standards, post-market surveillance and patient
registries, as well as adherence to the general controls provisions applicable to Class I devices.
Class III devices are devices that generally must receive pre-market approval by the FDA pursuant
to a pre-market approval application (PMA) to ensure their safety and effectiveness. Generally,
Class III devices are limited to life sustaining, life supporting or implantable devices; however,
this classification can also apply to novel technology or new intended uses or applications for
existing devices.
Before most medical devices can be marketed in the United States, they are required by the FDA
to secure either clearance of a pre-market notification pursuant to Section 510(k) of the FDC Act
(a 510(k) Clearance) or approval of a PMA. Obtaining approval of a PMA can take several years. In
contrast, the process of obtaining 510(k) Clearance generally requires a submission of
substantially less data and generally involves a shorter review period. Most Class I and Class II
devices enter the market via the 510(k) Clearance procedure, while new Class III devices ordinarily
enter the market via the more rigorous PMA procedure. In general, approval of a 510(k) Clearance
may be obtained if a manufacturer or seller of medical devices can establish that a new device is
substantially equivalent to a predicate device other than one that has an approved PMA. The claim
for substantial equivalence may have to be supported by various types of information, including
clinical data, indicating that the device is as safe and effective for its intended use as its
legally marketed equivalent device. The 510(k) Clearance is required to be filed and cleared by the
FDA prior to introducing a device into commercial distribution. Market clearance for a 510(k)
Notification submission may take 3 to 12 months or longer. If the FDA finds that the device is not
substantially equivalent to a predicate device, the device is deemed a Class III device, and a
manufacturer or seller is required to file a PMA. Approval of a PMA for a new medical device
usually requires, among other things, extensive clinical data on the safety and effectiveness of
the device. PMA applications may take years to be approved after they are filed. In addition to
requiring clearance or approval for new medical devices, FDA rules also require a new 510(k) filing
and review period prior to marketing a changed or modified version of an existing legally marketed
device if such changes or modifications could significantly affect the safety or effectiveness of
that device. The FDA prohibits the advertisement or promotion of any approved or cleared device for
uses other than those that are stated in the devices approved or cleared application.
We have received approval from the FDA to market our RemeCure CL15 dental curing lamp in the
United States. We submitted our application for approval on FDA Form 510(k) on October 30, 2002 and
received FDA approval for this product on January 9, 2003. None of our other products have FDA
approval for marketing in the United States. We believe that our products: The MetaTray
®
, is a
Class I medical device as defined in the Federal Code of Regulations under 21 CFR 872.6475 that is
exempt from advance market notification procedures, therefore the FDA clearance or approval for the
commercial distribution of this product in the US is not required. We believe that the GlamSmile,
iWhite
®
and RemeSmile will not require a 510(k) submission because the products fall within an
exemption under the 510(k) regulation.
International sales of medical devices are also subject to the regulatory requirements of each
country. In Europe, the regulations of the European Union require that a device have a CE Mark, a
mark that indicates conformance with European Union laws and regulations before it can be sold in
that market. The regulatory international review process varies from country to country. We
26
previously relied upon our distributors and sales representatives in the foreign countries in
which we market our products to ensure we comply with the regulatory laws of such countries;
however, during the year ended March 31, 2006 we expanded our own Research and Development
personnel to enable us to provide greater assistance and play a more proactive role in obtaining
local regulatory approvals, especially in Europe. We currently have an in-office regulatory affairs
representative who is responsible for coordinating local and international approvals as well as our
ISO:9001 and ISO:13485 (medical device).
Costs and Effects of Compliance with Environmental Laws and Regulations
We are not in a business that involves the use of materials in a manufacturing stage where
such materials are likely to result in the violation of any existing environmental rules and/or
regulations. Further, we do not own any real property that could lead to liability as a landowner.
Therefore, we do not anticipate that there will be any substantial costs associated with the
compliance of environmental laws and regulations.
Employees
We currently retain 23 full-time employees in Belgium. We currently have one employee,
operating as a consultant, in the United States. Our subsidiary, Remedent, N.V., has an employment
agreement with Mr. Philippe Van Acker, our Chief Financial Officer. Our employment agreement with
Mr. Judd Hoffman was terminated in July 2006 pursuant to an Employment Severance Agreement. In the
future, we will attempt to hire additional employees as needed based on our growth rate.
DESCRIPTION OF PROPERTY
The Company leases its 26,915 square feet office and warehouse facility in Deurle, Belgium
from an unrelated party pursuant to a nine-year lease commencing December 20, 2001 at a base rent
of
6,838 per month ($9,140 per month at March 31, 2007). In addition, the Company is
responsible for the payment of annual real estate taxes for the property which totaled
3,245
($4,207) for calendar year 2006. The minimum aggregate rent to be paid over the remaining lease
term based upon the conversion rate for the
at March 31, 2007 is $400,551.
LEGAL PROCEEDINGS
To the best knowledge of management, there are no material legal proceedings pending against
the Company.
MANAGEMENT
Directors and Executive Officers
The following table sets forth the names and ages of the current directors and executive
officers of the Company, the principal offices and positions with the Company held by each person
and the date such person became a director or executive officer of the Company. The executive
officers of the Company are elected annually by the Board of Directors. Each year the stockholders
elect the board of directors. The executive officers serve terms of one year or until their death,
resignation or removal by the Board of Directors. There was no arrangement or understanding between
any executive officer and any other person pursuant to which any person was elected as an executive
officer.
|
|
|
|
|
Person
|
|
Age
|
|
Position
|
Guy De Vreese
|
|
52
|
|
Chairman
|
Robin List
|
|
36
|
|
Director, Chief Executive Officer
|
Philippe Van Acker
|
|
42
|
|
Chief Financial Officer
|
Stephen Ross
|
|
48
|
|
Director, Secretary
|
Roger Leddington
|
|
62
|
|
Senior VP, Head of U.S. Marketing
|
Fred Kolsteeg
|
|
63
|
|
Director
|
Guy De Vreese, Chairman
. From April 1, 2002, Mr. De Vreese has served as our Chairman of the
Board. From June 2001 Mr. De Vreese has also served as President of Remedent N.V. and he has served
as President of DMDS, Ltd., a European subsidiary of Dental & Medical Systems, Inc. DMDS, Ltd.
developed and marketed high-tech dental equipment. In August 1996, Mr. De Vreese founded
27
DMD N.V., a Belgian company that was the independent European distributor for DMDS products
and was its Chief Executive Officer until DMD purchased its distribution rights in April 1998. Mr.
De Vreese later worked as CEO from 1996 through February 1999 for Lident, N.V., a Belgian company
that merged with DMD and specialized in digital photography and developer of imaging software. Mr.
De Vreese also served as a consultant providing services to DMDS, Ltd. from February 1999 to June
2001. Mr. De Vreese resides in Belgium.
Robin List, Director, Chief Executive Officer
. From April 1, 2002, Mr. List has served as our
Chief Executive Officer and as a director. From April 2001, Mr. List has served a director of
Remedent N.V. From January 1998 through April 2001, Mr. List was a director of New BitSnap N.V., a
Belgian company. In this position Mr. List consulted for DMDS Ltd., a European subsidiary of Dental
& Medical Diagnostic Systems, Inc. DMDS, Ltd. developed and marketed high-tech dental equipment.
From August 1995 to January 1998, Mr. List served as commercial director for WAVE Imaging B.V., a
Dutch based company that provided digital services. Mr. List resides in Belgium.
Philippe Van Acker, Chief Financial Officer
. Mr. Van Acker was appointed as our Chief
Financial Officer as of March 30, 2005. From July 2001 to March 30, 2005, Mr. Van Acker has served
as a director of the Companys subsidiary, Remedent N.V. where he has also served as financial
controller. From 1999 to 2001, Mr. Van Acker served as Director of Finance for DMDS, Ltd., a
European subsidiary of Dental & Medical Diagnostic Systems, Inc., a company that developed and
marketed high-tech dental equipment. From 1992 to 1999, Mr. Van Acker held various positions with
Pfizer Medical Technology Group. Mr. Van Acker resides in Belgium.
Stephen Ross, Director, Secretary
. Mr. Ross has served as our director since August 2001 and
as our Secretary since April 2002. He also served as our Chief Financial Officer from August 2001
until March 2005. From February 1998 through January 2001, Mr. Ross was CFO of Dental & Medical
Diagnostic Systems, Inc., a company that developed and marketed high-tech dental equipment and
declared bankruptcy in July 2001. Commencing in 1996 and terminating February 1998, Mr. Ross served
as a senior management consultant with Kibel and Green, a corporate restructuring and management
firm. Prior to working for Kibel and Green, Mr. Ross served as CFO and co-founder of a personal
care company, and as tax manager with an accounting firm. Mr. Ross resides in Los Angeles,
California.
Roger Leddington, Senior Vice President and Head of U.S. Marketing
. Mr. Leddington has served
as our Senior Vice President and Head of U.S. Marketing since August 2007. Prior to joining the
Company, since July 1995, Mr. Leddington was the founder and principal of a private consulting
firm, Windermere Works, specializing in the introduction of high-tech products to the dental
industry, both in the United States and internationally. From 1990 to 1995, Mr. Leddington served
consecutively as marketing director, president and CEO of New Image Industries, Inc., a company
involved in the development and marketing of dental computer imaging and intraoral camera systems.
Mr. Leddington was also a director of New Image Industries, Inc.
from 1992 to 1995. Mr. Leddington resides in Incline Village,
Nevada.
Fred Kolsteeg, Director
. Mr. Kolsteeg has served as a director of the Company since April
2002. Since 1996, Mr. Kolsteeg has served as the president of WAVE Communications, a Dutch based
advertising agency. Prior to founding WAVE in 1996, he founded several other advertising agencies
such as ARA, Team and Team Saatchi. Mr. Kolsteeg has also worked at Phillips and Intermarco
Publicis. Mr. Kolsteeg resides in Holland.
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth information regarding all forms of compensation received by the
named executive officers during the fiscal years ended March 31, 2007 and March 31, 2006,
respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
All Other
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Total
|
Guy De Vreese,
|
|
|
2007
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
294,429
|
(1)
|
|
$
|
294,429
|
(1)
|
Chairman, CEO of Remedent N.V.
|
|
|
2006
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
222,000
|
(2)
|
|
$
|
222,000
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robin List,
|
|
|
2007
|
|
|
$
|
239,045
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
239,045
|
|
CEO
|
|
|
2006
|
|
|
$
|
213,000
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
213,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philippe Van Acker,
|
|
|
2007
|
|
|
$
|
138,573
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
138,573
|
|
CFO
|
|
|
2006
|
|
|
$
|
122,000
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
180,000
|
(3)
|
|
|
|
|
|
$
|
302,000
|
|
28
|
|
|
(1)
|
|
These amounts are consulting fees including a car allowance paid by Remedent N.V. to Lausha,
N.V., a company controlled by Mr. De Vreese, pursuant to an oral consulting agreement between
Lausha N.V. and Remedent N.V.
|
|
(2)
|
|
These amounts are consulting fees including a car allowance paid by Remedent N.V. to Lausha,
N.V. and Lident N.V., both companies controlled by Mr. De Vreese, pursuant to an oral
consulting agreement between these companies and Remedent N.V.
|
|
(3)
|
|
In March 2005, Mr. Van Acker was appointed as the Companys Chief Financial Officer. In
December, 2005, he was granted 75,000 fully vested ten year options to purchase the Companys
common stock at an exercise price of $2.46 (fair market value at date of grant) per share.
|
29
Outstanding Equity Awards at Fiscal Year End
The following table provides information with respect to the named executive officers
concerning unexercised stock options held by them at March 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
Number of Securities
|
|
underlying
|
|
Exercise
|
|
|
|
|
underlying Unexercised
|
|
Unexercised Options
|
|
Price per
|
|
|
Name
|
|
Options (Exercisable)
|
|
(Unexercisable)
|
|
Share
|
|
Expiration Date
|
Guy De Vreese
|
|
|
50,000
|
|
|
|
-0-
|
|
|
$
|
1.00
|
|
|
28-Mar-2012
|
Robin List
|
|
|
50,000
|
|
|
|
-0-
|
|
|
$
|
1.00
|
|
|
28-Mar-2012
|
Philippe Van Acker
|
|
|
75,000
|
|
|
|
-0-
|
|
|
$
|
2.46
|
|
|
23-Dec-2015
|
Philippe Van Acker
|
|
|
10,000
|
|
|
|
-0-
|
|
|
$
|
1.00
|
|
|
28-Mar-2012
|
As of March 31, 2007, there were no outstanding stock awards.
Director Compensation Table
Our directors do not receive any cash compensation, but are entitled to reimbursement of their
reasonable expenses incurred in attending directors meetings. However, at the discretion of our
Board of Directors, we may periodically issue stock options under our stock option plan to
directors.
The following table sets forth information regarding all forms of compensation received by all
non-executive directors of the Company during the fiscal year ended March 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned or Paid in
|
|
|
Stock
|
|
|
Option
|
|
|
All Other
|
|
|
|
|
Name
|
|
Cash
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Total
|
|
Stephen Ross
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
Fred Kolsteeg
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
Stock Option Plans
On May 29, 2001, our Board of Directors adopted an Incentive and Nonstatutory Stock Option
Plan (2001 Plan), reserving 250,000 shares underlying options for issuance under this stock
option plan. There is a restriction that no more than 50,000 options may be granted to any one
individual or entity in any one calendar year under the stock option plan.
In February and December 2004, in an action taken by written consent of the holders of a
majority of the issued and outstanding shares of our common stock, we authorized the implementation
of a 2004 Incentive and Nonstatutory Stock Option Plan, following the implementation of the reverse
stock split (so as not to be affected by the reverse stock split), reserving 800,000 shares of
common stock for issuance to employees, directors and consultants of the Company or any
subsidiaries. This action became effective June 3, 2005.
In addition to the equity compensation plans approved by our stockholders, we have issued
options and warrants to individuals pursuant to individual compensation plans not approved by our
stockholders. These options and warrants have been issued in exchange for services or goods
received by us.
30
The following table provides aggregate information as of March 31, 2007 with respect to all
compensation plans (including individual compensation arrangements) under which equity securities
are authorized for issuance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Number of securities
|
|
|
securities to be
|
|
|
|
|
|
remaining available for
|
|
|
issued upon
|
|
|
|
|
|
future issuance under
|
|
|
exercise of
|
|
Weighted-average
|
|
equity compensation
|
|
|
of outstanding
|
|
exercise price of
|
|
plans (excluding
|
|
|
options, warrants
|
|
outstanding options
|
|
securities reflected
|
Plan Category
|
|
and right
|
|
warrants and rights
|
|
in column (a))
|
Equity Compensation Plans approved by security holders
|
|
|
433,166
|
|
|
$
|
2.22
|
|
|
|
616,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Compensation Plans not approved by security holders
|
|
|
297,298
|
|
|
$
|
1.50
|
|
|
NA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
730,464
|
|
|
$
|
1.93
|
|
|
|
616,834
|
|
Employment Agreements
Our
subsidiary, Remedent, N.V., currently has employment agreements with Mr. Philippe Van
Acker, our Chief Financial Officer and Mr. Roger Leddington, our Senior
Vice President and Head of U.S. Marketing. Our employment agreement with Mr. Judd Hoffman was terminated
in July 2006 pursuant to an Employment Severance Agreement. We do not currently have any other
employment agreements with our executive officers. However, we anticipate having employment
contracts with executive officers and key personnel as necessary, in the future.
Long-Term Incentive Plans-Awards in Last Fiscal Year
We do not currently have any long-term incentive plans.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of our common
stock as of October 11, 2007. The information in this table provides the ownership information
for:
|
a.
|
|
each person known by us to be the beneficial owner of more than 5% of our common stock;
|
|
|
b.
|
|
each of our directors;
|
|
|
c.
|
|
each of our executive officers; and
|
|
|
d.
|
|
our executive officers, directors and director nominees as a group.
|
Beneficial ownership has been determined in accordance with Rule 13d-3 of the 1934 Exchange
Act and includes voting or investment power with respect to the shares. Unless otherwise indicated,
the persons named in the table below have sole voting and investment power with respect to the
number of shares indicated as beneficially owned by them. Common stock beneficially owned and
percentage ownership is based on 18,596,245 shares outstanding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
Shares Beneficially
|
|
Beneficially
|
Beneficial owner (1)
|
|
Owned
|
|
Owned
|
Guy De Vreese, Chairman (2)
Xavier de Cocklaan 42
9831 Deurle, Belgium
|
|
|
5,293,580
|
|
|
|
28.37
|
%
|
|
|
|
|
|
|
|
|
|
Robin List, CEO, Director (3)
Xavier de Cocklaan 42
9831 Deurle, Belgium
|
|
|
782,827
|
|
|
|
4.20
|
%
|
|
|
|
|
|
|
|
|
|
Philippe Van Acker, CFO (4)
Xavier de Cocklaan 42
9831 Deurle, Belgium
|
|
|
85,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Stephen Ross, Secretary, Director (5)
1921 Malcolm #101
Los Angeles, CA 90025
|
|
|
518,777
|
|
|
|
2.78
|
%
|
|
|
|
|
|
|
|
|
|
Fred Kolsteeg (6)
Managelaantje 10
3062 CV Rotterdam
The Netherlands
|
|
|
110,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
All Officers and Directors as a Group (5 persons)
|
|
|
6,790,184
|
|
|
|
36
|
%
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
Shares Beneficially
|
|
Beneficially
|
Beneficial owner (1)
|
|
Owned
|
|
Owned
|
5% or Greater Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Austin W. Marxe (7)
153 East 53rd Street, 55th Floor
New York, NY 10022
|
|
|
7,814,816
|
|
|
|
35.63
|
%
|
|
|
|
|
|
|
|
|
|
David M. Greenhouse (7)
|
|
|
7,814,816
|
|
|
|
35.63
|
%
|
153 East 53rd Street, 55th Floor
New York, NY 10022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul J. Solit (8)
|
|
|
2,380,000
|
|
|
|
19.35
|
%
|
825 Third Avenue, 33rd Floor
New York, NY 10020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jon D. Gruber (9)
|
|
|
1,971,200
|
|
|
|
10.14
|
%
|
50 Osgood Place, Penthouse
San Francisco, CA 94133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Patterson McBaine (10)
|
|
|
1,971,200
|
|
|
|
10.14
|
%
|
50 Osgood Place, Penthouse
San Francisco, CA 94133
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Less than one percent
|
|
(1)
|
|
Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange
Act. Pursuant to the rules of the Securities and Exchange Commission, shares of common stock
which an individual or group has a right to acquire within 60 days pursuant to the exercise of
options or warrants are deemed to be outstanding for the purpose of computing the percentage
ownership of such individual or group, but are not deemed to be beneficially owned and
outstanding for the purpose of computing the percentage ownership of any other person shown in
the table.
|
|
|
(2)
|
|
Guy De Vreese holds 3,204,4260 shares in his own name, which such amount includes 50,000
shares of common stock underlying options which vested on March 29, 2002 and have an exercise
price of $1.00 per share; 79,254 shares of common stock held in the name of Lausha N.V., a
Belgian company controlled by Guy De Vreese and 9,900 shares of common stock underlying
warrants with an exercise price of $10.00 per share held in the name of Lausha N.V., a Belgian company
controlled by Guy De Vreese; 2,000,000 shares of common stock held in the name of Lausha HK, a
Hong Kong company controlled by Guy De Vreese.
|
|
32
|
|
|
(3)
|
|
Includes 50,000 shares of common stock underlying options which vested on March 29, 2002 and
have an exercise price of $1.00 per share.
|
|
(4)
|
|
Includes 10,000 shares of common stock underlying options which vested on March 29, 2002 and
have an exercise price of $1.00 per share; includes 75,000 shares of common stock underlying
options which vested on December 2005 and have an exercise price of $2.46 per share.
|
|
(5)
|
|
Includes 50,000 shares of common stock underlying options which vested on March 29, 2002 and
have an exercise price of $1.00 per share and 12,500 shares of common stock underlying options
which vested on April 8, 2004 and have an exercise price of $2.00 per share.
|
|
(6)
|
|
Consists of 50,000 shares of common stock held in his own name, including 5,000 shares of
common stock underlying options which vested on March 29, 2002 and have an exercise price of
$1.00 per share, 60,000 shares of common stock held by Kolsteeg Beleggingsmaatschappij B.V., a
Dutch company of which Fred Kolsteeg is the principal, including 10,000 shares of common stock
underlying warrants held by Kolsteeg Beleggingsmaatschappij B.V. with an exercise price of
$10.00 per share.
|
|
|
(7)
|
|
Consists of 3,010,667 shares of common stock of the Company held by Special Situations
Private Equity Fund, L.P. (SSF Private Equity) and warrants to purchase 2,842,382 shares of
common stock held by SSF Private Equity; 529,700 shares of common stock held by Special
Situations Fund III QP, L.P. (SSF QP) and warrants to purchase 177,000 shares of common
stock held by SSF QP; 940,067 shares of common stock held by Special Situations Cayman Fund,
L.P. (SSF Cayman) and warrants to purchase 315,000 shares of common stock held by SSF
Cayman. MGP Advisors Limited (MGP) is the general partner of SSF QP. AWM Investment Company,
Inc. (AWM) is the general partner of MGP, the general partner of and investment adviser to
SSF Cayman and the investment adviser to SSF Private Equity. Austin W. Marxe and David M.
Greenhouse are the principal owners of MGP and AWM. Through their control of MGP and AWM,
Messrs. Marxe and Greenhouse share voting and investment control over the portfolio securities
of each of the funds listed above.
|
|
|
|
(8)
|
|
Consists of 565,820 shares of common stock of the Company held by Potomac Capital Partners LP
and warrants to purchase 424,365 shares of common stock held by Potomac Capital Partners LP;
391,968 shares of common stock held by Potomac Capital International Ltd and warrants to
purchase 293,976 shares of common stock held by Potomac Capital International Ltd; and 402,212
shares of common stock held by Pleiades Investment Partners-R LP (Pleiades) and warrants to
purchase 301,659 shares of common stock held by Pleiades. Paul J. Solit has disposition and
voting control for Potomac Capital Partners LP, Potomac Capital International Ltd. and
Pleiades.
|
|
|
|
(9)
|
|
Consists of 791,200 shares of common stock of the Company held by Lagunitas Partners LP and
warrants to purchase 593,400 shares of common stock held by Lagunitas Partners LP; 181,600
shares of common stock held by Gruber & McBaine International and warrants to purchase 136,200
shares of common stock held by Gruber & McBaine International; and 153,600 shares of common
stock held by the Jon D. and Linda W. Gruber Trust and warrants to purchase 115,200 shares of
common stock held by the Jon D. and Linda W. Gruber Trust. Jon D. Gruber and J. Patterson
McBaine share disposition and voting control for Lagunitas Partners, LP and Gruber & McBaine
International. Jon D. Gruber and Linda W. Gruber have disposition and voting control for the
Jon D. and Linda W. Gruber Trust.
|
|
|
|
(10)
|
|
Consists of 153,600 shares of common stock of the Company held by J. Patterson McBaine and
warrants to purchase 115,200 shares of common stock held by J. Patterson McBaine; 593,400
shares of common stock held by 791,200 shares of common stock of the Company held by Lagunitas
Partners LP and warrants to purchase 593,400 shares of common stock held by Lagunitas Partners
LP; and 181,600 shares of common stock held by Gruber & McBaine International and warrants to
purchase 136,200 shares of common stock held by Gruber & McBaine International. J. Patterson
McBaine and Jon D. Gruber share disposition and voting control for Lagunitas Partners, LP and
Gruber & McBaine International.
|
|
33
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Guy De Vreese, our Chairman of the Board, is the managing director of our subsidiary, Remedent
N.V. Mr. De Vreese provides his services as Remedent N.V.s Managing Director through two
companies, Lausha, N.V. and Lident N.V. Lausha, N.V. and Lident N.V. have oral consulting
arrangements with Remedent N.V. that provide Mr. De Vreeses services and are both companies
controlled by Mr. De Vreese. On March 20, 2006, Lausha N.V. and Lident N.V. merged into Lausha
N.V., controlled by Mr De Vreese. Lausha N.V. received a total of $281,000 as compensation for the
services for the year ending March 31, 2007. Lausha N.V. and Lident N.V. received a combined total
of $222,000 and $225,000 as compensation for these services for the years ending March 31, 2006 and
March 31, 2005, respectively.
In September 2004, we entered into an agreement with Lident N.V., a company controlled by Mr.
De Vreese, our Chairman, to obtain an option, exercisable through December 31, 2005, to license a
patent and worldwide manufacturing and distribution rights for a potential new product for which
Lident had been assigned certain rights by the inventors of the products, who are unrelated
parties, prior to Mr. De Vreeses association with us. The agreement required us to advance to the
inventors through Lident a fully refundable deposit of (Euro) 100,000 ($129,650) subject to our due
diligence regarding the enforceability of the patent and marketability of the product, which, if
viable, will be assigned to us for additional consideration to the inventors of (Euro) 100,000
($129,650) and an ongoing royalty from sales of products related to the patent equal to 3% of net
sales and, if not viable, the deposit will be repaid in full to us by Lident. The consideration we
had agreed to pay Lident upon the exercise of the option is the same as the consideration Lident is
obligated to pay the original inventors. Consequently, Lident will not profit from the exercise of
the option. Furthermore, at a meeting of our Board of Directors on July 13, 2005, we accepted
Lidents offer to facilitate an assignment of Lidents intellectual property rights to the
technology to us in exchange for the reimbursement of Lidents actual costs incurred relating to
the intellectual property. On December 12, 2005, the Company exercised the option and the Company
and the patent holder agreed to revise the assignment agreement whereby the Company agreed to pay
50,000 additional compensation in the form of prepaid royalties instead of the
100,000
previously agreed,
25,000 of which had been paid by the Company in September 2005 and the
remaining
25,000 to be paid upon the Companys first shipment of a product covered by the
patent. The patent is being amortized over five (5) years.
Since the inception of IMDS, Inc. (IMDS) in April, 2003, IMDS, a distributor of our
products, has purchased inventory valued at approximately $642,000 from us. All inventory was
purchased at standard pricing. Goods sold during the years ended March 31, 2007 and March 31, 2006
totaled $476,122 and $38,494, respectively. Accounts receivable at year end with this customer
totaled $392,057 and $12,008 as at March 31, 2007 and March 31, 2006, respectively. Mr. Stephen
Ross, one of our directors, owns a minority interest in IMDS.
In connection with the employment of Mr. Judd Hoffman, we issued Mr. Hoffman options to
purchase 400,000 shares of our common stock at an exercise price of $4.00 in October 2005. The
options were granted pursuant to our 2004 Incentive and Nonstatutory Stock Option Plan. One-third
of the options are scheduled to vest on each annual anniversary of Mr. Hoffmans employment. On
July 19, 2006 the Company entered into a employment severance agreement which allows 110,666 of Mr.
Hoffmans options to vest at August 31, 2006. The balance of the option lapsed upon his
termination.
In connection with services rendered by Mr. Philippe Van Acker, on December 23, 2005, the
Company granted to Mr. Van Acker 75,000 ten year options to purchase the Companys common stock at
an exercise price of $2.46, the market value of the Companys stock on the date of grant. The
options were fully vested upon issuance.
In the fall of 2006, we opened our initial GlamSmile Lab in Ghent. As a temporary solution,
the lab was integrated at the same address as the office of Evelyne Jacquemyns, a dentist in Ghent
who is a related person to Guy De Vreese, our Chairman, by virtue of sharing the same household. We
incurred $63,835 in cost related to the built out of the initial GlamSmile Lab. It was agreed that
we could use the office of Ms Jacquemyns from time to time for demonstration purposes in relation
to our GlamSmile veneers, at no cost. At current, we are in negotiations to finalize renting a
larger location at the same address of the current dental practice, where the initial GlamSmile Lab
will be moved. The amount of rent paid by Ms. Jacquemyns estimated to be allocated to this space,
based on the percent of total square footage, is approximately $1,030 per month.
SELLING SECURITY HOLDERS
In June 2007 we completed a private offering of 5,600,000 shares of our common stock at a
purchase price of $1.25 and warrants to purchase up to 4,200,000 shares of common stock at an
exercise price of $1.55 per share (the Private Offering) to certain institutional and accredited
investors. None of the Selling Security Holders listed below are affiliated with a broker dealer,
except as disclosed in footnote 21 below.
34
Further, in connection with the Private Offering, we engaged Roth Capital Partners, LLC to act
as our exclusive placement agent. In connection with their engagement, we have agreed to indemnify
Roth Capital Partners, LLC against various liabilities, including liabilities under the Securities
Act of 1933, as amended, or to contribute to payments it may be required to make in respect of any
of those liabilities
Further, in June 2005, current Selling Security Holder Special Situations Equity Fund L. P. acted as lead investor in a private equity financing,
and in a prospectus filed on October 28, 2005 Special Situations Equity Fund L. P. offered for resale 3,333,334 shares of our common stock.
The following table identifies the Selling Stockholders, as of October 11, 2007, and
indicates certain information known to us with respect to (i) the number of common shares
beneficially owned by the Selling Stockholder, (ii) the number of common shares that may be offered
for the Selling Stockholders account, and (iii) the number of common shares and percentage of
outstanding common shares to be beneficially owned by the Selling Stockholders assuming the sale of
all of the common shares covered hereby by the Selling Stockholders. The term beneficially owned
means common shares owned or that may be acquired within
60 days. As of October 11, 2007, 18,596,245
shares of common stock were issued and outstanding, plus an additional 7,735,067 shares of common
stock issuable upon the exercise of outstanding options and warrants. Shares of common stock that
are issuable upon the exercise of outstanding options, warrants, convertible securities or other
purchase rights, to the extent exercisable within 60 days of the date of this Prospectus, are
treated as outstanding for purposes of computing each Selling Stockholders percentage ownership of
outstanding shares. The Selling Stockholders may sell some, all, or none of our common shares. The
number and percentages set forth below under Shares Beneficially Owned After Offering assumes
that all offered shares are sold.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially
|
|
|
|
|
|
|
Owned
|
|
Shares to
|
|
Shares Beneficially
|
|
|
Prior to Offering
|
|
be Offered
|
|
Owned After Offering
|
Name of Selling Stockholder
|
|
Number
|
|
Percentage
|
|
Number
|
|
Number
|
|
Percentage
|
Special Situations Private Equity Fund L.P. (1)
|
|
|
5,853,049
|
(2)
|
|
|
27.30
|
%
|
|
|
2,352,000
|
|
|
|
3,501,049
|
|
|
|
17.42
|
%
|
Special Situations Cayman Fund LP (3)
|
|
|
1,255,067
|
(4)
|
|
|
6.64
|
%
|
|
|
735,000
|
|
|
|
520,067
|
|
|
|
2.80
|
%
|
Special Situations Fund III QP LP (5)
|
|
|
706,700
|
(6)
|
|
|
3.76
|
%
|
|
|
413,000
|
|
|
|
293,700
|
|
|
|
1.58
|
%
|
Lagunitas Partners LP (7)
|
|
|
1,384,600
|
(8)
|
|
|
7.22
|
%
|
|
|
1,384,600
|
|
|
|
0
|
|
|
|
0.00
|
%
|
Potomac Capital Partners LP (9)
|
|
|
990,185
|
(10)
|
|
|
5.21
|
%
|
|
|
990,185
|
|
|
|
0
|
|
|
|
0.00
|
%
|
Potomac Capital International Ltd. (11)
|
|
|
685,944
|
(12)
|
|
|
3.63
|
%
|
|
|
685,944
|
|
|
|
0
|
|
|
|
0.00
|
%
|
Pleiades Investment Partners-R LP (13)
|
|
|
703,871
|
(14)
|
|
|
3.72
|
%
|
|
|
703,871
|
|
|
|
0
|
|
|
|
0.00
|
%
|
MicroCapital Fund LP (15)
|
|
|
612,500
|
(16)
|
|
|
3.25
|
%
|
|
|
612,500
|
|
|
|
0
|
|
|
|
0.00
|
%
|
MicroCapital Fund Ltd. (17)
|
|
|
262,500
|
(18)
|
|
|
1.40
|
%
|
|
|
262,500
|
|
|
|
0
|
|
|
|
0.00
|
%
|
Raffles Associates, LP (19)
|
|
|
645,000
|
(20)
|
|
|
3.47
|
%
|
|
|
455,000
|
|
|
|
0
|
|
|
|
0.00
|
%
|
Neal I. Goldman (21)
|
|
|
350,000
|
(22)
|
|
|
1.87
|
%
|
|
|
350,000
|
|
|
|
0
|
|
|
|
0.00
|
%
|
Gruber & McBaine
International (23)
|
|
|
317,800
|
(24)
|
|
|
1.70
|
%
|
|
|
317,800
|
|
|
|
0
|
|
|
|
0.00
|
%
|
Jon D. and Linda W. Gruber
Trust (25)
|
|
|
268,800
|
(26)
|
|
|
1.44
|
%
|
|
|
268,800
|
|
|
|
0
|
|
|
|
0.00
|
%
|
J. Patterson McBaine (27)
|
|
|
268,800
|
(28)
|
|
|
1.44
|
%
|
|
|
268,800
|
|
|
|
0
|
|
|
|
0.00
|
%
|
Total:
|
|
|
|
|
|
|
|
|
|
|
9,800,000
|
|
|
|
|
|
|
|
|
|
35
|
|
|
(1)
|
|
Austin W. Marxe and David M. Greenhouse share disposition and voting control over
Special Situations Private Equity Fund L.P. Messrs. Marxe and Greenhouse are the principal owners
of MGP Advisors Limited (MGP) and AWM Investment Company, Inc. (AWM). Through their control of
MGP and AWM, Messrs. Marxe and Greenhouse share voting and investment control over Special
Situations Private Equity Fund L.P.
|
|
(2)
|
|
Consists of 3,010,667 shares of common stock of the Company held by Special Situations
Private Equity Fund L.P. and warrants to purchase 2,842,382 shares of common stock held by
Special Situations Private Equity Fund L.P.
|
|
(3)
|
|
Austin W. Marxe and David M. Greenhouse share disposition and voting control over Special
Situations Cayman Fund LP. Messrs. Marxe and Greenhouse are the principal owners of MGP
Advisors Limited (MGP) and AWM Investment Company, Inc. (AWM). Through their control of
MGP and AWM, Messrs. Marxe and Greenhouse share disposition and voting control over Special
Situations Cayman Fund LP.
|
|
(4)
|
|
Consists of 940,067 shares of common stock of the Company held by Special Situations Cayman
Fund LP (SSF Cayman) and warrants to purchase 315,000 shares of common stock held by SSF
Cayman.
|
|
(5)
|
|
Austin W. Marxe and David M. Greenhouse share disposition and voting control over Special
Situations Fund III QP LP. Messrs. Marxe and Greenhouse are the principal owners of MGP
Advisors Limited (MGP) and AWM Investment Company, Inc. (AWM). Through their control of
MGP and AWM, Messrs. Marxe and Greenhouse share voting and investment control over Special
Situations Fund III QP LP.
|
|
(6)
|
|
Consists of 529,700 shares of common stock of the Company held by Special Situations Fund III
QP LP and warrants to purchase 177,000 shares of common stock held by Special Situations Fund
III QP LP.
|
|
(7)
|
|
Jon D. Gruber and J. Patterson McBaine have disposition and voting control for Lagunitas
Partners, LP.
|
|
(8)
|
|
Includes warrants to purchase 593,400 shares of common stock.
|
|
(9)
|
|
Paul J. Solit has disposition and voting control for Potomac Capital Partners LP.
|
|
(10)
|
|
Includes warrants to purchase 424,365 shares of common stock.
|
|
(11)
|
|
Paul J. Solit has disposition and voting control for Potomac Capital International Ltd.
|
|
(12)
|
|
Includes warrants to purchase 293,976 shares of common stock.
|
|
(13)
|
|
Paul J. Solit has disposition and voting control for Pleiades Investment Partners-R LP.
|
|
(14)
|
|
Includes warrants to purchase 301,659 shares of common stock.
|
|
(15)
|
|
Ian P. Ellis and Chris A. Jarrous have disposition and voting control for MicroCapital Fund
LP, in their respective capacities as President and Senior Vice President of MicroCapital,
LLC, the investment manager to MicroCapital Fund LP. Messrs. Ellis and Jarrous disclaim
beneficial ownership of any such shares.
|
|
(16)
|
|
Includes warrants to purchase 262,500 shares of common stock.
|
|
(17)
|
|
Ian P. Ellis and Chris A. Jarrous have disposition and voting control for MicroCapital Fund
Ltd., in their respective capacities as President and Senior Vice President of MicroCapital,
LLC, the investment manager to MicroCapital Fund Ltd. Messrs. Ellis and Jarrous disclaim
beneficial ownership of any such shares.
|
|
(18)
|
|
Includes warrants to purchase 112,500 shares of common stock.
|
|
(19)
|
|
Paul H. OLeary has disposition and voting control for Raffles Associates, LP.
|
36
|
|
|
(20)
|
|
Includes warrants to purchase 195,000 shares of common stock.
|
|
(21)
|
|
Neal I. Goldman is the President of Goldman Capital, a broker dealer, but has represented to
the Company that he is purchasing in his individual capacity, for investment purposes.
|
|
(22)
|
|
Includes warrants to purchase 150,000 shares of common stock.
|
|
(23)
|
|
Jon D. Gruber and J. Patterson McBaine have disposition and voting control for Gruber & McBaine
International.
|
|
(24)
|
|
Includes warrants to purchase 136,200 shares of common stock.
|
|
(25)
|
|
Jon D. Gruber and Linda W. Gruber have disposition and voting control for Jon D. and Linda W.
Gruber Trust.
|
|
(26)
|
|
Includes warrants to purchase 115,200 shares of common stock.
|
|
(27)
|
|
J. Patterson McBaine also has shared disposition and voting control for Gruber & McBaine
International and Lagunitas Partners, LP.
|
|
(28)
|
|
Includes warrants to purchase 115,200 shares of common stock.
|
PLAN OF DISTRIBUTION
The selling stockholders, which as used herein includes donees, pledgees, transferees or other
successors-in-interest selling shares of common stock or interests in shares of common stock
received after the date of this prospectus from a selling stockholder as a gift, pledge,
partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise
dispose of any or all of their shares of common stock or interests in shares of common stock on any
stock exchange, market or trading facility on which the shares are traded or in private
transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of
sale, at prices related to the prevailing market price, at varying prices determined at the time of
sale, or at negotiated prices.
The selling stockholders may use any one or more of the following methods when disposing of
shares or interests therein:
ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers;
block trades in which the broker-dealer will attempt to sell the shares as agent, but may
position and resell a portion of the block as principal to facilitate the transaction;
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
an exchange distribution in accordance with the rules of the applicable exchange;
privately negotiated transactions;
short sales effected after the date the registration statement of which this Prospectus is
a part is declared effective by the SEC;
through the writing or settlement of options or other hedging transactions, whether through
an options exchange or otherwise;
broker-dealers may agree with the selling stockholders to sell a specified number of such
shares at a stipulated price per share; and
a combination of any such methods of sale.
The selling stockholders may, from time to time, pledge or grant a security interest in some
or all of the shares of common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell
the shares of common stock, from time to time, under this prospectus, or under an amendment to
this prospectus under Rule 424(b)(3)
37
or other applicable provision of the Securities Act amending
the list of selling stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus. The selling stockholders also may transfer the
shares of common stock in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of this prospectus.
In connection with the sale of our common stock or interests therein, the selling stockholders
may enter into hedging transactions with broker-dealers or other financial institutions, which may
in turn engage in short sales of the common stock in the course of hedging the positions they
assume. The selling stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common stock to broker-dealers
that in turn may sell these securities. The selling stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions or the creation of one or
more derivative securities which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction).
The aggregate proceeds to the selling stockholders from the sale of the common stock offered
by them will be the purchase price of the common stock less discounts or commissions, if any. Each
of the selling stockholders reserves the right to accept and, together with their agents from time
to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly
or through agents. We will not receive any of the proceeds from this offering. Upon any exercise of
the warrants by payment of cash, however, we will receive the exercise price of the warrants.
The selling stockholders also may resell all or a portion of the shares in open market
transactions in reliance upon Rule 144 under the Securities Act of 1933, provided that they meet
the criteria and conform to the requirements of that rule.
The selling stockholders and any underwriters, broker-dealers or agents that participate in
the sale of the common stock or interests therein may be underwriters within the meaning of
Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on
any resale of the shares may be underwriting discounts and commissions under the Securities Act.
Selling stockholders who are underwriters within the meaning of Section 2(11) of the Securities
Act will be subject to the prospectus delivery requirements of the Securities Act.
To the extent required, the shares of our common stock to be sold, the names of the selling
stockholders, the respective purchase prices and public offering prices, the names of any agents,
dealer or underwriter, any applicable commissions or discounts with respect to a particular offer
will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.
In order to comply with the securities laws of some states, if applicable, the common stock
may be sold in these jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states the common stock may not be sold unless it has been registered or
qualified for sale or an exemption from registration or qualification requirements is available and
is complied with.
We have advised the selling stockholders that the anti-manipulation rules of Regulation M
under the Exchange Act may apply to sales of shares in the market and to the activities of the
selling stockholders and their affiliates. In addition, we will make copies of this prospectus (as
it may be supplemented or amended from time to time) available to the selling stockholders for the
purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling
stockholders may indemnify any broker-dealer that participates in transactions involving the sale
of the shares against certain liabilities, including liabilities arising under the Securities Act.
We have agreed to indemnify the selling stockholders against liabilities, including
liabilities under the Securities Act and state securities laws, relating to the registration of the
shares offered by this prospectus.
We have agreed with the selling stockholders to keep the registration statement of which this
prospectus constitutes a part effective until the earlier of (1) such time as all of the shares
covered by this prospectus have been disposed of pursuant to and in accordance with the
registration statement or (2) the date on which the shares may be sold pursuant to Rule 144(k) of
the Securities Act.
38
DESCRIPTION OF SECURITIES
We are authorized by our Amended and Restated Articles of Incorporation to issue 50,000,000
shares of common stock, $0.001 par value and 10,000,000 shares of preferred stock, $0.001 par
value. As of October 11, 2007, there were 18,596,245 shares of common stock outstanding and no
shares of preferred stock outstanding. Holders of shares of common stock have full voting rights,
one vote for each share held of record. Stockholders are entitled to receive dividends as may be
declared by the Board out of funds legally available therefore and share pro rata in any
distributions to stockholders upon liquidation. Stockholders have no conversion, preemptive or
subscription rights. All outstanding shares of common stock are fully paid and nonassessable, and
all the shares of common stock issued by us upon the exercise of outstanding warrants will, when
issued, be fully paid and nonassessable.
In connection with the Companys private placement in June 2007 of $7,000,000, (the Private
Offering) we issued warrants to purchase up to 4,200,000 shares of common stock at an exercise
price of $1.55 per share (the Warrants). The shares of common stock underlying the Warrants are
covered by this Prospectus. Under the terms of the Private Offering, the Warrants are exercisable
for a period of five years and entitle the holder to purchase one share of restricted common stock
(the Warrant Shares) for $1.55 per Warrant Share. The Company also has the right to redeem the
Warrants for $0.001 per Warrant Share covered by the Warrants if the Shares trade on the OTC
Electronic Bulletin Board or similar market above $5.25 per share for 20 consecutive trading days
following the initial effective date of the registration statement covering the resale of the
shares and Warrant Shares, based upon the closing bid price for the shares for each trading day
(the Redemption Right). Once the Redemption Right vests, the Company has the right, but not the
obligation, to redeem the Warrants for $0.001 per Warrant Share covered by the Warrants upon 30
days written notice to the holders of the Warrants.
On June 3, 2005, we effected a one-for-twenty reverse stock split. In connection therewith, we
did not issue any fractional shares of our common stock. Instead, all shares of our common stock
held by a stockholder were aggregated into a single certificate and, on June 3, 2005, we issued
scrip for any fractional shares resulting from the reverse stock split. As of June 3, 2006, all
fractional shares represented by scrip were void and all holders of scrip have no rights
thereunder.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Under the Nevada General Corporation Law and our Amended and Restated Articles of
Incorporation, our directors will have no personal liability to us or our stockholders for damages
incurred as the result of the breach or alleged breach of fiduciary duty as a director involving
any act or omission of any such director. This provision does not apply to the directors (i) acts
or omissions that involve intentional misconduct, fraud or knowing violation of law, or (ii)
approval of an unlawful dividend, distribution, stock repurchase or redemption under Section 78.300
of the Nevada Revised Statutes. This provision would generally absolve directors of personal
liability for negligence in the performance of duties, including gross negligence.
The effect of this provision in our Amended and Restated Articles of Incorporation, is to
eliminate our rights and the rights of our stockholders (through stockholders derivative suits on
our behalf) to recover damages against a director for breach of his fiduciary duties as a director
(including breaches resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) and (ii) above. This provision does not limit nor eliminate our
rights or any stockholders rights to seek equitable relief such as an injunction or rescission in
the event of a breach of a directors fiduciary duties. The Nevada General Corporation Law grants
corporations the right to indemnify their directors, officers, employees and agents in accordance
with applicable law. In addition, our Amended and Restated Bylaws authorizes us to indemnify our
directors and officers in cases where our officer or director acted in good faith and in a manner
reasonably believed to be in our best interest, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the Act
or Securities Act) may be permitted to directors, officers or persons controlling us pursuant to
the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable.
LEGAL MATTERS
The validity of the shares of common stock offered by the Selling Stockholders will be passed
on by the law firm of Bullivant Houser Bailey PC, Sacramento, California.
39
EXPERTS
PKF bedrijfsrevisoren, independent registered public accounting firm, audited our consolidated
financial statements as of and for the years ended March 31, 2007 and March 31, 2006. We have
included our financial statements in this Prospectus and elsewhere in the registration statement in
reliance on PKF bedrijfsrevisoren reports given on their authority as experts in accounting and
auditing.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Interwest Transfer Co., Inc., located
at 1981 East 4800 South, Suite 100, Salt Lake City, UT 84117, with the same mailing address and
telephone number (801) 272-9294.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form SB-2, together with all amendments and
exhibits, with the SEC. This Prospectus, which forms a part of that registration statement, does
not contain all information included in the registration statement. Certain information is omitted
and you should refer to the registration statement and its exhibits. With respect to references
made in this Prospectus to any of our contracts or other documents, the references are not
necessarily complete and you should refer to the exhibits attached to the registration statement
for copies of the actual contracts or documents. You may read and copy any document that we file at
the Commissions Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms.
Our filings and the registration statement can also be reviewed by accessing the SECs website at
http://www.sec.gov.
40
REMEDENT, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2007 AND FOR THE YEARS ENDED MARCH 31, 2007 AND 2006
|
|
|
|
|
F-2
|
|
|
F-3
|
|
|
F-4
|
|
|
F-5
|
|
|
F-7
|
|
|
F-9
|
|
|
F-10
|
|
|
|
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2007 AND FOR THE THREE MONTHS ENDED JUNE
30, 2007 AND 2006 (UNAUDITED)
|
|
|
|
|
|
|
|
F-26
|
|
|
F-27
|
|
|
F-28
|
|
|
F-29
|
|
|
F-30
|
|
|
F-31
|
F-1
|
|
|
|
|
|
Bedrijfsrevisoren
|
|
PKF
|
|
|
Business advisers
|
INDEPENDENT AUDITORS REPORT
REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM
To the Board of Directors and Stockholders of Remedent, Inc.:
We have audited the accompanying consolidated balance sheets of Remedent, Inc. as of March 31, 2007
and March 31, 2006 and the related consolidated statements of operations, stockholders equity
(deficit), cash flows, and comprehensive loss for the years then ended. These consolidated
financial statements are the responsibility of the Companys management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audit.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the financial position of the Company at March 31, 2007 and March 31, 2006 and the
results of its operations and its cash flows for the two years then ended in conformity with
accounting principles generally accepted in the United States of America.
Antwerp
Belgium, 12 July 2007
PKF bedrijfsrevisoren
Statutory Auditors
Represented by
/s/ Ria Verheyen
Registered Auditor
Tel
+32 (0)3 235 66 66 / Fax +32 (0)3 235 22 22 /
antwerpen@pkf.be
/
www.pkf.be
PKF bedrijfsrevisoren CVBA / burgerlijke vennootschap met handelsvorm
Potvlietlaan 6 / 2600 Antwerpen / BTW BE 0439 814 826 / RPR Antwerpen
The PKF International Association is an association of legally independent firms.
F-2
REMEDENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
126,966
|
|
|
$
|
332,145
|
|
Cash, restricted
|
|
|
|
|
|
|
70,762
|
|
Accounts receivable, net of allowance for doubtful accounts of $79,996 at March 31,
2007 and $74,133 at March 31, 2006
|
|
|
1,724,121
|
|
|
|
2,370,846
|
|
Inventories, net
|
|
|
1,132,941
|
|
|
|
1,470,553
|
|
Prepaid expense
|
|
|
668,421
|
|
|
|
335,111
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
3,652,449
|
|
|
|
4,579,417
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET
|
|
|
589,623
|
|
|
|
317,361
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
|
Patents, net
|
|
|
135,894
|
|
|
|
166,166
|
|
|
|
|
|
|
|
|
|
|
|
135,894
|
|
|
|
166,166
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
4,377,966
|
|
|
$
|
5,062,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS DEFICIT
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Current portion, long term debt
|
|
$
|
43,499
|
|
|
$
|
12,641
|
|
Line of Credit
|
|
|
1,530,276
|
|
|
|
605,200
|
|
Notes payable
|
|
|
11,282
|
|
|
|
31,282
|
|
Accounts payable
|
|
|
1,441,502
|
|
|
|
1,632,449
|
|
Accrued liabilities
|
|
|
412,435
|
|
|
|
601,042
|
|
Due to related parties
|
|
|
50,536
|
|
|
|
58,958
|
|
Income taxes payable
|
|
|
|
|
|
|
103,001
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
3,489,530
|
|
|
|
3,044,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG TERM DEBT
|
|
|
152,343
|
|
|
|
60,998
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS DEFICIT:
|
|
|
|
|
|
|
|
|
Preferred Stock $0.001 par value (10,000,000 shares authorized, none issued and
outstanding)
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; (50,000,000 shares authorized, 12,996,245 shares
issued and outstanding at March 31, 2007 and 12,764,112 shares issued and
outstanding at March 31, 2006)
|
|
|
12,996
|
|
|
|
12,764
|
|
Additional paid-in capital
|
|
|
11,904,000
|
|
|
|
11,624,234
|
|
Accumulated deficit
|
|
|
(11,147,600
|
)
|
|
|
(9,651,551
|
)
|
Common stock subscribed, not issued
|
|
|
|
|
|
|
200
|
|
Accumulated other comprehensive income (loss) (foreign currency translation adjustment)
|
|
|
(33,303
|
)
|
|
|
(28,274
|
)
|
|
|
|
|
|
|
|
Total stockholders equity (deficit)
|
|
|
736,093
|
|
|
|
1,957,373
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
|
|
$
|
4,377,966
|
|
|
$
|
5,062,944
|
|
|
|
|
|
|
|
|
COMMITMENTS (Note 20)
SUBSEQUENT EVENT (Note 21)
The accompanying notes are an integral part of these consolidated financial statements.
F-3
REMEDENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
For the years ended
|
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
Net sales
|
|
$
|
6,676,365
|
|
|
$
|
7,393,948
|
|
Cost of sales
|
|
|
3,342,716
|
|
|
|
3,812,463
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
3,333,649
|
|
|
|
3,581,485
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
341,764
|
|
|
|
1,153,897
|
|
Sales and marketing
|
|
|
888,810
|
|
|
|
1,202,145
|
|
General and administrative
|
|
|
3,288,723
|
|
|
|
4,235,292
|
|
Non cash restructuring expense
|
|
|
|
|
|
|
764,151
|
|
Depreciation and amortization
|
|
|
209,340
|
|
|
|
107,222
|
|
|
|
|
|
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
4,728,637
|
|
|
|
7,462,707
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS
|
|
|
(1,394,988
|
)
|
|
|
(3,881,222
|
)
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(176,344
|
)
|
|
|
(24,195
|
)
|
Non cash interest expense
|
|
|
|
|
|
|
(100,000
|
)
|
Other income
|
|
|
75,283
|
|
|
|
49,427
|
|
|
|
|
|
|
|
|
TOTAL OTHER INCOME (EXPENSES)
|
|
|
(101,061
|
)
|
|
|
(74,768
|
)
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
|
|
(1,496,049
|
)
|
|
|
(3,955,990
|
)
|
Income tax (expense) benefit
|
|
|
|
|
|
|
68,688
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(1,496,049
|
)
|
|
$
|
(3,887,302
|
)
|
|
|
|
|
LOSS PER SHARE
|
|
|
|
|
|
|
|
|
Basic and fully diluted
|
|
$
|
(0.12
|
)
|
|
$
|
(0.35
|
)
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
Basic and fully diluted
|
|
|
12,971,795
|
|
|
|
11,122,754
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-4
REMEDENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
FOR THE YEARS ENDED MARCH 31, 2007 AND 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid in
|
|
Accumulated
|
|
Stock
|
|
Treasury
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
Subscribed
|
|
Stock
|
|
Other
|
|
Total
|
|
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
Balance, March 31, 2005
|
|
|
2,176,225
|
|
|
|
2,176
|
|
|
|
5,427,289
|
|
|
|
(5,764,249
|
)
|
|
|
|
|
|
|
|
|
|
|
60,874
|
|
|
|
(273,910
|
)
|
Common stock issued for 78% equity interest in Remedent NV
|
|
|
7,715,703
|
|
|
|
7,716
|
|
|
|
1,170,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,178,592
|
|
Common Stock issued to MDB Capital for conversion of
$100,000 note payable including $10,000 accrued interest
and $100,000 non cash interest as a result of stock
valuation
|
|
|
197,839
|
|
|
|
198
|
|
|
|
209,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
210,000
|
|
Common Stock issued to MDB Capital for consulting fees
|
|
|
247,298
|
|
|
|
247
|
|
|
|
395,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
395,677
|
|
Warrants issued to MDB Capital for consulting fees
|
|
|
|
|
|
|
|
|
|
|
368,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
368,474
|
|
Common stock issued by private placement
|
|
|
2,520,661
|
|
|
|
2,521
|
|
|
|
3,197,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,200,081
|
|
Common stock to be issued for development services
|
|
|
|
|
|
|
|
|
|
|
519,800
|
|
|
|
|
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
520,000
|
|
Stock options issued for development services
|
|
|
|
|
|
|
|
|
|
|
361,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
361,500
|
|
Value of stock options issued to employees
|
|
|
|
|
|
|
|
|
|
|
113,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113,709
|
|
Treasury stock received as repayment of related party loan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(140,300
|
)
|
|
|
|
|
|
|
(140,300
|
)
|
Treasury stock retired and cancelled
|
|
|
(93,533
|
)
|
|
|
(94
|
)
|
|
|
(140,206
|
)
|
|
|
|
|
|
|
|
|
|
|
140,300
|
|
|
|
|
|
|
|
|
|
Common stock fractional shares cancelled in reverse split
|
|
|
(81
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(89,148
|
)
|
|
|
(89,148
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,887,302
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,887,302
|
)
|
|
|
|
Balance, March 31, 2006
|
|
|
12,764,112
|
|
|
|
12,764
|
|
|
|
11,624,234
|
|
|
|
(9,651,551
|
)
|
|
|
200
|
|
|
|
|
|
|
|
(28,274
|
)
|
|
|
1,957,373
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-5
REMEDENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
FOR THE YEARS ENDED MARCH 31, 2007 AND 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid in
|
|
Accumulated
|
|
Common Stock
|
|
Treasury
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
Subscribed
|
|
Stock
|
|
Other
|
|
Total
|
|
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
Balance, March 31, 2006, carried forward
|
|
|
12,764,112
|
|
|
|
12,764
|
|
|
|
11,624,234
|
|
|
|
(9,651,551
|
)
|
|
|
200
|
|
|
|
|
|
|
|
(28,274
|
)
|
|
|
1,957,373
|
|
Common stock issued for development services
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
(200
|
)
|
|
|
|
|
Common stock issued on conversion of convertible debentures
|
|
|
32,133
|
|
|
|
32
|
|
|
|
57,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,839
|
|
Value of stock options issued to employees
|
|
|
|
|
|
|
|
|
|
|
221,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
221,959
|
|
Cumulative translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,029
|
)
|
|
|
(5,029
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,496,049
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,496,049
|
)
|
|
|
|
Balance, March 31, 2007
|
|
|
12,996,245
|
|
|
|
12,996
|
|
|
|
11,904,000
|
|
|
|
(11,147,600
|
)
|
|
|
|
|
|
|
|
|
|
|
(33,303
|
)
|
|
|
736,094
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-6
REMEDENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
For the year ended March 31,
|
|
|
|
2007
|
|
|
2006
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,496,049
|
)
|
|
$
|
(3,887,302
|
)
|
Adjustments to reconcile net income (loss) to net cash used by
operating activities Depreciation and amortization
|
|
|
209,340
|
|
|
|
105,807
|
|
Inventory reserve
|
|
|
|
|
|
|
(23,997
|
)
|
Allowance for doubtful accounts
|
|
|
(1,813
|
)
|
|
|
(729
|
)
|
Common Stock issued to MDB Capital for non- cash
interest on conversion of $100,000 note payable
|
|
|
|
|
|
|
100,000
|
|
Common Stock issued to MDB Capital for consulting fees
|
|
|
|
|
|
|
395,677
|
|
Warrants issued to MDB Capital for consulting fees
|
|
|
|
|
|
|
368,474
|
|
Stock issued upon conversion of convertible debentures
|
|
|
25,706
|
|
|
|
|
|
Common stock to be issued for development services
|
|
|
|
|
|
|
520,000
|
|
Stock options issued for development services
|
|
|
|
|
|
|
361,500
|
|
Value of issued stock options to employees
|
|
|
221,959
|
|
|
|
113,709
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
870,014
|
|
|
|
(972,084
|
)
|
Due from related party
|
|
|
|
|
|
|
4,159
|
|
Inventories
|
|
|
476,814
|
|
|
|
(917,006
|
)
|
Prepaid expenses
|
|
|
(297,844
|
)
|
|
|
(155,188
|
)
|
Accounts payable
|
|
|
(336,606
|
)
|
|
|
791,888
|
|
Accrued liabilities
|
|
|
(220,360
|
)
|
|
|
261,969
|
|
Deferred revenue
|
|
|
|
|
|
|
(17,457
|
)
|
Income taxes payable
|
|
|
(110,468
|
)
|
|
|
(62,875
|
)
|
|
|
|
Net cash used by operating activities
|
|
|
(659,307
|
)
|
|
|
(3,013,455
|
)
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Decrease (increase) in restricted cash
|
|
|
70,762
|
|
|
|
(70,762
|
)
|
Decrease (increase) in other current assets
|
|
|
|
|
|
|
119,983
|
|
Purchase of patent rights
|
|
|
|
|
|
|
(117,871
|
)
|
Purchases of equipment
|
|
|
(385,866
|
)
|
|
|
(276,324
|
)
|
|
|
|
Net cash used by investing activities
|
|
|
(315,104
|
)
|
|
|
(344,974
|
)
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net proceeds from private placement
|
|
|
|
|
|
|
3,200,081
|
|
Proceeds from capital lease note payable
|
|
|
151,402
|
|
|
|
|
|
Principal payments on capital lease note payable
|
|
|
(40,171
|
)
|
|
|
|
|
Note payments related parties
|
|
|
(8,422
|
)
|
|
|
|
|
Note payments-unrelated parties
|
|
|
|
|
|
|
(150,883
|
)
|
Proceeds from (repayments of) line of credit
|
|
|
837,180
|
|
|
|
599,913
|
|
|
|
|
Net cash provided by financing activities
|
|
|
939,988
|
|
|
|
3,649,111
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH
|
|
|
(34,423
|
)
|
|
|
290,682
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(170,756
|
)
|
|
|
1,021
|
|
CASH AND CASH EQUIVALENTS, BEGINNING
|
|
|
332,145
|
|
|
|
40,442
|
|
|
|
|
CASH AND CASH EQUIVALENTS, ENDING
|
|
$
|
126,966
|
|
|
$
|
332,145
|
|
|
|
|
Supplemental Information:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
111,493
|
|
|
$
|
23,527
|
|
|
|
|
Income taxes paid
|
|
$
|
0
|
|
|
$
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-7
SUPPLEMENTAL NON-CASH INVESTING
AND FINANCING ACTIVITIES:
(a) On June 3, 2005, the Company issued 7,715,703 shares of its common stock in exchange for 78% of
the stock of Remedent N.V., a commonly controlled subsidiary and the $1,178,592 minority interest
associated with this 78% interest as of the closing of the transaction was recorded by the Company
as additional paid in capital ($1,170,876) and common stock ($7,716). (Refer to Note 3 for other
non-cash activities).
(b) On June 3, 2005 a $100,000 note payable issued by the Company on March 23, 2004 the Christopher
T. Marlett Living Trust (Marlett Note) converted to 197,839 shares of common stock pursuant to
its terms which required automatic conversion contingent upon successful completion of the
Companys corporate restructuring. The Company recognized the value of the beneficial conversion
feature of the Marlett Note equal to the difference between the effective conversion price, $0.57
per share, and the fair market value of the Companys common stock as of the date of the Marlett
Note was issued ($1.60 per share as of March 23, 2004) as additional interest expense as of the
date of the conversion, not to exceed the amount of the proceeds received from the Marlett Note.
Accordingly, the Company recorded $100,000 in additional non-cash interest expense as of June 3,
2005.
(c) Effective July 13, 2005, the Companys Board of Directors approved the repayment of a
115,000
advance to Dental Marketing Development N.V. (DMD), a company owned and operated by Guy De Vreese
which later merged with Lident N.V., another company controlled by Mr. De Vreese, in exchange for
93,533 shares of the Companys common stock held by Lident valued at $1.50 per share based upon a
principal amount of
115,000 and a conversion rate of $1.22 to the Euro. The 93,533 shares of
common stock received have been cancelled and were available for reissue as of March 31, 2006.
(d) On July 31, 2006, the Company issued 32,133 shares of its common stock in exchange for $20,000
in convertible debentures and accrued interest of $12,133. The difference between the conversion
price of $1.00 per share and the market value of the common stock exchanged valued at $1.80 per
share totaled $25,706 and was charged to interest expense.
F-8
REMEDENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
|
|
For the year ended
|
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2006
|
|
Net Loss
|
|
$
|
(1,496,049
|
)
|
|
$
|
(3,887,302
|
)
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE LOSS:
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
(5,029
|
)
|
|
|
(89,148
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(1,501,078
|
)
|
|
$
|
(3,976,450
|
)
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
|
|
BACKGROUND AND ORGANIZATION
|
|
|
|
The Company is a manufacturer and distributor of cosmetic dentistry products, including a full
line of professional dental and retail Over-The-Counter tooth whitening products which are
distributed in Europe, and recently in Asia and the United States. The Company manufactures many
of its products in its facility in Deurle, Belgium as well as outsourced manufacturing in China.
The Company distributes its products using both its own internal sales force and through the use
of third party distributors.
|
|
|
|
The accompanying consolidated financial statements include the accounts of Remedent, Inc.
(formerly Remedent USA, Inc.), a Nevada corporation, and its three subsidiaries, Remedent N.V.
(Belgian corporation) located in Deurle, Belgium, Remedent Professional, Inc. (incorporated in
California) and a subsidiary of Remedent Professional Holdings, Inc. and Remedent Asia Pte Ltd, a
wholly-owned subsidiary formed under the laws of Singapore (collectively, the Company).
Remedent, Inc. is a holding company with headquarters in Deurle, Belgium and, as of October 2005,
offices in Los Angeles, California. Remedent Professional, Inc. and Remedent Professional
Holdings, Inc. have been dormant since inception. Remedent Asia Pte. Ltd., commenced operations
as of July 2005. All significant inter-company accounts and transactions have been eliminated in
the consolidated financial statements.
|
|
|
|
The Company was originally incorporated under the laws of Arizona in September 1996 under the
name Remedent USA, Inc. In October 1998, the Company was acquired by Resort World Enterprises,
Inc., a Nevada corporation (RWE) in a share exchange and RWE immediately changed its name to
Remedent USA, Inc. The share exchange was a reverse acquisition and accounted for as if the
Company acquired RWE and then recapitalized its capital structure. On July 1, 2001, the Company
formed three wholly-owned subsidiaries, Remedent Professional Holdings, Inc., Remedent
Professional, Inc. and Remedent N.V. (a Belgium corporation). Remedent Professional, Inc. and
Remedent Professional Holdings, Inc. are both wholly-owned subsidiaries and have been inactive
since inception. In June 2005, the Company formed Remedent Asia Pte Ltd, a wholly-owned
subsidiary formed under the laws of Singapore. In October, 2005, the Company established a sales
office in Los Angeles, California in order to introduce its products to the United States market.
|
|
|
|
During the quarter ended March 31, 2002, through the Companys Belgium based subsidiary, Remedent
N.V., the Company initiated its entrance into the high technology dental equipment market. Since
that time, the majority of the Companys operations have been conducted through its subsidiary,
Remedent N.V. For the last five fiscal years, substantially all of the Companys revenue has been
generated by Remedent N.V., which has become a provider of cosmetic dentistry products, including
a full line of professional dental and retail over-the-counter tooth whitening products in
Europe. Because the controlling stockholders of Remedent N.V. consisted of the Companys
executive officers or companies owned by these executive officers, the Company has always had
effective control over Remedent N.V., as defined by APB 51
Consolidated Financial Statements
,
even though it owned only twenty two percent (22%) of this subsidiary.
|
|
|
|
On June 3, 2005, the Company consummated the acquisition of the remaining 78% of Remedent N.V.,
and issued 7,715,703 shares of the Companys common stock in exchange for the 78% of the common
stock of Remedent N.V. not owned by the Company. As a result of this acquisition, Remedent N.V.
is now our wholly-owned subsidiary.
|
|
|
|
In addition, on June 3, 2005, the Company amended its Articles of Incorporation pursuant to the
filing of the Amended and Restated Articles of Incorporation with the Nevada Secretary of State.
The Amended and Restated Articles of Incorporation (i) changed the name of the Company from
Remedent USA, Inc. to Remedent, Inc. (ii) increased the number of authorized shares to
60,000,000 shares consisting of 50,000,000 shares of common stock and 10,000,000 shares of
Preferred Stock, and (iii) effected a one-for-twenty reverse stock split (collectively, the
Amendments). The consolidated financial statements and accompanying notes have been
retroactively adjusted to reflect the effects of the reverse split and authorization of
10,000,000 shares of Preferred Stock.
|
F-10
2.
|
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
|
|
Basis of Presentation
|
|
|
|
The Companys financial statements have been prepared on an accrual basis of accounting, in
conformity with accounting principles generally accepted in the United States of America. These
principles contemplate the realization of assets and liquidation of liabilities in the normal
course of business. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting periods. Actual results could
differ from those estimates. These financial statements do not include any adjustments that might
be necessary if the Company is unable to continue as a going concern.
|
|
|
|
On June 3, 2005, the Company amended its Articles of Incorporation pursuant to the filing of the
Amended and Restated Articles of Incorporation with the Nevada Secretary of State. The Amended
and Restated Articles of Incorporation (i) changed the name of the Company from Remedent USA,
Inc. to Remedent, Inc. (ii) increased the number of authorized shares to 60,000,000 shares
consisting of 50,000,000 shares of common stock and 10,000,000 shares of Preferred Stock, and
(iii) effected a 1 for 20 reverse stock split (collectively, the Amendments). The Amendments
were disclosed in an Information Statement on Schedule 14 (c) mailed on May 9, 2005 to all
stockholders of record as of the close of business on February 1, 2005. The consolidated
financial statements and accompanying notes have been retroactively adjusted to reflect the
effects of the reverse split and authorization of 10,000,000 shares of Preferred Stock.
|
|
|
|
Principles of Consolidation
|
|
|
|
All inter-company balances and transactions have been eliminated in consolidation. Corporate
administrative costs are not allocated to subsidiaries.
|
|
|
|
Revenue Recognition
|
|
|
|
The Company recognizes revenue from product sales when persuasive evidence of a sale exists: that
is, a product is shipped under an agreement with a customer; risk of loss and title has passed to
the customer; the fee is fixed or determinable; and collection of the resulting receivable is
reasonably assured. Sales allowances are estimated based upon historical experience of sales
returns.
|
|
|
|
Impairment of Long-Lived Assets
|
|
|
|
Long-lived assets consist primarily of patents and property and equipment. The recoverability of
long-lived assets is evaluated by an analysis of operating results and consideration of other
significant events or changes in the business environment. If impairment exists, the carrying
amount of the long-lived assets is reduced to its estimated fair value, less any costs associated
with the final settlement. As of March 31, 2007, management believes there was no impairment of
the Companys long-lived assets.
|
|
|
|
Pervasiveness of Estimates
|
|
|
|
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires the Company to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, the Company evaluates estimates and
judgments, including those related to revenue, bad debts, inventories, fixed assets, intangible
assets, stock based compensation, income taxes, and contingencies. Estimates are based on
historical experience and on various other assumptions that the Company believes reasonable in
the circumstances. The results form the basis for making judgments about the carrying vales of
assets and liabilities that are not readily apparent from other sources. Actual results could
differ from those estimates.
|
F-11
|
|
Cash and Cash Equivalents
|
|
|
|
The Company considers all highly liquid investments with maturities of three months or less to be
cash or cash equivalents.
|
|
|
|
Accounts Receivable and Allowance for Doubtful Accounts
|
|
|
|
The Company sells professional dental equipment to various companies, primarily to distributors
located in Western Europe. The terms of sales vary by customer, however, generally are 2% 10
days, net 30 days. Accounts receivable is reported at net realizable value and net of allowance
for doubtful accounts. The Company uses the allowance method to account for uncollectible
accounts receivable. The Companys estimate is based on historical collection experience and a
review of the current status of trade accounts receivable.
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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 $13,366 at March 31, 2007 and $12,104 at March 31, 2006.
|
|
|
|
Prepaid Expense
|
|
|
|
The Companys 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.
|
|
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|
Property and Equipment
|
|
|
|
Property and equipment are stated at cost. Major renewals and improvements are charged to the
asset accounts while replacements, maintenance and repairs, which do not improve or extend the
lives of the respective assets, are expensed. At the time property and equipment are retired or
otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of
the applicable amounts. Gains or losses from retirements or sales are credited or charged to
income.
|
|
|
|
The Company depreciates its property and equipment for financial reporting purposes using the
straight-line method based upon the following useful lives of the assets:
|
|
|
|
Tooling
|
|
3 Years
|
Furniture and fixtures
|
|
4 Years
|
Machinery and Equipment
|
|
4 Years
|
|
|
Patents
|
|
|
|
Patents consist of the costs incurred to purchase patent rights and are reported net of
accumulated amortization. Patents are amortized using the straight-line method over a period
based on their contractual lives.
|
|
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|
Research and Development Costs
|
|
|
|
The Company expenses research and development costs as incurred.
|
|
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|
Advertising
|
|
|
|
Costs incurred for producing and communicating advertising are expensed when incurred and
included in sales and marketing and general and administrative expenses. For the years ended
March 31, 2007 and 2006, advertising expense was $350,793 and $581,047, respectively.
|
F-12
|
|
Income taxes
|
|
|
|
Income taxes are provided in accordance with Statement of Financial Accounting Standards No. 109
(SFAS 109),
Accounting for Income Taxes
. Deferred taxes are recognized for temporary
differences in the bases of assets and liabilities for financial statement and income tax
reporting as well as for operating losses and credit carry forwards. A provision has been made
for income taxes due on taxable income and for the deferred taxes on the temporary differences.
The components of the deferred tax asset and liability are individually classified as current and
non-current based on their characteristics.
|
|
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|
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it
is more likely than not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
|
|
|
|
Warranties
|
|
|
|
The Company typically warrants its products against defects in material and workmanship for a
period of 18 months from shipment. Based upon historical trends and warranties provided by the
Companys suppliers and sub-contractors, the Company has made a provision for warranty costs of
$20,049 and $18,156 as of March 31, 2007 and March 31, 2006, respectively.
|
|
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|
Segment Reporting
|
|
|
|
Statement of Financial Accounting Standards No. 131 (SFAS 131),
Disclosure About Segments of
an Enterprise and Related
Information requires use of the management approach model for
segment reporting. The management approach model is based on the way a companys management
organizes segments within the company for making operating decisions and assessing performance.
Reportable segments are based on products and services, geography, legal structure, management
structure, or any other manner in which management disaggregates a company. The Companys
management considers its business to comprise one segment for reporting purposes.
|
|
|
|
Computation of Earnings (Loss) per Share
|
|
|
|
Basic net income (loss) per common share is computed by dividing net income (loss) attributable
to common stockholders by the weighted average number of shares of common stock outstanding
during the period. Net income (loss) per common share attributable to common stockholders
assuming dilution is computed by dividing net income by the weighted average number of shares of
common stock outstanding plus the number of additional common shares that would have been
outstanding if all dilutive potential common shares had been issued. Potential common shares
related to stock options and stock warrants are excluded from the computation when their effect
is anti-dilutive.
|
|
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Conversion of Foreign Currencies
|
|
|
|
The reporting currency for the consolidated financial statements of the Company is the U.S.
dollar. The functional currency for the Companys European subsidiary, Remedent N.V. is the Euro.
The functional currency for Remedent Professional, Inc. is the U.S. dollar. The Company
translates foreign currency statements to the reporting currency in accordance with FASB 52. The
assets and liabilities of companies whose functional currency is other that the U.S. dollar are
included in the consolidation by translating the assets and liabilities at the exchange rates
applicable at the end of the reporting period. The statements of income of such companies are
translated at the average exchange rates during the applicable period. Translation gains or
losses are accumulated as a separate component of stockholders deficit.
|
|
|
|
Comprehensive Income (Loss)
|
|
|
|
The Company has adopted the provisions of Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income
(SFAS No. 130). SFAS No. 130 establishes standards for the
reporting and display of comprehensive income, its components and accumulated balances in a full
set of general purpose financial statements. SFAS No. 130 defines comprehensive income (loss) to
include all changes in equity except those resulting from investments by owners and distributions
to owners, including adjustments to minimum pension liabilities, accumulated foreign currency
translation, and unrealized gains or losses on marketable securities.
|
F-13
|
|
The Companys only component of other comprehensive income is the accumulated foreign currency
translation consisting of losses of $(5,029) and $(89,148) for the years ended March 31, 2007 and
2006, respectively. These amounts have been recorded as a separate component of stockholders
deficit.
|
|
|
|
Stock Based Compensation
|
|
|
|
In December 2004, the Financial Accounting Standards Board issued SFAS No. 123R,
Share-Based
Payment
. Subsequently, the Securities and Exchange Commission (SEC) provided for a phase-in
implementation process for SFAS No. 123R, which required adoption of the new accounting standard
no later than January 1, 2006. SFAS No. 123R requires accounting for stock options using a
fair-value-based method as described in such statement and recognize the resulting compensation
expense in the Companys financial statements. Prior to January 1, 2006, the Company accounted
for employee stock options using the intrinsic value method under APB No. 25, Accounting for
Stock Issued to Employees and related Interpretations, which generally resulted in no employee
stock option expense. The Company adopted SFAS No. 123R on January 1, 2006 and does not plan to
restate financial statements for prior periods. The Company plans to continue to use the
Black-Scholes option valuation model in estimating the fair value of the stock option awards
issued under SFAS No. 123R. The adoption of SFAS No. 123R has a material impact on the Companys
results of operations. For the year ended March 31, 2007, equity compensation in the form of
stock options and grants of restricted stock totaled $221,959.
|
|
|
|
Impact of New Accounting Standards
|
|
|
|
In February 2006, the Financial Accounting Standard Board (FASB) issued SFAS No. 155,
Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and
140
. This Statement resolves issues addressed in Statement 133 Implementation Issue No. D1,
Application of Statement 133 to Beneficial Interest in Securitized Financial Assets. This
pronouncement will be effective on the fiscal year beginning after September 15, 2006. Currently,
the Company does not have any derivative instruments or participate in any hedging activities,
and therefore the adoption of SFAS No. 155 is not expected to have a material impact on the
Companys financial position or results of operations.
|
|
|
|
In March 2006, the Financial Accounting Standard Board (FASB) issued SFAS No. 156,
Accounting
for Servicing of Financial Assets, an amendment of FASB Statement No. 140
. This Statement
requires recognition of servicing a financial asset by entering into a servicing contract in
certain situations. This pronouncement will be effective on the fiscal year beginning after
September 15, 2006. Currently, the Company does not have any servicing asset or liability, and
therefore the adoption of SFAS No. 156 is not expected to have a material impact on the Companys
financial position or results of operations.
|
|
|
|
In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No.
48,
Accounting for Uncertainty in Income Taxes an interpretation of FASB No. 109
(FIN
48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a companys
financial statements in accordance with SFAS No. 109 and provides guidance on recognizing,
measuring, presenting and disclosing in the financial statements tax positions that a company has
taken or expected to take on a tax return. FIN 48 is effective for the Company as of April 1,
2007. The Company is currently evaluating the impact that the adoption of FIN 48 will have on its
financial position and results of operations.
|
|
|
|
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measures
. This Statement defines
fair value, establishes a framework for measuring fair value in generally accepted accounting
principles (GAAP), expands disclosures about fair value measurements, and applies under other
accounting pronouncements that require or permit fair value measurements. SFAS No. 157 does not
require any new fair value measurements. However,
|
|
|
|
the FASB anticipates that for some entities, the application of SFAS No. 157 will change current
practice. SFAS No. 157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007, which for the Company is the fiscal year beginning April 1, 2008. The
Company is currently evaluating the impact of SFAS No. 157 but does not expect that it will have
a material impact on its financial statements.
|
|
|
|
In September 2006, the FASB issued SFAS No. 158,
Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans
. This Statement requires an employer to recognize the
over funded or under funded status of a defined benefit post retirement plan (other than a
multiemployer plan) as an asset or liability in its statement of financial position, and to
recognize changes in that funded status in the year in which the changes occur through
comprehensive income. SFAS No. 158 is
|
F-14
|
|
effective for fiscal years ending after December 15, 2006. The implementation of SFAS No. 158 did
not have any impact on the Companys financial position and results of operations.
|
|
|
|
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and
Financial Liabilities
. This Statement permits entities to choose to measure many financial
assets and financial liabilities at fair value. Unrealized gains and losses on items for which
the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of
SFAS No. 159 on its financial position and results of operations.
|
|
|
|
In September 2006, the SEC issued Staff Accounting Bulletin (SAB) No. 108,
Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements
. SAB No. 108 addresses how the effects of prior year uncorrected misstatements should
be considered when quantifying misstatements in current year financial statements. SAB No. 108
requires companies to quantify misstatements using a balance sheet and income statement approach
and to evaluate whether either approach results in quantifying an error that is material in light
of relevant quantitative and qualitative factors. SAB No. 108 is effective for periods ending
after November 15, 2006. The implementation of SAB No. 108 did not have any impact on the
Companys financial position and results of operations.
|
|
3.
|
|
CORPORATE RESTRUCTURING 2006
|
|
|
|
Action by Unanimous Written Consent
|
|
|
|
In February 2005 and December 2004, in an action taken by written consent of the holders of a
majority of the issued and outstanding shares of the Companys common stock, and without a
meeting pursuant to Section 78.320 of the Nevada Revised Statute (the Written Consent), the
Company: (i) increased the number of authorized shares to 60,000,000 shares, consisting of
50,000,000 shares of common stock and 10,000,000 shares of preferred stock, (ii) implemented a
one-for-twenty reverse stock split with consideration for fractional shares to be issued in the
form of scrip, and (iii) changed the name of the Company from Remedent USA, Inc. to Remedent,
Inc. The Written Consent also authorized acquisition of the remaining 78% of the Companys
subsidiary, Remedent N.V., that the Company did not own from Messrs. Guy De Vreese and Robin
List, the Chairman and Chief Executive Officer respectively, through the issuance of shares of
the Companys common stock equal to 78% of the Companys issued and outstanding shares following
the completion of the transaction. Lastly, the Written Consent authorized the implementation of a
2004 Incentive and Nonstatutory Stock Option Plan, following the implementation of the reverse
stock split (so as not to be affected by the reverse stock split), reserving 800,000 shares of
common stock for issuance to employees, directors and consultants of the Company or any
subsidiaries. These actions were disclosed in an Information Statement on Schedule 14C mailed on
May 9, 2005 to all stockholders of record as of the close of business on February 1, 2005 and
became effective June 3, 2005.
|
|
|
|
On June 3, 2005, the Company amended its Articles of Incorporation pursuant to the filing of the
Amended and Restated Articles of Incorporation with the Nevada Secretary of State. The Amended
and Restated Articles of Incorporation (i) changed the name of the Company from Remedent USA,
Inc. to Remedent, Inc. (ii) increased the number of authorized shares to 60,000,000 shares
consisting of 50,000,000 shares of common stock and 10,000,000 shares of Preferred Stock, and
(iii) effected a 1 for 20 reverse stock split (collectively, the Amendments).
|
|
|
|
Acquisition of Minority Interest
|
|
|
|
Also on June 3, 2005 the Company entered into an agreement (Exchange Agreement) with Remedent
N.V. the Companys Belgium based consolidated subsidiary, Lausha N.V., a Belgian company that is
controlled by Guy De Vreese who is Chairman of the Company (Lausha); and Robin List, a director
and the Chief Executive Officer of the Company (Mr. List). Mr. List and Lausha are collectively
referred to as the Exchanging Stockholders. Prior to the exchange contemplated by the Exchange
Agreement, the Company owned 2,200 shares of Remedent N.V. representing a twenty two percent
(22%) ownership interest in Remedent N.V. and the Exchanging Stockholders collectively owned
7,800 shares of Remedent N.V. representing a seventy-eight percent (78%) ownership interest of
Remedent N.V. Under the terms of the Exchange Agreement, the Company agreed to issue 7,715,703 of
its restricted common stock (representing a 78% ownership interest in the Company) giving effect
to a one for twenty reverse stock split (the Reverse Stock Split), in exchange for all of the
issued and outstanding shares of Remedent N.V. owned by the Exchanging Stockholders (the
Acquisition). The number of shares to be issued, as a percentage of the Companys
|
F-15
outstanding shares, in consideration for the Acquisition of the seventy eight percent (78%)
of the shares of Remedent N.V. was based on an evaluation by MDB Capital Group, LLC (MDB), a
NASD registered broker dealer retained by the Company to render advice with regard to the
Companys restructuring. MDB concluded that the Companys twenty two percent (22%) interest in
Remedent N.V. was the Companys only asset and therefore, as consideration for their seventy
eight percent (78%) interest in Remedent N.V., the Exchanging Stockholders should receive an
equal percentage ownership interest in the Company, therefore preserving the existing
proportional indirect ownership interests in Remedent N.V. of both the Exchanging Stockholders
and the existing Company stockholders.
The Company consummated the Acquisition of Remedent N.V. as contemplated by the Exchange
Agreement on June 3, 2005. In connection with the Acquisition, the Company issued 7,715,703
shares of its restricted common stock to the Exchanging Stockholders in exchange for all of the
issued and outstanding shares of Remedent N.V. owned by the Exchanging Stockholders. As a result
of the Acquisition, Remedent N.V. is a wholly owned subsidiary of the Company. Since the
Exchanging Stockholders of Remedent N.V. are officers, directors and shareholders of the Company,
the Company has determined that it has control of Remedent N.V., as defined by APB 51
Consolidated Financial Statements
. Accordingly, the Acquisition was recorded at predecessor
basis and all assets and liabilities have been presented at historical amounts.
Conversion of Note Payable
Upon successful completion of the foregoing transactions, on June 3, 2005 a $100,000 note payable
issued by the Company on March 23, 2004 to Christopher Marlett (Marlett Note) converted to
197,839 shares of common stock pursuant to its terms which required automatic conversion
contingent upon successful completion of any corporate restructuring in an amount equal to two
percent (2.0%) of the outstanding shares of the Company at the completion of such restructuring.
As of June 3, 2005, accrued interest on the Marlett Note was $11,173, resulting in an effective
conversion price of $0.57 per share. In accordance with Emerging Issues Task Force (EITF)
consensus on Issue No. 98-5,
Accounting for Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Ratios
, the Company recognized the value of the
beneficial conversion feature equal to the difference between the effective conversion price,
$0.57 per share, and the fair market value of the Companys common stock as of the date of the
Marlett Note was issued ($1.60 per share as of March 23, 2004) as additional interest expense as
of the date of the conversion, not to exceed the amount of the proceeds received from the Marlett
Note. Accordingly, the Company recorded $100,000 in additional non-cash interest expense as of
June 3, 2005.
Non-cash Fees for Financial Advisory Services
Also upon completion of the foregoing transactions, MDB, for financial advisory services rendered
to the Company in connection with the Companys corporate restructuring, was entitled to receive
shares of the Companys common stock equal to 2.5% the issued and outstanding shares as of June
3, 2005 restructuring and five year common stock purchase warrants equal to another 2.5% of the
Companys outstanding shares as of June 3, 2005 that will be exercisable beginning sixty (60)
days after June 3, 2005 with an exercise price of $1.20 per share. Accordingly, as of June 3,
2005, the Company was obligated to issue to MDB or its designee, 247,298 shares of the Companys
common stock and 247,298 five year common stock purchase warrants. The market value of the
Companys common stock on June 3, 2005 was $1.60 per share, resulting in a value attributable to
the stock issued to MDB of $395,677. The value of the warrants, determined in accordance with the
Black-Scholes pricing model utilizing an historic volatility factor of 1.52, a risk free interest
rate of 6.0% and an expected life for the warrants of five years, is $1.49 per warrant, for a
total for the warrants of $368,474. Accordingly the Company recognized a non-cash restructuring
expense as of June 3, 2005 of $764,151.
4.
|
|
PRIVATE PLACEMENT
|
|
|
|
On July 20, 2005 the Company completed a private placement of 2,520,661 Units for an aggregate
offering price of $3,780,985 (the Offering). Each Unit consists of one share of restricted
Common Stock (the Shares) and one Common Stock Purchase Warrant (the Warrants) at a price of
$1.50 per Unit. The Warrants are exercisable for a period of five years and entitle the holder to
purchase one share of restricted Common Stock (the Warrant Shares) for $1.75 per Warrant Share.
The Company also has the right to redeem the Warrants for $0.01 per Warrant Share covered by the
Warrants if the Shares trade on the Over the Counter Bulletin Board or similar market above $3.50
per share for 30 consecutive trading days based upon the closing bid price for the Shares for
each trading day (the Redemption Right), provided, however, that the Warrant Shares have been
registered with the Securities and Exchange Commission (the SEC). Once the Redemption Right
vests, the Company has the right, but not the obligation, to redeem the Warrants for $0.01 per
Warrant Share covered by the Warrants upon 30 days written notice to the holders of the Warrants.
|
F -16
|
|
Under the terms of the subscription agreement/purchase agreement and the registration rights
agreement, the Company was required to prepare and file with the SEC a registration statement
covering the resale of the Shares and the Warrant Shares. The Company has filed such registration
statement and it was declared effective by the SEC during October 2005.
|
|
|
|
The Company engaged MDB Capital Group, LLC, as its exclusive agent to offer the Units (the
Placement Agent). The Placement Agent earned a fee equal to ten percent (10%) of the gross
proceeds derived from the sale of the Units, which totaled $378,099, together with a five year
warrant to purchase up to 252,067 of the Units sold in the Offering at an exercise price of $1.50
per Unit. In addition, the Company incurred a total of $200,283 in professional fees and costs
associated with this offering which were offset against the proceeds attributable to additional
paid in capital.
|
|
|
|
The Units were offered and sold by the Company to accredited investors in reliance on Section 506
of Regulation D of the Securities Act of 1933, as amended.
|
|
5.
|
|
CONCENTRATION OF RISK
|
|
|
|
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 Companys customer base and their dispersion across different
geographic areas. At March 31, 2007 two customers accounted for 35% and 10% of the Companys
trade accounts receivable. At March 31, 2006, two customers accounted for 20% and 13% of the
Companys trade accounts receivable. The Company performs ongoing credit evaluations of its
customers and normally does not require collateral to support accounts receivable.
|
|
|
|
Purchases The Company has diversified its sources for product components and finished goods
and, as a result, the loss of a supplier would not have a material impact on the Companys
operations. For the year ended March 31, 2007, the Company had one supplier who accounted for 38%
of gross purchases and four other suppliers who accounted for between 10% and 20% of gross
purchases each. For the year ended March 31, 2006, the Company had one supplier who accounted for
28% of gross purchases.
|
|
|
|
Revenues For the year ended March 31, 2007 the Company had two customers that accounted for 35%
and 10%, respectively, of total revenues. For the year ended March 31, 2006 the Company had two
customers that accounted for 20% and 13% respectively, of total revenues.
|
|
6.
|
|
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
|
|
|
|
The Companys accounts receivable at year end were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
March 31, 2006
|
|
|
|
Accounts receivable, gross
|
|
$
|
1,804,117
|
|
|
$
|
2,444,979
|
|
Less: allowance for doubtful accounts
|
|
|
(79,996
|
)
|
|
|
(74,133
|
)
|
|
|
|
Accounts receivable, net
|
|
$
|
1,724,121
|
|
|
$
|
2,370,846
|
|
|
|
|
7.
|
|
INVENTORIES
|
|
|
|
Inventories at year end are stated at the lower of cost (first-in, first-out) or net realizable
value and consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
March 31, 2006
|
|
|
|
Raw materials
|
|
$
|
30,579
|
|
|
$
|
30,538
|
|
Components
|
|
|
786,728
|
|
|
|
1,102,231
|
|
Finished goods
|
|
|
329,000
|
|
|
|
349,888
|
|
|
|
|
|
|
|
1,146,307
|
|
|
|
1,482,657
|
|
Less: reserve for obsolescence
|
|
|
(13,366
|
)
|
|
|
(12,104
|
)
|
|
|
|
Net inventory
|
|
$
|
1,132,941
|
|
|
$
|
1,470,553
|
|
|
|
|
F -17
8.
|
|
PREPAID EXPENSES
|
|
|
|
Prepaid expenses are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
March 31, 2006
|
|
|
|
Prepaid materials and components
|
|
$
|
394,598
|
|
|
$
|
72,106
|
|
Prepaid Belgium income taxes
|
|
|
66,830
|
|
|
|
60,520
|
|
Prepaid consulting
|
|
|
66,830
|
|
|
|
|
|
VAT payments in excess of VAT receipts
|
|
|
47,260
|
|
|
|
92,181
|
|
Royalties
|
|
|
33,415
|
|
|
|
30,260
|
|
Prepaid trade show expenses
|
|
|
6,523
|
|
|
|
25,325
|
|
Legal
|
|
|
|
|
|
|
16,159
|
|
Prepaid rent
|
|
|
7,054
|
|
|
|
20,712
|
|
Other
|
|
|
45,911
|
|
|
|
17,848
|
|
|
|
|
|
|
$
|
668,421
|
|
|
$
|
335,111
|
|
|
|
|
9.
|
|
PROPERTY AND EQUIPMENT
|
|
|
|
Property and equipment are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
March 31, 2006
|
|
|
|
Furniture and Fixtures
|
|
$
|
137,560
|
|
|
$
|
94,368
|
|
Machinery and Equipment
|
|
|
559,422
|
|
|
|
167,764
|
|
Tooling
|
|
|
188,450
|
|
|
|
175,950
|
|
|
|
|
|
|
|
885,432
|
|
|
|
438,082
|
|
Accumulated depreciation
|
|
|
(295,809
|
)
|
|
|
(120,721
|
)
|
|
|
|
Property & equipment, net
|
|
$
|
589,623
|
|
|
$
|
317,361
|
|
|
|
|
10.
|
|
LICENSED PATENTS
|
|
|
|
Teeth Whitening Patents
|
|
|
|
In October 2004, the Company acquired from the inventor the exclusive, perpetual license to two
issued United States patents which are applicable to several teeth whitening products currently
being marketed by the Company. Pursuant to the terms of the license agreement, the Company was
granted an exclusive, worldwide, perpetual license to manufacture, market, distribute and sell
the products contemplated by the patents subject to the payment of $65,000 as reimbursement to
the patent holder for legal and other costs associated with obtaining the patents, which was paid
in October 2004, and royalties for each unit sold subject to an annual minimum royalty of
$100,000 per year. The Company is amortizing the initial cost of $65,000 for these patents over a
ten year period and accordingly has recorded $16,250 of accumulated amortization for this patent
as of March 31, 2007. The Company accrues this royalty when it becomes payable to the inventory
therefore no provision has been made for this obligation as of March 31, 2007.
|
|
|
|
Universal Applicator Patent
|
|
|
|
In September 2004, the Company entered into an agreement with Lident N.V. (Lident), a company
controlled by Mr. De Vreese, the Companys Chairman, to obtain an option, exercisable through
December 31, 2005, to license an international patent (excluding the US) and worldwide
manufacturing and distribution rights for a potential new product which Lident had been assigned
certain rights by the inventors of the products, who are unrelated parties, prior to Mr. De
Vreese association with the Company. The patent is an Italian patent which relates to a single
use universal applicator for dental pastes, salves, creams, powders, liquids and other substances
where manual application could be relevant. The Company has filed to have the patent approved
throughout Europe. The agreement required the Company to advance to the inventors through Lident
a fully refundable deposit of
100,000 subject to the Companys due diligence regarding the
enforceability of the patent and marketability of the product, which, if viable, would be
assigned to the Company for additional consideration to the inventors of
100,000 and an
ongoing royalty from sales of products related to the patent equal to 3% of net sales and, if not
viable, the deposit would be repaid in full by Lident. The consideration the Company had agreed
to pay Lident upon the exercise of the option is the same as the
|
F -18
|
|
consideration Lident is obligated to pay the original inventors. Consequently, Lident would not
have profited from the exercise of the option. Furthermore, at a meeting of the Companys Board
of Directors on July 13, 2005, the Board accepted Lidents offer to facilitate an assignment of
Lidents intellectual property rights to the technology to the Company in exchange for the
reimbursement of Lidents actual costs incurred relating to the intellectual property.
Consequently, when the Company exercises the option, all future payments, other than the
reimbursement of costs would be paid directly to the original inventors and not to Lident.
|
|
|
|
On December 12, 2005, the Company exercised the option and the Company and the patent holder
agreed to revise the assignment agreement whereby the Company agreed to pay
50,000 additional
compensation in the form of prepaid royalties instead of the
100,000 previously agreed,
25,000 of which had been paid by the Company in September 2005 and the remaining
25,000
to be paid upon the Companys first shipment of a product covered by the patent. The patent is
being amortized over five (5) years and accordingly, the Company has recorded $31,696 of
accumulated amortization for this patent as of March 31, 2007.
|
|
|
|
On December 12, 2005, the Company exercised the option and the Company and the patent holder
agreed to revise the assignment agreement whereby the Company agreed to pay
50,000 additional
compensation in the form of prepaid royalties instead of the
100,000 previously agreed,
25,000 of which had been paid by the Company in September 2005 and the remaining
25,000
to be paid upon the Companys first shipment of a product covered by the patent. The patent is
being amortized over five (5) years.
|
|
11.
|
|
LINE OF CREDIT
|
|
|
|
On October 8, 2004, our wholly owned subsidiary, Remedent N.V., obtained a mixed-use line of
credit facility with Fortis Bank, a Belgian bank, for
1,070,000 (the Facility). The
Facility was secured by a first lien on the assets of Remedent N.V. The purpose of the Facility
is to provide working capital to grow our business and to finance certain accounts receivable as
necessary. Since opening the Facility in 2004, Remedent N.V. and Fortis Bank have subsequently
amended the Facility several times to increase or decrease the line of credit. On May 3, 2005 the
Facility was amended to decrease the line of credit to
1,050,000. On March 13, 2006 the
Facility was amended to increase the mixed-use line of credit to
2,300,000, consisting of a
1,800,000 credit line based on the eligible accounts receivable and a
500,000 general
line of credit. The latest amendment to the Facility, dated September 1, 2006, amended and
decreased the mixed-use line of credit to
2,050,000. Each line of credit carries its own
interest rates and fees as provided in the Facility. Remedent N.V. is currently only utilizing
two lines of credit, advances based on account receivables and the straight loan. As of March 31,
2007 and March 31, 2006, Remedent N.V. had, in the aggregate, $1,530,276 and $605,200 advances
outstanding, respectively, under this mixed-use line of credit facility.
|
|
12.
|
|
NOTES PAYABLE
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
March 31, 2006
|
|
|
|
Convertible Debentures:
|
|
|
|
|
|
|
|
|
Maturity Dates: September 1, 2001 thru February 8, 2002 Interest rate: 10% per annum Debentures are unsecured Convertible at 30% of the average trading price (average of bid and ask) for the 30 days immediately prior to the maturity date (1) Unpaid principal balance
|
|
$
|
|
|
|
$
|
20,000
|
|
|
|
|
|
|
|
|
|
|
Union Bank Debt:
|
|
|
|
|
|
|
|
|
Maturity Dates: April 26, 2005 Interest rate: 7.5% per annum Security: All of the assets of the company Unpaid principal balance
|
|
|
11,282
|
|
|
|
11,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total notes payable
|
|
$
|
11,282
|
|
|
$
|
31,282
|
|
|
|
|
|
|
|
(1)
|
|
The remaining outstanding debentures of $20,000 plus $12,133 in accrued interest were
converted to 32,133 shares of common stock as of July 2006. The Company valued the common
stock at the market price of $1.80 per share on the date of conversion and charged interest
expense for $25,706 for the difference between the amount of the debt converted and the market
value of the common stock issued upon conversion.
|
F -19
13.
|
|
LONG TERM DEBT
|
|
|
|
On June 15, 2005, the Company entered into two five year capital lease agreements for
manufacturing equipment totaling
70,296 (US $85,231). On October 24, 2006, the Company
entered into another five year capital lease agreement for additional manufacturing equipment
totaling
123,367 (US $157,503). The leases require monthly payments of principal and interest
at 7.43% of
1,258 (US$1,681 at March 31, 2007) for the first two leases and 9.72% of
2,256 (US$ 3,015 at March 31, 2007) and provide for buyouts at the conclusion of the five
year term of
2,820 (US$3,769) or 4.0% of original value for the first two contracts and
4,933 (US $ 6,593) or 4.0 % of the original value for the second contract. The book value as
of March 31, 2007 and March 31, 2006 of the equipment subject to the foregoing leases are
$198,225 and $73,411, respectively.
|
|
14.
|
|
DUE TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS
|
|
|
|
Balances due to related parties consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
March 31, 2006
|
|
|
|
Demand loan from a former officer and major stockholder
|
|
$
|
50,536
|
|
|
$
|
58,958
|
|
|
|
|
|
|
|
$
|
50,536
|
|
|
$
|
58,958
|
|
|
|
|
Borrowings from employees and entities controlled by officers of the Company are, unsecured,
non-interest bearing, and due on demand.
Transactions with related parties consisted of the following:
Compensation:
During the years ended March 31, 2007 and 2006 respectively, the Company incurred $748,580 and
$708,000 respectively, as compensation for all directors and officers.
Sales Transactions:
One of the Companys directors owns a minority interest in a client company, IMDS Inc., to which
goods were sold during the years ended March 31, 2007 and 2006 totaling $476,122 and $38,494
respectively. Accounts receivable at year end with this customer totaled $392,057 and $12,008 as
at March 31, 2007 and 2006 respectively.
All related party transactions involving provision of services or tangible assets were recorded
at the exchange amount, which is the value established and agreed to by the related parties
reflecting arms length consideration payable for similar services or transfers. Other related
party transactions are disclosed in Supplemental Non-Cash Investing and Financing Activities,
clause (e), and Note 17.
15.
|
|
ACCRUED LIABILITIES
|
|
|
|
Accrued liabilities are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
March 31, 2006
|
|
|
|
Accrued employee benefit taxes
|
|
$
|
260,676
|
|
|
$
|
227,369
|
|
Royalties
|
|
|
|
|
|
|
100,000
|
|
Commissions
|
|
|
2,834
|
|
|
|
80,366
|
|
Accrued audit and tax preparation fees
|
|
|
27,282
|
|
|
|
23,500
|
|
Reserve for warranty costs
|
|
|
20,049
|
|
|
|
18,156
|
|
Accrued interest
|
|
|
6,180
|
|
|
|
15,584
|
|
Accrued consulting fees
|
|
|
2,528
|
|
|
|
9,021
|
|
Other accrued expenses
|
|
|
92,886
|
|
|
|
127,046
|
|
|
|
|
|
|
$
|
412,435
|
|
|
$
|
601,042
|
|
|
|
|
F -20
16.
|
|
INCOME TAXES
|
|
|
|
The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes
(SFAS No. 109). Under the asset and liability method of SFAS No.
109, deferred income tax assets and liabilities are recognized for the future tax consequences
attributable to differences between financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled.
Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
|
|
|
|
In assessing the realizability of deferred tax assets, the Company considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become deductible. The Company
considers the scheduled reversals of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment.
|
|
|
|
The domestic and foreign (Belgium and Singapore) components of income (loss) before income
taxes and minority interest were comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
March 31, 2006
|
Domestic
|
|
$
|
(1,627,604
|
)
|
|
$
|
(3,190,901
|
)
|
Foreign
|
|
|
131,555
|
|
|
|
(765,089
|
)
|
|
|
|
|
|
$
|
(1,496,049
|
)
|
|
$
|
(3,955,990
|
)
|
|
|
|
The Companys domestic and foreign components of deferred income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
March 31, 2006
|
Domestic Net operating loss carryforward
|
|
$
|
3,025,488
|
|
|
$
|
2,533,512
|
|
Foreign Net operating loss carryforward
|
|
|
202,731
|
|
|
|
244,828
|
|
|
|
|
Total
|
|
|
3,228,219
|
|
|
|
2,778,341
|
|
Valuation allowance
|
|
|
(3,228,219
|
)
|
|
|
(2,778,341
|
)
|
|
|
|
Net deferred tax assets
|
|
$
|
|
|
|
$
|
|
|
|
|
|
The principal reasons for the difference between the income tax (benefit) and the amounts computed
by applying the statutory income tax rates to the income (loss) for the year ended March 31, 2007
and March 31, 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
March 31, 2006
|
Domestic
|
|
|
|
|
|
|
|
|
Pre tax income
|
|
$
|
(1,627,604
|
)
|
|
$
|
(3,190,901
|
)
|
Statutory tax rate
|
|
|
35
|
%
|
|
|
35
|
%
|
|
|
|
Tax benefit based upon statutory rate
|
|
|
(569,661
|
)
|
|
|
(1,116,815
|
)
|
Increase in valuation allowance
|
|
|
569,661
|
|
|
|
1,116,815
|
|
|
|
|
Net domestic income tax (benefit)
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
|
|
Pre tax income (loss)
|
|
|
135,101
|
|
|
|
(765,089
|
)
|
Statutory tax rate
|
|
|
32
|
%
|
|
|
32
|
%
|
Tax expense (benefit) based upon statutory rate
|
|
|
43,232
|
|
|
|
(244,828
|
)
|
Permanent differences
|
|
|
(43,232
|
)
|
|
|
176,140
|
|
Net operating loss
|
|
|
|
|
|
|
|
|
|
|
|
Net foreign income tax (benefit)
|
|
|
|
|
|
|
(68,688
|
)
|
|
|
|
Total Income tax (benefit )
|
|
$
|
|
|
|
$
|
(68,688
|
)
|
|
|
|
F -21
17.
|
|
EQUITY COMPENSATION PLANS
|
|
|
|
The Board of Directors and stockholders approved the Nonstatutory Stock Option Plan (the 2001
Plan) and adopted it on May 29, 2001. The Company has reserved 250,000 shares of its common
stock for issuance to the directors, employees and consultants under the Plan. The Plan is
administered by the Board of Directors. Vesting terms of the options range from immediately to
five years.
|
|
|
|
Pursuant to an Information Statement on Schedule 14C mailed on May 9, 2005 to all stockholders of
record as of the close of business on February 1, 2005 and became effective June 3, 2005, the
Company authorized the implementation of a 2004 Incentive and Nonstatutory Stock Option Plan
(2004 Plan) reserving 800,000 shares of common stock for issuance to employees, directors and
consultants of the Company or any subsidiaries. This plan became effective as of June 3, 2005
after the Company had completed a one for twenty reverse split.
|
|
|
|
On October 12, 2005, the Company entered into an Employment Agreement with an individual to
render full-time employment to the Company as for an initial term of three (3) years whose duties
include managing worldwide sales for the Company. The agreement automatically renews for an
additional one (1) year period at the end of each then existing term, unless one party gives to
the other written notice to terminate. The agreement provides for an annual salary of $275,000
and quarterly bonuses in the amount of $25,000, subject to certain conditions. The agreement also
granted 400,000 options under the Companys 2004 Incentive and Nonstatutory Stock Option Plan
(the Stock Plan). The options were priced at $4.00. The options vest one third each on the last
day of the first, second and third years of employment. These options have a term of eight (8)
years from the date of grant and are subject to other standard terms and conditions under the
Stock Plan and contain standard anti-dilution language and a provision for cashless exercise. The
market value of the foregoing option grant based upon the Black-Scholes option pricing model
utilizing a market price on the date of grant of $3.50 per share, an annualized volatility of
155%, a risk free interest rate of 4.5% and an expected life of eight years is $3.41 per option
granted, for a total value of approximately $1,364,490.
|
|
|
|
On December 23, 2005, the Company granted to its Chief Financial Officer 75,000 ten year options
to purchase the Companys common stock at an exercise price of $2.46, the market value of the
Companys stock on the date of grant. The options were fully vested upon issue. The value of the
foregoing option grants based upon the Black-Scholes option pricing model utilizing a market
price on the date of grant of $2.46 per share, an annualized volatility of 155%, a risk free
interest rate of 4.5% and an expected life of eight years is $2.40 per option granted, for a
total value of approximately $180,000.
|
|
|
|
On October 1, 2006, the Company granted to a marketing consultant 25,000 options to purchase the
Companys common stock at a price of $1.80 per share. These options vested immediately upon grant
and are exercisable for a period of five years. The Company valued the foregoing options using
the Black Scholes option pricing model using the following assumptions: no dividend yield;
expected volatility rate of 91.58%; risk free interest rate of 5% and an average life of 5 years
resulting in a value of $1.298 per option granted.
|
|
|
|
On June 14, 2006, pursuant to an S-8 filed with the SEC, the Company registered 1,150,000 common
shares, pursuant to compensation arrangements.
|
|
|
|
A summary of the option activity for the years ended March 31, 2007 and 2006 pursuant to the
terms of the plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2001 Plan
|
|
|
2004 Plan
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
|
Outstanding
|
|
|
Average
|
|
|
Outstanding
|
|
|
Average
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Options
|
|
|
Exercise Price
|
|
Options outstanding , March 31, 2005
|
|
|
222,500
|
|
|
|
1.29
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
475,000
|
|
|
|
3.76
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled or expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding , March 31, 2006
|
|
|
222,500
|
|
|
$
|
1.29
|
|
|
|
475,000
|
|
|
$
|
3.76
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
1.80
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled or expired
|
|
|
|
|
|
|
|
|
|
|
(289,334
|
)
|
|
|
4.00
|
|
|
|
|
|
|
Options outstanding, March 31, 2007
|
|
|
222,500
|
|
|
$
|
1.29
|
|
|
|
210,666
|
|
|
$
|
3.19
|
|
|
|
|
|
|
Options exercisable March 31, 2007
|
|
|
222,500
|
|
|
$
|
1.29
|
|
|
|
210,666
|
|
|
$
|
3.19
|
|
|
|
|
|
|
Exercise price range
|
|
$
|
1.00 to $4.00
|
|
|
|
|
|
|
$
|
2.46 to $4.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining life
|
|
|
5.0
|
years
|
|
|
|
|
|
|
2.3
|
years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares available for future issuance
|
|
|
27,500
|
|
|
|
|
|
|
|
589,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F -22
A summary of the Companys equity compensation plans approved and not approved by shareholders is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Number of securities
|
|
|
|
securities to be
|
|
|
|
|
|
|
remaining available for
|
|
|
|
issued upon
|
|
|
|
|
|
|
future issuance under
|
|
|
|
exercise of
|
|
|
Weighted-average
|
|
|
equity compensation
|
|
|
|
of outstanding
|
|
|
exercise price of
|
|
|
plans (excluding
|
|
|
|
options, warrants
|
|
|
outstanding options
|
|
|
securities reflected
|
|
Plan Category
|
|
and right
|
|
|
warrants and rights
|
|
|
in column (a))
|
|
Equity Compensation Plans approved by security holders
|
|
|
433,166
|
|
|
$
|
2.22
|
|
|
|
616,834
|
|
Equity Compensation Plans not approved by security holders
|
|
|
297,298
|
|
|
$
|
1.50
|
|
|
|
NA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
730,464
|
|
|
$
|
1.93
|
|
|
|
616,834
|
|
|
|
|
|
|
|
|
|
|
|
Prior to January 1, 2006, the Company accounted for employee stock-based compensation under the
recognition and measurement principles of Accounting Principles Board Opinion (APB) No. 25,
Accounting for Stock Issued to Employees, and related Interpretations, as permitted by SFAS No.
123, Accounting for Stock-Based Compensation. Under the recognition principles of APB No. 25,
compensation expense related to restricted stock and performance units was recognized in the
financial statements. However, APB No. 25 generally did not require the recognition of
compensation expense for stock options because the exercise price of these instruments was
generally equal to the fair value of the underlying common stock on the date of grant, and the
related number of shares granted were fixed at that point in time.
Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No.
123(R), Share-Based Payment. In addition to recognizing compensation expense related to
restricted stock and performance units, SFAS No. 123(R) also requires recognition of compensation
expense related to the estimated fair value of stock options. The Company adopted SFAS No. 123(R)
using the modified-prospective-transition method. Under that transition method, compensation
expense recognized subsequent to adoption includes: (a) compensation cost for all share-based
payments granted prior to, but not yet vested as of January 1, 2006, based on the values
estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation cost
for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair
values estimated in accordance with the provisions of SFAS No. 123(R). Consistent with the
modified-prospective-transition method, the Companys results of operations for prior periods
have not been adjusted to reflect the adoption of FAS 123(R). For the year ended March 31, 2007,
the Company recognized $221,959 (2006 $113,709) in compensation expense in the consolidated
statement of operations
For purposes of proforma disclosures prior to January 1, 2006, the estimated fair value of the
options is amortized to expense over the options vesting periods. The Companys proforma
information follows:
|
|
|
|
|
|
|
March 31, 2006
|
Net income (loss):
|
|
|
|
|
As reported
|
|
$
|
(3,887,302
|
)
|
Pro forma
|
|
$
|
(4,067,302
|
)
|
Earnings per share:
|
|
|
|
|
Basic and fully diluted
|
|
|
|
|
As reported
|
|
$
|
(0.35
|
)
|
Pro forma
|
|
$
|
(0.37
|
)
|
18.
|
|
COMMON STOCK WARRANTS AND OTHER OPTIONS
|
|
|
|
On February 10, 2006, the Company issued to an individual the right to purchase 150,000 shares of
the Companys common stock at an exercise price of $2.60 per share for a term of five (5) years
pursuant to the terms and conditions of a Stock Option Agreement as consideration for past
services performed and the release of any and all claims under this individuals prior agreements
with the Company. The 150,000 options have been valued in accordance with the Black-Scholes
pricing model utilizing an historic volatility factor of 1.55, a risk free interest rate of 4.5%
and an expected life for the options of five years, resulting in a value of $2.41 per option
granted for a total for the warrants of $361,500. The value of this option grant was recorded as
of December 31, 2005 as a research and development expense.
|
F -23
|
|
In November 2006, the Company entered into a Settlement Agreement and Release (Settlement
Agreement) with this individual pursuant to which the prior agreement was terminated. In
connection with the Settlement Agreement, the Company agreed to pay this individual $65,000 in
settlement of all accounts which was recorded as an expense as of the date of the Settlement
Agreement and he in turn agreed to the cancellation of his options to purchase 150,000 shares of
the Companys common stock in exchange for certain product rights that the Company had elected
not to pursue.
|
|
|
|
As of March 31, 2007 and March 31, 2006, the Company has 3,105,651 and 3,371,591 warrants and
options, respectively, to purchase the Companys common stock outstanding that were not granted
under shareholder approved equity compensation plans at prices ranging between $1.20 and $10.00
per share with expiration dates between January and August 2007 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Outstanding
|
|
|
Average Exercise
|
|
|
|
Warrants
|
|
|
Price
|
|
|
|
|
Warrants and options outstanding , March 31, 2005
|
|
|
201,565
|
|
|
|
6.16
|
|
Granted for services
|
|
|
397,298
|
|
|
|
1.73
|
|
Issued to investors in private placement
|
|
|
2,520,661
|
|
|
|
1.75
|
|
Issued to placement agent for private placement
|
|
|
252,067
|
|
|
|
1.75
|
|
Exercised
|
|
|
|
|
|
|
|
|
Cancelled or expired
|
|
|
|
|
|
|
|
|
|
|
|
Warrants and options outstanding , March 31, 2006
|
|
|
3,371,591
|
|
|
$
|
2.01
|
|
Granted
|
|
|
|
|
|
|
|
|
Cancelled or expired
|
|
|
(265,940
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants exercisable March 31, 2007
|
|
|
3,105,651
|
|
|
$
|
1.72
|
|
|
|
|
Exercise price range
|
|
|
$1.20 to $10.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining life
|
|
|
4.74
|
Years
|
|
|
|
|
|
|
|
|
|
|
|
|
19.
|
|
SEGMENT INFORMATION
|
|
The Companys only operating segment consists of dental products and oral hygiene products sold by
Remedent N.V. The other subsidiaries of the Company have been dormant since inception. Since the
Company only has one segment, no further segment information is presented.
|
|
Customers Outside of the United States
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
March 31, 2006
|
|
|
|
U.S. sales
|
|
$
|
561,055
|
|
|
$
|
437,132
|
|
Foreign sales
|
|
|
6,115,310
|
|
|
|
6,956,816
|
|
|
|
|
|
|
$
|
6,676,365
|
|
|
$
|
7,393,948
|
|
|
|
|
20. COMMITMENTS AND CONTINGENCIES
Real Estate Lease
The Company leases its 26,915 square feet office and warehouse facility in Deurle, Belgium from
an unrelated party pursuant to a nine year lease commencing December 20, 2001 at a base rent of
#6,838 per month ($9,140 per month at March 31, 2007). In addition, the Company is responsible
for the payment of annual real estate taxes for the property which totaled # 3,245 ($4,207) for
calendar year 2006. The minimum aggregate rent to be paid over the remaining lease term based
upon the conversion rate for the
at March 31, 2007 is $400,551. Rent expense for the
foregoing lease for the year ended March 31, 2007 and March 31, 2006 was $105,276 and $92,706
respectively.
From November 2, 2005 to July 2006, the Company leased an office space in Los Angeles, California
on a month to month base. The monthly rent was $4,675.00.
F -24
Equipment Lease
In November 2004, the Company leased new computer equipment from a Belgium based Lessor pursuant
to a three year operating lease with monthly payments of
1,005 ($1,343 per month at March 31,
2007). The aggregate rent to be paid over the remaining lease term is $9,403.
Minimum monthly lease payments for real estate, and all other leased equipment for the next four
years are as follows based upon the conversion rate for the (Euro) at March 31, 2007.
|
|
|
|
|
March 31, 2008
|
|
$
|
230,376
|
|
March 31, 2009
|
|
$
|
200,603
|
|
March 31, 2010
|
|
$
|
140,929
|
|
March 31, 2011
|
|
$
|
35,623
|
|
21.
|
|
SEVERANCE AGREEMENT
|
|
|
|
Effective July 19, 2006, pursuant to an Employment Severance Agreement (the Agreement), the
Company terminated the services of its Vice President of Worldwide Sales and Operations (the
VPS).
|
|
|
|
In accordance with the Agreement the Company allowed 110,666 of the VPSs options to vest at
August 31, 2006. The balance of his options, being 289,334, lapsed upon termination. In
conjunction with the terms of the Agreement, the VPS has agreed to (a) a general release of
liability and (b) a non-solicitation clause for a term of eighteen (18) months commencing on
August 31, 2006. As a result of the foregoing the Company recognized severance costs of $31,731
and compensation expense related to the vesting of the options of $36,329 as of July 19, 2006.
|
|
22.
|
|
SUBSEQUENT EVENTS
|
|
|
|
On June 25, 2007, the Company completed a private offering of 5,600,000 shares of its common
stock, par value $.001 per share at a purchase price of $1.25 per share (the Shares) and five
year warrants to purchase 4,200,000 shares of common stock, par value $.001 per share, at an
exercise price of $1.55 per share (the Warrants) to certain institutional and accredited
investors, for an aggregate purchase price of $7,000,000 (the Offering).
|
|
|
|
Under the terms of the Offering, the Company has the right to redeem the Warrants for $0.001 per
Warrant Share covered by the Warrants if the Shares trade on the OTC Electronic Bulletin Board or
similar market above $5.25 per share for 20 consecutive trading days following the initial
effective date of the registration statement covering the resale of the Shares and Warrant
Shares, based upon the closing bid price for the Shares for each trading day (the Redemption
Right). Once the Redemption Right vests, the Company has the right, but not the obligation, to
redeem the Warrants for $0.001 per Warrant Share covered by the Warrants upon 30 days written
notice to the holders of the Warrants.
|
|
|
|
Under the terms of the Purchase Agreement and the Registration Rights Agreement, the Company is
required to prepare and file with the SEC a registration statement covering the resale of the
Shares and the Warrant Shares. The Company has agreed to prepare and file a registration
statement covering the resale no later than 30 days after the Closing (the Filing Deadline). In
the event the Company is unable to file a registration statement by the Filing Deadline or the
registration statement is not declared effective on or before 90 days from the Closing (120 days
from the Closing if the registration statement is reviewed by the SEC) (Effective Deadline),
then the Company will have to pay liquidated damages equal to 1.5% of the aggregate amount
invested by each investor for each 30-day period, or pro rata portion thereof, following the date
by which such registration statement should have been effective, until the registration statement
has been declared effective by the SEC. All payments must be made in cash.
|
|
|
|
The Placement Agent is entitled to a fee equal to ten percent (10%) of the gross proceeds derived
from the Offering, of which the Placement Agent may, at its option, receive up to 2% of its 10%
fee in securities issued in the Offering. The Company has agreed to pay the Placement Agent 5% of
the exercise price of the Warrants promptly following the Companys receipt thereof. In addition,
the Company agreed to reimburse the Placement Agent for its out-of-pocket expenses related to the
Offering, including an up-front payment of $25,000 to cover such expenses, of which any unused
amount will be netted against the Placement Agents 10% fee.
|
|
|
|
The Units were offered and sold by the Company to accredited investors in reliance on Section 506
of Regulation D of the Securities Act of 1933, as amended.
|
F -25
REMEDENT, INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007
(unaudited)
REMEDENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007
|
|
|
March 31, 2007
|
|
|
|
(unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
6,893,709
|
|
|
$
|
126,966
|
|
Accounts receivable, net of allowance for doubtful accounts of $80,827 at June 30, 2007
and $79,996 at March 31, 2007
|
|
|
1,438,655
|
|
|
|
1,724,121
|
|
Inventories, net
|
|
|
927,682
|
|
|
|
1,132,941
|
|
Prepaid expense
|
|
|
798,596
|
|
|
|
668,421
|
|
|
|
|
Total current assets
|
|
|
10,058,642
|
|
|
|
3,652,449
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET
|
|
|
584,366
|
|
|
|
589,623
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
|
Patents, net
|
|
|
128,326
|
|
|
|
135,894
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
10,771,334
|
|
|
$
|
4,377,966
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS DEFICIT
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Current portion, long term debt
|
|
$
|
32,071
|
|
|
$
|
43,499
|
|
Line of Credit
|
|
|
1,011,087
|
|
|
|
1,530,276
|
|
Notes payable
|
|
|
11,282
|
|
|
|
11,282
|
|
Accounts payable
|
|
|
1,846,124
|
|
|
|
1,441,502
|
|
Accrued liabilities
|
|
|
1,270,869
|
|
|
|
412,435
|
|
Due to related parties
|
|
|
50,536
|
|
|
|
50,536
|
|
|
|
|
Total current liabilities
|
|
|
4,221,969
|
|
|
|
3,489,530
|
|
|
|
|
LONG TERM DEBT
|
|
|
154,330
|
|
|
|
152,343
|
|
STOCKHOLDERS DEFICIT:
|
|
|
|
|
|
|
|
|
Preferred Stock $0.001 par value (10,000,000 shares authorized, none issued and outstanding)
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value;
(50,000,000 shares authorized, 18,596,245 shares issued and outstanding at June 30, 2007 and 12,996,245 shares issued and outstanding at March 31, 2007)
|
|
|
18,596
|
|
|
|
12,996
|
|
Additional paid-in capital
|
|
|
17,943,694
|
|
|
|
11,904,000
|
|
Accumulated deficit
|
|
|
(11,538,552
|
)
|
|
|
(11,147,600
|
)
|
Accumulated other comprehensive income (loss) (foreign currency translation adjustment)
|
|
|
(28,703
|
)
|
|
|
(33,303
|
)
|
|
|
|
Total stockholders equity (deficit)
|
|
|
6,395,035
|
|
|
|
736,093
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
|
|
$
|
10,771,334
|
|
|
$
|
4,377,966
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F -26
REMEDENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
June 30,
|
|
|
2007
|
|
2006
|
|
Net sales
|
|
$
|
1,244,657
|
|
|
$
|
1,295,639
|
|
Cost of sales
|
|
|
665,428
|
|
|
|
745,662
|
|
|
|
|
Gross profit
|
|
|
579,229
|
|
|
|
549,977
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
29,389
|
|
|
|
125,282
|
|
Sales and marketing
|
|
|
103,241
|
|
|
|
386,575
|
|
General and administrative
|
|
|
744,481
|
|
|
|
837,350
|
|
Depreciation and amortization
|
|
|
65,634
|
|
|
|
41,262
|
|
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
942,745
|
|
|
|
1,390,469
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS
|
|
|
(363,516
|
)
|
|
|
(840,492
|
)
|
OTHER INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(28,829
|
)
|
|
|
(24,015
|
)
|
Other income
|
|
|
1,392
|
|
|
|
24,777
|
|
|
|
|
TOTAL OTHER INCOME (EXPENSES)
|
|
|
(27,437
|
)
|
|
|
762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(390,953
|
)
|
|
$
|
(839,730
|
)
|
|
|
|
LOSS PER SHARE
|
|
|
|
|
|
|
|
|
Basic and fully diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(0.07
|
)
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
Basic and fully diluted
|
|
|
13,611,630
|
|
|
|
12,898,178
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F - 27
REMEDENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30,
|
|
|
(Unaudited)
|
|
|
2007
|
|
2006
|
|
Net Income (Loss)
|
|
$
|
(390,953
|
)
|
|
$
|
(839,730
|
)
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE
INCOME (LOSS):
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
4,600
|
|
|
|
11,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
(386,353
|
)
|
|
$
|
(828,728
|
)
|
|
|
|
F - 28
REMEDENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
June 30,
|
|
|
2007
|
|
2006
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(390,953
|
)
|
|
$
|
(839,730
|
)
|
Adjustments to reconcile net income (loss) to net cash used by operating activities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
65,634
|
|
|
|
41,167
|
|
Allowance for doubtful accounts
|
|
|
|
|
|
|
(6,082
|
)
|
Value of stock options to employees
|
|
|
|
|
|
|
113,709
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
296,096
|
|
|
|
1,143,177
|
|
Inventories
|
|
|
211,818
|
|
|
|
169,269
|
|
Prepaid expenses
|
|
|
(122,238
|
)
|
|
|
(61,266
|
)
|
Accounts payable
|
|
|
382,544
|
|
|
|
(579,825
|
)
|
Accrued liabilities
|
|
|
855,583
|
|
|
|
(25,366
|
)
|
Income taxes payable
|
|
|
|
|
|
|
(103,529
|
)
|
|
|
|
Net cash provided by (used by) operating activities
|
|
|
1,298,484
|
|
|
|
(148,476
|
)
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Decrease (increase) in restricted cash
|
|
|
|
|
|
|
(8,303
|
)
|
Purchases of equipment
|
|
|
(50,364
|
)
|
|
|
(61,339
|
)
|
|
|
|
Net cash used by investing activities
|
|
|
(50,364
|
)
|
|
|
(69,642
|
)
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net proceeds from private placement
|
|
|
6,045,294
|
|
|
|
|
|
Principal payments on (proceeds from) capital lease note payable
|
|
|
(11,201
|
)
|
|
|
2,638
|
|
Proceeds from (repayments of) line of credit
|
|
|
(522,226
|
)
|
|
|
60,830
|
|
|
|
|
Net cash provided by financing activities
|
|
|
5,511,867
|
|
|
|
63,468
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH
|
|
|
6,759,987
|
|
|
|
(154,650
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
6,756
|
|
|
|
(49,158
|
)
|
CASH AND CASH EQUIVALENTS, BEGINNING
|
|
|
126,966
|
|
|
|
332,145
|
|
|
|
|
CASH AND CASH EQUIVALENTS, ENDING
|
|
$
|
6,893,709
|
|
|
$
|
128,337
|
|
|
|
|
Supplemental Information:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
23,376
|
|
|
$
|
24,548
|
|
|
|
|
Income taxes paid
|
|
$
|
|
|
|
$
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F - 29
SUPPLEMENTAL NON-CASH INVESTING
AND FINANCING ACTIVITIES:
On July 31, 2006, the Company issued 32,133 shares of its common stock in exchange for $20,000 in
convertible debentures and accrued interest of $12,133. The difference between the conversion price
of $1.00 per share and the market value of the common stock exchanged valued at $1.80 per share
totaled $25,706 and was charged to interest expense.
F - 30
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
|
1.
|
|
BACKGROUND AND ORGANIZATION
|
|
|
|
|
|
The Company is a manufacturer and distributor of cosmetic dentistry products, including a full
line of professional dental and retail Over-The-Counter tooth whitening products which are
distributed in Europe, and recently in Asia and the United States. The Company manufactures many
of its products in its facility in Deurle, Belgium as well as outsourced manufacturing in China.
The Company distributes its products using both its own internal sales force and through the use
of third party distributors.
|
|
|
|
2.
|
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
|
|
|
|
Organization and Principles of Consolidation
|
|
|
|
|
|
The accompanying consolidated financial statements include the accounts of Remedent, Inc.
(formerly Remedent USA, Inc.), a Nevada corporation, and its three subsidiaries, Remedent N.V.
(Belgian corporation) located in Deurle, Belgium, Remedent Professional, Inc. (incorporated in
California) and a subsidiary of Remedent Professional Holdings, Inc. and Remedent Asia Pte Ltd, a
wholly-owned subsidiary formed under the laws of Singapore (collectively, the Company).
Remedent, Inc. is a holding company with headquarters in Deurle, Belgium and, as of October 2005,
offices in Los Angeles, California. Remedent Professional, Inc. and Remedent Professional
Holdings, Inc. have been dormant since inception. Remedent Asia Pte. Ltd., commenced operations
as of July 2005. All significant inter-company accounts and transactions have been eliminated in
the consolidated financial statements. 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 months ended June
30, 2007, are not necessarily indicative of the results that may be expected for the year ended
March 31, 2008. Accordingly, your attention is directed to footnote disclosures found in the
Annual Report on Form 10-KSB for the year ended March 31, 2007, and particularly to Note 1, which
includes a summary of significant accounting policies.
|
|
|
|
|
|
Basis of Presentation
|
|
|
|
|
|
The Companys financial statements have been prepared on an accrual basis of accounting, in
conformity with accounting principles generally accepted in the United States of America. These
principles contemplate the realization of assets and liquidation of liabilities in the normal
course of business. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting periods. Actual results could
differ from those estimates. These financial statements do not include any adjustments that might
be necessary if the Company is unable to continue as a going concern.
|
|
|
|
|
|
Revenue Recognition
|
|
|
|
|
|
The Company recognizes revenue from product sales when persuasive evidence of a sale exists: that
is, a product is shipped under an agreement with a customer; risk of loss and title has passed to
the customer; the fee is fixed or determinable; and collection of the resulting receivable is
reasonably assured. Sales allowances are estimated based upon historical experience of sales
returns.
|
|
F - 31
|
|
|
Impairment of Long-Lived Assets
|
|
|
|
|
|
Long-lived assets consist primarily of patents and property and equipment. The recoverability of
long-lived assets is evaluated by an analysis of operating results and consideration of other
significant events or changes in the business environment. If impairment exists, the carrying
amount of the long-lived assets is reduced to its estimated fair value, less any costs associated
with the final settlement. As of June 30, 2007, management believes there was no impairment of
the Companys long-lived assets.
|
|
|
|
|
|
Pervasiveness of Estimates
|
|
|
|
|
|
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires the Company to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, the Company evaluates estimates and
judgments, including those related to revenue, bad debts, inventories, fixed assets, intangible
assets, stock based compensation, income taxes, and contingencies. Estimates are based on
historical experience and on various other assumptions that the Company believes reasonable in
the circumstances. The results form the basis for making judgments about the carrying vales of
assets and liabilities that are not readily apparent from other sources. Actual results could
differ from those estimates.
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
|
|
|
|
The Company considers all highly liquid investments with maturities of three months or less to be
cash or cash equivalents.
|
|
|
|
|
|
Accounts Receivable and Allowance for Doubtful Accounts
|
|
|
|
|
|
The Company sells professional dental equipment to various companies, primarily to distributors
located in Western Europe. The terms of sales vary by customer, however, generally are 2% 10
days, net 30 days. Accounts receivable is reported at net realizable value and net of allowance
for doubtful accounts. The Company uses the allowance method to account for uncollectible
accounts receivable. The Companys 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 $13,505 at June 30, 2007 and $13,366 at March 31, 2007.
|
|
|
|
|
|
Prepaid Expense
|
|
|
|
|
|
The Companys prepaid expense consists of prepayments to suppliers for inventory purchases and to
the Belgium customs department, to obtain an exemption of direct VAT payments for imported goods
out of the European Union (EU). This prepayment serves as a guarantee to obtain the facility to
pay VAT at the moment of sale and not at the moment of importing goods at the border. Prepaid
expenses also include VAT payments made for goods and services in excess of VAT payments received
from the sale of products as well as amounts for other prepaid operating expenses.
|
|
|
|
|
|
Property and Equipment
|
|
|
|
|
|
Property and equipment are stated at cost. Major renewals and improvements are charged to the
asset accounts while replacements, maintenance and repairs, which do not improve or extend the
lives of the respective assets, are expensed. At the time property and equipment are retired or
otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of
the applicable amounts. Gains or losses from retirements or sales are credited or charged to
income.
|
|
F - 32
|
|
|
The Company depreciates its property and equipment for financial reporting purposes using the
straight-line method based upon the following useful lives of the assets:
|
|
|
|
|
|
|
Tooling
|
|
3 Years
|
Furniture and fixtures
|
|
4 Years
|
Machinery and Equipment
|
|
4 Years
|
|
|
|
Patents
|
|
|
|
|
|
Patents consist of the costs incurred to purchase patent rights and are reported net of
accumulated amortization. Patents are amortized using the straight-line method over a period
based on their contractual lives.
|
|
|
|
|
|
Research and Development Costs
|
|
|
|
|
|
The Company expenses research and development costs as incurred.
|
|
|
|
|
|
Advertising
|
|
|
|
|
|
Costs incurred for producing and communicating advertising are expensed when incurred and
included in sales and marketing and general and administrative expenses. For the three month
periods ended June 30, 2007 and June 30, 2006, advertising expense was $38,331 and $106,976,
respectively.
|
|
|
|
|
|
Income taxes
|
|
|
|
|
|
Income taxes are provided in accordance with Statement of Financial Accounting Standards No. 109
(SFAS 109),
Accounting for Income Taxes
. Deferred taxes are recognized for temporary
differences in the bases of assets and liabilities for financial statement and income tax
reporting as well as for operating losses and credit carry forwards. A provision has been made
for income taxes due on taxable income and for the deferred taxes on the temporary differences.
The components of the deferred tax asset and liability are individually classified as current and
non-current based on their characteristics.
|
|
|
|
|
|
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it
is more likely than not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
|
|
|
|
|
|
Warranties
|
|
|
|
|
|
The Company typically warrants its products against defects in material and workmanship for a
period of 18 months from shipment. Based upon historical trends and warranties provided by the
Companys suppliers and sub-contractors, the Company has made a provision for warranty costs of
$20,255 and $20,049 as of June 30, 2007 and March 31, 2007, respectively.
|
|
|
|
|
|
Segment Reporting
|
|
|
|
|
|
Statement of Financial Accounting Standards No. 131 (SFAS 131),
Disclosure About Segments of
an Enterprise and Related
Information requires use of the management approach model for
segment reporting. The management approach model is based on the way a companys management
organizes segments within the company for making operating decisions and assessing performance.
Reportable segments are based on products and services, geography, legal structure, management
structure, or any other manner in which management disaggregates a company. The Companys
management considers its business to comprise one segment for reporting purposes.
|
|
|
|
|
|
Computation of Earnings (Loss) per Share
|
|
|
|
|
|
Basic net income (loss) per common share is computed by dividing net income (loss) attributable
to common stockholders by the weighted average number of shares of common stock outstanding
during the period. Net income (loss) per common share attributable to common stockholders
assuming dilution is computed by dividing net income by the weighted average number of
|
|
F - 33
|
|
|
shares of common stock outstanding
during the period. Net income (loss) per common share attributable to common stockholders
assuming dilution is computed by dividing net income by the weighted average number of
shares of common stock outstanding plus the number of additional common shares that would have
been outstanding if all dilutive potential common shares had been issued. Potential common shares
related to stock options and stock warrants are excluded from the computation when their effect
is anti-dilutive.
|
|
|
|
|
|
Conversion of Foreign Currencies
|
|
|
|
|
|
The reporting currency for the consolidated financial statements of the Company is the U.S.
dollar. The functional currency for the Companys European subsidiary, Remedent N.V. is the Euro.
The functional currency for Remedent Professional, Inc. is the U.S. dollar. The Company
translates foreign currency statements to the reporting currency in accordance with FASB 52. The
assets and liabilities of companies whose functional currency is other that the U.S. dollar are
included in the consolidation by translating the assets and liabilities at the exchange rates
applicable at the end of the reporting period. The statements of income of such companies are
translated at the average exchange rates during the applicable period. Translation gains or
losses are accumulated as a separate component of stockholders deficit.
|
|
|
|
|
|
Comprehensive Income (Loss)
|
|
|
|
|
|
The Company has adopted the provisions of Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income
(SFAS No. 130). SFAS No. 130 establishes standards for the
reporting and display of comprehensive income, its components and accumulated balances in a full
set of general purpose financial statements. SFAS No. 130 defines comprehensive income (loss) to
include all changes in equity except those resulting from investments by owners and distributions
to owners, including adjustments to minimum pension liabilities, accumulated foreign currency
translation, and unrealized gains or losses on marketable securities.
|
|
|
|
|
|
The Companys only component of other comprehensive income is the accumulated foreign currency
translation consisting of gains of $4,600 and $11,002 for the three month periods ended June 30,
2007 and June 30, 2006, respectively. These amounts have been recorded as a separate component of
stockholders deficit.
|
|
|
|
|
|
Stock Based Compensation
|
|
|
|
|
|
In December 2004, the Financial Accounting Standards Board issued SFAS No. 123R,
Share-Based
Payment
. Subsequently, the Securities and Exchange Commission (SEC) provided for a phase-in
implementation process for SFAS No. 123R, which required adoption of the new accounting standard
no later than January 1, 2006. SFAS No. 123R requires accounting for stock options using a
fair-value-based method as described in such statement and recognize the resulting compensation
expense in the Companys financial statements. Prior to January 1, 2006, the Company accounted
for employee stock options using the intrinsic value method under APB No. 25, Accounting for
Stock Issued to Employees and related Interpretations, which generally resulted in no employee
stock option expense. The Company adopted SFAS No. 123R on January 1, 2006 and does not plan to
restate financial statements for prior periods. The Company plans to continue to use the
Black-Scholes option valuation model in estimating the fair value of the stock option awards
issued under SFAS No. 123R. The adoption of SFAS No. 123R has a material impact on the Companys
results of operations. For the three month periods ended June 30, 2007 and June 30, 2006, equity
compensation in the form of stock options and grants of restricted stock totaled $nil and
$113,709, respectively.
|
|
|
|
3.
|
|
PRIVATE PLACEMENT
|
|
|
|
|
|
On June 25, 2007, the Company completed its private offering of 5,600,000 shares of its common
stock, par value $.001 per share at a purchase price of $1.25 per share (the Shares) and
warrants to purchase 4,200,000 shares of common stock, par value $.001 per share, at an exercise
price of $1.55 per share (the Warrants) to certain institutional and accredited investors, for
an aggregate purchase price of $7,000,000 (the Offering).
|
|
|
|
|
|
Under the terms of the Offering, the Warrants are exercisable for a period of five years and
entitle the holder to purchase one share of restricted common stock (the Warrant Shares) for
$1.55 per Warrant Share. The Company also has the right to redeem the Warrants for $0.001 per
Warrant Share covered by the Warrants if the Shares trade on the OTC Electronic Bulletin Board or
similar market above $5.25 per share for 20 consecutive trading days following the initial
effective date of the registration statement covering the resale of the Shares and Warrant
Shares, based upon the closing bid price for the Shares for each trading day (the
|
|
F-34
|
|
|
Redemption Right). Once the Redemption Right vests, the Company has the right, but not the
obligation, to redeem the Warrants for $0.001 per Warrant Share covered by the Warrants upon 30
days written notice to the holders of the Warrants.
|
|
|
|
|
|
Under the terms of the Purchase Agreement and the Registration Rights Agreement, the Company was
required to prepare and file with the Securities and Exchange Commission (the Commission) a
registration statement covering the resale of the Shares and the Warrant Shares. The Company
agreed to prepare and file a registration statement covering the resale no later than 30 days
after the Closing. Effective July 20, 2007 the registration statement was filed.
|
|
|
|
|
|
The Company engaged Roth Capital Partners, LLC, as its exclusive agent to offer the Shares and
Warrants (the Placement Agent). The Placement Agent is entitled to a fee equal to ten percent
(10%) of the gross proceeds derived from the Offering, of which the Placement Agent may, at its
option, receive up to 2% of its 10% fee in securities issued in the Offering. Further, the
Company agreed to pay the Placement Agent 5% of the exercise price of the Warrants promptly
following the Companys receipt thereof. In addition, the Company agreed to reimburse the
Placement Agent for its out-of-pocket expenses related to the Offering, including an up front
payment of $25,000 to cover such expenses, of which any unused amount will be netted against the
Placement Agents 10% fee.
|
|
|
|
|
|
The total costs of this private placement were $954,706, comprising of: commissions of $762,505;
out-of-pocket costs of $25,000; and professional fees of $167,201; and have been recorded against
share capital as a cost of financing.
|
|
|
|
|
|
The Offering was conducted in reliance upon an exemption from registration under the Securities
Act of 1933, as amended (the Securities Act), including, without limitation, that under Section
506 of Regulation D promulgated under the Securities Act. The Units were offered and sold by the
Company to accredited investors in reliance on Section 506 of Regulation D of the Securities Act
of 1933, as amended.
|
|
|
|
4.
|
|
CONCENTRATION OF RISK
|
|
|
|
|
|
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 Companys customer base and their dispersion across different
geographic areas. At June 30, 2007 one customer accounted for 25% of the Companys trade accounts
receivable. The Company performs ongoing credit evaluations of its customers and normally does
not require collateral to support accounts receivable.
|
|
|
|
|
|
Purchases The Company has diversified its sources for product components and finished goods
and, as a result, the loss of a supplier would not have a material impact on the Companys
operations. For the three month period ended June 30, 2007, the Company had five suppliers who
accounted for a total of 29% of gross purchases. For the three month period ended June 30, 2006,
the Company relied on two factories to manufacture certain components of its new MetaTray and
iWhite products, of which one represented 24% of the Companys purchases.
|
|
|
|
|
|
Revenues For the three month period ended June 30, 2007 the Company had five customers that
accounted for 32% of total revenues. For the three months ended June 30, 2006 the Company had one
customer that accounted for 29.4% of total revenues.
|
|
|
|
5.
|
|
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
|
|
|
|
|
|
A summary of accounts receivable and allowance for doubtful accounts as of June 30, 2007 and
March 31, 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007
|
|
March 31, 2007
|
|
|
|
Accounts receivable, gross
|
|
$
|
1,519,482
|
|
|
$
|
1,804,117
|
|
Less: allowance for doubtful accounts
|
|
|
(80,827
|
)
|
|
|
(79,996
|
)
|
|
|
|
Accounts receivable, net
|
|
$
|
1,438,655
|
|
|
$
|
1,724,121
|
|
|
|
|
|
6.
|
|
INVENTORIES
|
|
|
|
|
|
Inventories are stated at the lower of cost (weighted average) or market. Inventory costs include
material, labor and manufacturing overhead. Individual components of inventory are listed below
as follows:
|
|
F-35
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007
|
|
March 31, 2007
|
|
|
|
Raw materials
|
|
$
|
28,096
|
|
|
$
|
30,579
|
|
Components
|
|
|
707,801
|
|
|
|
786,728
|
|
Finished goods
|
|
|
205,290
|
|
|
|
329,000
|
|
|
|
|
|
|
|
941,187
|
|
|
|
1,146,307
|
|
Less: reserve for obsolescence
|
|
|
(13,505
|
)
|
|
|
(13,366
|
)
|
|
|
|
Net inventory
|
|
$
|
927,682
|
|
|
$
|
1,132,941
|
|
|
|
|
|
7.
|
|
PREPAID EXPENSES
|
|
|
|
|
|
Prepaid expenses are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007
|
|
March 31, 2007
|
|
|
|
Prepaid materials and components
|
|
$
|
487,149
|
|
|
$
|
394,598
|
|
Prepaid Belgium income taxes
|
|
|
67,525
|
|
|
|
66,830
|
|
Prepaid consulting
|
|
|
86,607
|
|
|
|
66,830
|
|
VAT payments in excess of VAT receipts
|
|
|
49,681
|
|
|
|
47,260
|
|
Royalties
|
|
|
33,763
|
|
|
|
33,415
|
|
Prepaid trade show expenses
|
|
|
35,160
|
|
|
|
6,523
|
|
Prepaid rent
|
|
|
9,235
|
|
|
|
7,054
|
|
Other
|
|
|
29,476
|
|
|
|
45,911
|
|
|
|
|
|
|
$
|
798,596
|
|
|
$
|
668,421
|
|
|
|
|
|
8.
|
|
PROPERTY AND EQUIPMENT
|
|
|
|
|
|
Property and equipment are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
March 31, 2007
|
|
|
|
Furniture and Fixtures
|
|
$
|
137,560
|
|
|
$
|
137,560
|
|
Machinery and Equipment
|
|
|
609,960
|
|
|
|
559,422
|
|
Tooling
|
|
|
188,450
|
|
|
|
188,450
|
|
|
|
|
|
|
|
935,970
|
|
|
|
885,432
|
|
Accumulated depreciation
|
|
|
(351,604
|
)
|
|
|
(295,809
|
)
|
|
|
|
Property & equipment, net
|
|
$
|
584,366
|
|
|
$
|
589,623
|
|
|
|
|
|
9.
|
|
LICENSED PATENTS
|
|
|
|
|
|
Teeth Whitening Patents
|
|
|
|
|
|
In October 2004, the Company acquired from the inventor the exclusive, perpetual license to two
issued United States patents which are applicable to several teeth whitening products currently
being marketed by the Company. Pursuant to the terms of the license agreement, the Company was
granted an exclusive, worldwide, perpetual license to manufacture, market, distribute and sell
the products contemplated by the patents subject to the payment of $65,000 as reimbursement to
the patent holder for legal and other costs associated with obtaining the patents, which was paid
in October 2004, and royalties for each unit sold subject to an annual minimum royalty of
$100,000 per year. The Company is amortizing the initial cost of $65,000 for these patents over a
ten year period and accordingly has recorded $17,875 of accumulated amortization for this patent
as of June 30, 2007. The Company accrues this royalty when it becomes payable to the inventory
therefore no provision has been made for this obligation as of June 30, 2007.
|
|
|
|
|
|
Universal Applicator Patent
|
|
|
|
|
|
In September 2004, the Company entered into an agreement with Lident N.V. (Lident), a company
controlled by Mr. De Vreese, the Companys Chairman, to obtain an option, exercisable through
December 31, 2005, to license an international patent
|
|
F-36
|
|
|
(excluding the US) and worldwide manufacturing and distribution rights for a potential new
product which Lident had been assigned certain rights by the inventors of the products, who are
unrelated parties, prior to Mr. De Vreese association with the Company. The patent is an Italian
patent which relates to a single use universal applicator for dental pastes, salves, creams,
powders, liquids and other substances where manual application could be relevant. The Company has
filed to have the patent approved throughout Europe. The agreement required the Company to
advance to the inventors through Lident a fully refundable deposit of
100,000 subject to the
Companys due diligence regarding the enforceability of the patent and marketability of the
product, which, if viable, would be assigned to the Company for additional consideration to the
inventors of
100,000 and an ongoing royalty from sales of products related to the patent
equal to 3% of net sales and, if not viable, the deposit would be repaid in full by Lident. The
consideration the Company had agreed to pay Lident upon the exercise of the option is the same as
the consideration Lident is obligated to pay the original inventors. Consequently, Lident would
not have profited from the exercise of the option. Furthermore, at a meeting of the Companys
Board of Directors on July 13, 2005, the Board accepted Lidents offer to facilitate an
assignment of Lidents intellectual property rights to the technology to the Company in exchange
for the reimbursement of Lidents actual costs incurred relating to the intellectual property.
Consequently, when the Company exercises the option, all future payments, other than the
reimbursement of costs would be paid directly to the original inventors and not to Lident.
|
|
|
|
|
|
On December 12, 2005, the Company exercised the option and the Company and the patent holder
agreed to revise the assignment agreement whereby the Company agreed to pay
50,000 additional
compensation in the form of prepaid royalties instead of the
100,000 previously agreed,
25,000 of which had been paid by the Company in September 2005 and the remaining
25,000
to be paid upon the Companys first shipment of a product covered by the patent. The patent is
being amortized over five (5) years and accordingly, the Company has recorded $37,639 of
accumulated amortization for this patent as of June 30, 2007.
|
|
|
|
|
|
On December 12, 2005, the Company exercised the option and the Company and the patent holder
agreed to revise the assignment agreement whereby the Company agreed to pay
50,000 additional
compensation in the form of prepaid royalties instead of the
100,000 previously agreed,
25,000 of which had been paid by the Company in September 2005 and the remaining
25,000
to be paid upon the Companys first shipment of a product covered by the patent. The patent is
being amortized over five (5) years.
|
|
|
|
10.
|
|
LINE OF CREDIT
|
|
|
|
|
|
On October 8, 2004, our wholly owned subsidiary, Remedent N.V., obtained a mixed-use line of
credit facility with Fortis Bank, a Belgian bank, for
1,070,000 (the Facility). The
Facility was secured by a first lien on the assets of Remedent N.V. The purpose of the Facility
is to provide working capital to grow our business and to finance certain accounts receivable as
necessary. Since opening the Facility in 2004, Remedent N.V. and Fortis Bank have subsequently
amended the Facility several times to increase or decrease the line of credit. On May 3, 2005 the
Facility was amended to decrease the line of credit to
1,050,000. On March 13, 2006 the
Facility was amended to increase the mixed-use line of credit to
2,300,000, consisting of a
1,800,000 credit line based on the eligible accounts receivable and a
500,000 general
line of credit. The latest amendment to the Facility, dated September 1, 2006, amended and
decreased the mixed-use line of credit to
2,050,000. Each line of credit carries its own
interest rates and fees as provided in the Facility. Remedent N.V. is currently only utilizing
two lines of credit, advances based on account receivables and the straight loan. As of June 30,
2007 and March 31, 2007, Remedent N.V. had, in the aggregate, $1,011,087 and $1,530,276 advances
outstanding, respectively, under this mixed-use line of credit facility.
|
|
|
|
11.
|
|
NOTE PAYABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007
|
|
March 31, 2007
|
|
|
|
Union Bank Debt:
|
|
|
|
|
|
|
|
|
Maturity Dates: April 26, 2005 Interest rate: 7.5% per annum
Security: All of the assets of the company Unpaid principal balance
|
|
$
|
11,282
|
|
|
$
|
11,282
|
|
|
|
|
Total note payable
|
|
$
|
11,282
|
|
|
$
|
11,282
|
|
|
|
|
|
|
12.
|
|
LONG TERM DEBT
|
|
|
|
|
|
On June 15, 2005, the Company entered into two five year capital lease agreements for
manufacturing equipment totaling
70,296 (US $85,231). On October 24, 2006, the Company
entered into another five year capital lease agreement for additional manufacturing equipment
totaling
123,367 (US $157,503). The leases require monthly payments of principal and interest
at
|
|
F-37
|
|
|
7.43% of
1,258 (US$1,699 at June 30, 2007) for the first two leases and 9.72% of
2,256
(US$ 3,047 at June 30, 2007) and provide for buyouts at the conclusion of the five year term of
2,820 (US$3,808) or 4.0% of original value for the first two contracts and
4,933 (US $
6,662) or 4.0 % of the original value for the second contract. The book value as of June 30, 2007
and March 31, 2007 of the equipment subject to the foregoing leases are $185,408 and $198,225,
respectively.
|
|
|
|
13.
|
|
DUE TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS
|
|
|
|
|
|
Balances due to related parties consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007
|
|
March 31, 2007
|
|
|
|
Demand loan from a former officer and major stockholder
|
|
$
|
50,536
|
|
|
$
|
50,536
|
|
|
|
|
|
|
$
|
50,536
|
|
|
$
|
50,536
|
|
|
|
|
|
|
|
|
Borrowings from employees and entities controlled by officers of the Company are, unsecured,
non-interest bearing, and due on demand.
|
|
|
|
|
|
Transactions with related parties consisted of the following:
|
|
|
|
|
|
Compensation:
|
|
|
|
|
|
During the three month periods ended June 30, 2007 and 2006 respectively, the Company incurred
$156,594 and $144,547 respectively, as compensation for all directors and officers.
|
|
|
|
|
|
Sales Transactions:
|
|
|
|
|
|
One of the Companys directors owns a minority interest in a client company, IMDS Inc., to which
goods were sold during the years ended March 31, 2007 and 2006 totaling $476,122 and $38,494
respectively. Accounts receivable with this customer totaled $361,129 and $0 as at June 30, 2007
and 2006 respectively.
|
|
|
|
|
|
All related party transactions involving provision of services or tangible assets were recorded
at the exchange amount, which is the value established and agreed to by the related parties
reflecting arms length consideration payable for similar services or transfers. Other related
party transactions are disclosed in Supplemental Non-Cash Investing and Financing Activities,
clause (e), and Note 17.
|
|
|
|
14.
|
|
ACCRUED LIABILITIES
|
|
|
|
|
|
Accrued liabilities are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007
|
|
March 31, 2007
|
|
|
|
Accrued private placement costs
|
|
$
|
890,473
|
|
|
$
|
|
|
Accrued employee benefit taxes
|
|
|
208,211
|
|
|
|
260,676
|
|
Commissions
|
|
|
6,293
|
|
|
|
2,834
|
|
Accrued audit and tax preparation fees
|
|
|
28,000
|
|
|
|
27,282
|
|
Reserve for warranty costs
|
|
|
20,255
|
|
|
|
20,049
|
|
Accrued interest
|
|
|
759
|
|
|
|
6,180
|
|
Accrued consulting fees
|
|
|
14,397
|
|
|
|
2,528
|
|
Other accrued expenses
|
|
|
102,478
|
|
|
|
92,886
|
|
|
|
|
|
|
$
|
1,270,869
|
|
|
$
|
412,435
|
|
|
|
|
|
|
15.
|
|
EQUITY COMPENSATION PLANS
|
|
|
|
|
|
The Board of Directors and stockholders approved the Nonstatutory Stock Option Plan (the 2001
Plan) and adopted it on May 29, 2001. The Company has reserved 250,000 shares of its common
stock for issuance to the directors, employees and consultants under the Plan. The Plan is
administered by the Board of Directors. Vesting terms of the options range from immediately to
five years.
|
|
F-38
Pursuant to an Information Statement on Schedule 14C mailed on May 9, 2005 to all stockholders of
record as of the close of business on February 1, 2005 and became effective June 3, 2005, the
Company authorized the implementation of a 2004 Incentive and Nonstatutory Stock Option Plan
(2004 Plan) reserving 800,000 shares of common stock for issuance to employees, directors and
consultants of the Company or any subsidiaries. This plan became effective as of June 3, 2005
after the Company had completed a one for twenty reverse split.
On October 1, 2006, the Company granted to a marketing consultant 25,000 options to purchase the
Companys common stock at a price of $1.80 per share. These options vested immediately upon grant
and are exercisable for a period of five years. The Company valued the foregoing options using
the Black Scholes option pricing model using the following assumptions: no dividend yield;
expected volatility rate of 91.58%; risk free interest rate of 5% and an average life of 5 years
resulting in a value of $1.298 per option granted.
On June 14, 2006, pursuant to an S-8 filed with the SEC, the Company registered 1,150,000 common
shares, pursuant to compensation arrangements.
A summary of the option activity for the three months ended June 30, 2007 pursuant to the terms
of the plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2001 Plan
|
|
|
2004 Plan
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
|
Outstanding
|
|
|
Average
|
|
|
Outstanding
|
|
|
Average
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Options
|
|
|
Exercise Price
|
|
Options outstanding , March 31, 2007
|
|
|
222,500
|
|
|
$
|
1.29
|
|
|
|
210,666
|
|
|
$
|
3.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled or expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, June 30, 2007
|
|
|
222,500
|
|
|
$
|
1.29
|
|
|
|
210,666
|
|
|
$
|
3.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable June 30, 2007
|
|
|
222,500
|
|
|
$
|
1.29
|
|
|
|
210,666
|
|
|
$
|
3.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise price range
|
|
$
|
1.00 to $4.00
|
|
|
|
|
|
|
$
|
2.46 to $4.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining life
|
|
|
4.8
|
years
|
|
|
|
|
|
|
2.1
|
years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares available for future issuance
|
|
|
27,500
|
|
|
|
|
|
|
|
589,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of the Companys equity compensation plans approved and not approved by shareholders is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Number of securities
|
|
|
|
securities to be
|
|
|
|
|
|
|
remaining available for
|
|
|
|
issued upon
|
|
|
|
|
|
|
future issuance under
|
|
|
|
exercise of
|
|
|
Weighted-average
|
|
|
equity compensation
|
|
|
|
of outstanding
|
|
|
exercise price of
|
|
|
plans (excluding
|
|
|
|
options, warrants
|
|
|
outstanding options
|
|
|
securities reflected
|
|
Plan Category
|
|
and right
|
|
|
warrants and rights
|
|
|
in column (a))
|
|
Equity Compensation Plans approved by security holders
|
|
|
433,166
|
|
|
$
|
2.22
|
|
|
|
616,834
|
|
Equity Compensation Plans not approved by security holders
|
|
|
297,298
|
|
|
$
|
1.50
|
|
|
NA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
730,464
|
|
|
$
|
1.93
|
|
|
|
616,834
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior to January 1, 2006, the Company accounted for employee stock-based compensation under the
recognition and measurement principles of Accounting Principles Board Opinion (APB) No. 25,
Accounting for Stock Issued to Employees, and related Interpretations, as permitted by SFAS No.
123, Accounting for Stock-Based Compensation. Under the recognition principles of APB No. 25,
compensation expense related to restricted stock and performance units was recognized in the
financial statements. However, APB No. 25 generally did not require the recognition of
compensation expense for stock options because the exercise price of these instruments was
generally equal to the fair value of the underlying common stock on the date of grant, and the
related number of shares granted were fixed at that point in time.
Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No.
123(R), Share-Based Payment. In addition to recognizing compensation expense related to
restricted stock and performance units, SFAS No. 123(R) also requires recognition of compensation
expense related to the estimated fair value of stock options. The Company adopted SFAS No. 123(R)
using the modified-prospective-transition method. Under that transition method, compensation
expense recognized subsequent to adoption includes: (a) compensation cost for all share-based
payments granted prior to, but not yet vested as of January 1, 2006, based on the values
estimated in accordance with the original provisions of SFAS No. 123, and (b)
F-39
compensation cost for all share-based payments granted subsequent to January 1, 2006, based on
the grant-date fair values estimated in accordance with the provisions of SFAS No. 123(R).
Consistent with the modified-prospective-transition method, the Companys results of operations
for prior periods have not been adjusted to reflect the adoption of FAS 123(R). For the three
months ended June 30, 2007 the Company recognized $nil (2006 $113,709) in compensation expense
in the consolidated statement of operations.
For purposes of proforma disclosures prior to January 1, 2006, the estimated fair value of the
options is amortized to expense over the options vesting periods. The Companys proforma
information follows:
|
|
|
|
|
|
|
|
March 31, 2006
|
Net income (loss):
|
|
|
|
|
As reported
|
|
$
|
(3,887,302
|
)
|
Pro forma
|
|
$
|
(4,067,302
|
)
|
Earnings per share:
|
|
|
|
|
Basic and fully diluted
|
|
|
|
|
As reported
|
|
$
|
(0.35
|
)
|
Pro forma
|
|
$
|
(0.37
|
)
|
|
16. COMMON STOCK WARRANTS AND OTHER OPTIONS
On February 10, 2006, the Company issued to an individual the right to purchase 150,000 shares of
the Companys common stock at an exercise price of $2.60 per share for a term of five (5) years
pursuant to the terms and conditions of a Stock Option Agreement as consideration for past
services performed and the release of any and all claims under this individuals prior agreements
with the Company. The 150,000 options have been valued in accordance with the Black-Scholes
pricing model utilizing an historic volatility factor of 1.55, a risk free interest rate of 4.5%
and an expected life for the options of five years, resulting in a value of $2.41 per option
granted for a total for the warrants of $361,500. The value of this option grant was recorded as
of December 31, 2005 as a research and development expense.
In November 2006, the Company entered into a Settlement Agreement and Release (Settlement
Agreement) with this individual pursuant to which the prior agreement was terminated. In
connection with the Settlement Agreement, the Company agreed to pay this individual $65,000 in
settlement of all accounts which was recorded as an expense as of the date of the Settlement
Agreement and he in turn agreed to the cancellation of his options to purchase 150,000 shares of
the Companys common stock in exchange for certain product rights that the Company had elected
not to pursue.
As of June 30, 2007, the Company has 7,301,901 warrants to purchase the Companys common stock
outstanding that were not granted under shareholder approved equity compensation plans at prices
ranging between $1.20 and $10.00 per share with expiration dates between August 2007 and June
2012 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Outstanding
|
|
|
Average Exercise
|
|
|
|
Warrants
|
|
|
Price
|
|
|
|
|
Warrants and options outstanding , March 31, 2007
|
|
|
3,105,651
|
|
|
$
|
1.72
|
|
Granted
|
|
|
4,200,000
|
|
|
|
1.55
|
|
Cancelled or expired
|
|
|
(3,750
|
)
|
|
|
|
|
|
|
|
Warrants exercisable June 30, 2007
|
|
|
7,301,901
|
|
|
$
|
1.76
|
|
|
|
|
|
|
|
|
Exercise price range
|
|
$1.20 to $10.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining life
|
|
4.98 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17. SEGMENT INFORMATION
The Companys only operating segment consists of dental products and oral hygiene products sold
by Remedent N.V. The other subsidiaries of the Company have been dormant since inception. Since
the Company only has one segment, no further segment information is presented.
F-40
Customers Outside of the United States
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007
|
|
June 30, 2006
|
|
|
|
U.S. sales
|
|
$
|
33,777
|
|
|
$
|
42,986
|
|
Foreign sales
|
|
|
1,210,880
|
|
|
|
1,216,653
|
|
|
|
|
|
|
$
|
1,244,657
|
|
|
$
|
1,259,639
|
|
|
|
|
|
18. COMMITMENTS AND CONTINGENCIES
Real Estate Lease
The Company leases its 26,915 square feet office and warehouse facility in Deurle, Belgium from
an unrelated party pursuant to a nine year lease commencing December 20, 2001 at a base rent of
6,838 per month ($9,235 per month at June 30, 2007). In addition, the Company is responsible
for the payment of annual real estate taxes for the property which totaled
3,245 ($4,382)
for calendar year 2006. The minimum aggregate rent to be paid over the remaining lease term based
upon the conversion rate for the
at June 30, 2007 is $273,533. Rent expense for the
foregoing lease for the three months ended June 30, 2007 and June 30, 2006 was $31,342 and
$51,071 respectively.
From November 2, 2005 to July 2006, the Company leased an office space in Los Angeles, California
on a month to month base. The monthly rent was $4,675.
Equipment Lease
In November 2004, the Company leased new computer equipment from a Belgium based Lessor pursuant
to a three year operating lease with monthly payments of
1,005 ($1,357 per month at June 30,
2007). The aggregate rent to be paid over the remaining lease term is $6,786.
Minimum monthly lease payments for real estate, and all other leased equipment for the next four
years are as follows based upon the conversion rate for the (Euro) at June 30, 2007.
|
|
|
|
|
|
March 31, 2008
|
|
$
|
223,271
|
|
March 31, 2009
|
|
$
|
202,689
|
|
March 31, 2010
|
|
$
|
142,394
|
|
March 31, 2011
|
|
$
|
35,994
|
|
|
F-41
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Nevada General Corporation Law and our Amended and Restated Articles of
Incorporation, our directors will have no personal liability to us or our stockholders for damages
incurred as the result of the breach or alleged breach of fiduciary duty as a director of the
Company involving any act or omission of any such director. This provision does not apply to the
directors (i) acts or omissions that involve intentional misconduct, fraud or knowing violation of
law, or (ii) approval of an unlawful dividend, distribution, stock repurchase or redemption under
Section 78.300 of the Nevada Revised Statutes. This provision would generally absolve directors of
personal liability for negligence in the performance of duties, including gross negligence.
The effect of this provision in our Amended and Restated Articles of Incorporation, is to
eliminate the rights of our Company and our stockholders (through stockholders derivative suits on
behalf of our Company) to recover damages against a director for breach of his fiduciary duties as
a director (including breaches resulting from negligent or grossly negligent behavior) except in
the situations described in clauses (i) and (ii) above. This provision does not limit nor eliminate
the rights of our Company or any stockholder to seek relief such as an injunction or rescission in
the event of a breach of a directors fiduciary duties. The Nevada General Corporation Law grants
corporations the right to indemnify their directors, officers, employees and agents in accordance
with applicable law. In addition, our Amended and Restated Bylaws authorizes the Company to
indemnify directors and officers of the Company in cases where such officer or director acted in
good faith and in a manner reasonably believed to be in the best interest of the Company, and with
respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by us in connection with the
issuance and distribution of the securities being registered hereunder. No expenses will be borne
by the Selling Stockholders. All of the amounts shown are estimates, except for the SEC
registration fee.
|
|
|
|
|
SEC Registration Fee
|
|
$
|
483.53
|
|
Accounting Fees and Expenses
|
|
$
|
4,000.00
|
|
Legal Fees
|
|
$
|
4,000.00
|
|
Total
|
|
$
|
8,483.53
|
|
RECENT SALES OF UNREGISTERED SECURITIES
1. On July 20, 2005, we completed a private placement offering of 2,520,661 Units consisting of one
share of its common stock (the Shares) and one common stock purchase warrant (the Warrants) at
a price of $1.50 per Unit for a total of $3,780,985 (the Units). The Warrants are exercisable for
a period of five years and shall entitle the holder to purchase one share of common stock (the
Warrant Shares) for $1.75 per Warrant Share. We have the right to redeem the Warrants for $0.01
per Warrant Share covered by the Warrants after July 6, 2007 if the Shares trade on the
Over-The-Counter Bulletin Board above $3.50 per share for thirty consecutive trading days provided
that certain conditions are met (the Redemption Right). Once the Redemption Right vests ,we will
have the right, but not the obligation, to redeem the Warrants for $0.01 per Warrant Share covered
by the Warrants upon thirty days written notice to the holders of the Warrants.
The sales and issuances of common stock and warrants to purchase common stock in private placements
listed above were made by us in reliance upon the exemptions from registration provided under
Section 4(2) and 4(6) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D,
promulgated by the Securities and Exchange Commission under federal securities laws and comparable
exemptions for sales to accredited investors under state securities laws. The offers and sales
were made to accredited investors as defined in Rule 501(a) under the Securities Act, no general
solicitation was made by us or any person acting on our behalf; the securities sold were subject to
transfer restrictions, and the certificates for those shares contained an appropriate legend
stating that they had not been registered under the Securities Act and may not be offered or sold
absent registration or pursuant to an exemption there from.
2. As consideration for past services performed by this individual and the release of any and all
claims under this individuals prior agreements with us, we (i) issued two hundred thousand
(200,000) shares of our restricted common stock pursuant to the terms and
II-1
conditions of a Stock Purchase Agreement, and (ii) issued to this individual options to purchase
150,000 shares of our common stock pursuant to the terms and conditions of a Stock Option Agreement
to be agreed to. The securities were issued pursuant to an exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended.
3. In connection with the employment of Mr. Judd Hoffman, we issued Mr. Hoffman options to purchase
400,000 shares of our common stock at an exercise price of $4.00 in October 2005. The options were
granted pursuant to our 2004 Incentive and Nonstatutory Stock Option Plan. One-third of the options
are scheduled to vest on each annual anniversary of Mr. Hoffmans employment. On July 19, 2006, we
entered into an Employment Severance Agreement (the Agreement) with Mr. Hoffman pursuant to which
an employment agreement between us and Mr. Hoffman dated October 12, 2005 (the Employment
Agreement) was mutually terminated. As of July 19, 2006, Mr. Hoffman is no longer our Vice
President of Worldwide Sales and Operations. Under the Agreement, we agreed to make a one-time
severance payment to Mr. Hoffman in an amount equal to Mr. Hoffmans base salary currently in
effect as of July 19, 2006 through August 31, 2006. In addition, we agreed to allow 110,666 of Mr.
Hoffmans options to vest at August 31, 2006. The balance of Mr. Hoffmans options lapsed upon his
termination. In conjunction with the terms of the Agreement, Mr. Hoffman has agreed to (a) a
general release of liability and (b) a non-solicitation clause for a term of eighteen (18) months
commencing on August 31, 2006. The options were issued in reliance upon exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended.
4. In connection with services rendered by Mr. Philippe Van Acker, on December 23, 2005, the
Company granted to Mr. Van Acker 75,000 ten year options to purchase the Companys common stock at
an exercise price of $2.46, the market value of the Companys stock on the date of grant. The
options were fully vested upon issuance. The options were issued in reliance upon exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended.
5. On June 25, 2007, the Company completed a private offering of 5,600,000 shares of its common
stock, par value $.001 per share at a purchase price of $1.25 per share (the Shares) and five
year warrants to purchase 4,200,000 shares of common stock, par value $.001 per share, at an
exercise price of $1.55 per share (the Warrants) to certain institutional and accredited
investors, for an aggregate purchase price of $7,000,000 (the Offering). Under the terms of the
Offering, the Company has the right to redeem the Warrants for $0.001 per Warrant Share covered by
the Warrants if the Shares trade on the OTC Electronic Bulletin Board or similar market above $5.25
per share for 20 consecutive trading days following the initial effective date of the registration
statement covering the resale of the Shares and Warrant Shares, based upon the closing bid price
for the Shares for each trading day (the Redemption Right). Once the Redemption Right vests, the
Company has the right, but not the obligation, to redeem the Warrants for $0.001 per Warrant Share
covered by the Warrants upon 30 days written notice to the holders of the Warrants.
The sales and issuances of common stock and warrants to purchase common stock in private placements
listed above were made by us in reliance upon the exemptions from registration provided under
Section 4(2) and 4(6) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D,
promulgated by the Securities and Exchange Commission under federal securities laws and comparable
exemptions for sales to accredited investors under state securities laws. The offers and sales
were made to accredited investors as defined in Rule 501(a) under the Securities Act, no general
solicitation was made by us or any person acting on our behalf; the securities sold were subject to
transfer restrictions, and the certificates for those shares contained an appropriate legend
stating that they had not been registered under the Securities Act and may not be offered or sold
absent registration or pursuant to an exemption there from.
II-2
EXHIBIT INDEX
|
|
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Exhibit No.
|
|
Description
|
|
|
|
2.1
|
|
Stock Exchange Agreement with Resort World Enterprises, Inc. (1)
|
|
|
|
3.1
|
|
Articles of Incorporation of Jofran Confectioners International, Inc., a Nevada corporation, dated July 31, 1986 (1)
|
|
|
|
3.2
|
|
Amendment to Articles of Incorporation changing name from Jofran Confectioners International, Inc., a Nevada
corporation, to Cliff Typographers, Inc., a Nevada corporation, dated July 31, 1986 (1)
|
|
|
|
3.3
|
|
Amendment to Articles of Incorporation changing name from Cliff Typographers, Inc., a Nevada corporation, to Cliff
Graphics International, Inc., a Nevada corporation, dated January 9, 1987 (1)
|
|
|
|
3.4
|
|
Amendment to Articles of Incorporation changing name from Cliff Graphics International, Inc., a Nevada corporation,
to Global Golf Holdings, Inc., a Nevada corporation, dated March 8, 1995 (1)
|
|
|
|
3.5
|
|
Amendment to Articles of Incorporation changing name from Global Golf Holdings, Inc., a Nevada corporation, to Dino
Minichiello Fashions, Inc., a Nevada corporation, dated November 20, 1997 (1)
|
|
|
|
3.6
|
|
Amendment to Articles of Incorporation changing name from Dino Minichiello Fashions, Inc., a Nevada corporation, to
Resort World Enterprises, Inc., a Nevada corporation, dated August 18, 1998 (1)
|
|
|
|
3.7
|
|
Amendment to Articles of Incorporation changing name from Resort World Enterprises, Inc., a Nevada corporation, to
Remedent, Inc., dated October 5, 1998 (1)
|
|
|
|
3.8
|
|
Amended and Restated Articles of Incorporation changing name from Remedent, USA, Inc. to Remedent, Inc. and to
effect a one-for-twenty reverse stock split on June 3, 2005 (2)
|
|
|
|
3.9
|
|
Amended and Restated Bylaws (2)
|
|
|
|
4.1
|
|
Specimen of Stock Certificate (7)
|
|
|
|
4.2
|
|
Form of Subscription Agreement (5)
|
|
|
|
4.3
|
|
Form of Warrant for Common Stock (5)
|
|
|
|
4.4
|
|
Form of Registration Rights Agreement (5)
|
|
|
|
4.5
|
|
Form of Warrant for Unit (8)
|
|
|
|
4.6
|
|
Form of Warrant for Common Stock (17)
|
|
|
|
|
5.1
|
|
Opinion of Bullivant Houser Bailey (18)
|
|
|
|
|
10.1
|
|
Incentive and Nonstatutory Stock Option Plan, dated May 29, 2001 (1)
|
|
|
|
10.2
|
|
2004 Incentive and Nonstatutory Stock Option Plan (8)
|
|
|
|
10.3
|
|
Exchange Agreement by and among Remedent, Inc. and Lausha, N.V. and Robin List dated June 3, 2005 (2)
|
|
|
|
10.4
|
|
Amendment to Line of Credit Agreement by and Between Remedent, N.V. and Fortis Bank dated May 3, 2005, subject to
General Terms and Conditions (6)
|
|
|
|
10.5
|
|
Exclusive License Agreement between Remedent, Inc. and Dan Darnell dated October 11, 2004 (6)
|
|
|
|
10.6
|
|
Amendment to Development Agreement between Remedent, Inc. and P. Michael Williams dated August 4, 2004 (6)
|
|
|
|
10.7
|
|
Option Agreement between Remedent, N.V. and Lident NV dated July 6, 2004 (6)
|
|
|
|
10.8
|
|
Development Agreement between Remedent, Inc. and P. Michael Williams dated March 15, 2004 (6)
|
|
|
|
10.9
|
|
Convertible Promissory Note dated March 23, 2004 (3)
|
|
|
|
10.10
|
|
Letter Agreement by and between MDB Capital Group, Inc. and Remedent, Inc. dated September 22, 2003 (6)
|
|
|
|
10.11
|
|
Stock Purchase Agreement with Dental Advisors, dated September 14, 2001 (1)
|
|
|
|
10.12
|
|
Asset Purchase Agreement for IMDS, dated January 15, 2001 (1)
|
|
|
|
10.13
|
|
Stock Purchase Agreement, dated January 11, 2002 (1)
|
II-3
|
|
|
Exhibit No.
|
|
Description
|
|
10.14
|
|
Stock Purchase Agreement, dated May 1, 2002 (1)
|
|
|
|
10.15
|
|
Securities Purchase Agreement dated July 6, 2005 (5)
|
|
|
|
10.16
|
|
Registration Rights Agreement dated July 6, 2005 (5)
|
|
|
|
10.17
|
|
Warrant dated July 6, 2005 (5)
|
|
|
|
10.18
|
|
Amendment to Warrant (8)
|
|
|
|
10.19
|
|
Employment Agreement between Remedent N.V. and Philippe Van Acker (7)
|
|
|
|
10.20
|
|
Agreement between Remedent N.V. and Omega Pharma NV dated as of September 9, 2003(8)
|
|
|
|
10.21
|
|
Addendum to Distribution Agreement between Remedent N.V. and Omega Pharma NV dated September 24, 2003 (7)
|
|
|
|
10.22
|
|
Addendum to Distribution Agreement between Remedent N.V. and Omega Pharma NV dated February 4, 2004 (7)
|
|
|
|
10.23
|
|
Lease Agreement dated December 20, 2001 (7)
|
|
|
|
10.24
|
|
Consulting Agreement between Remedent, Inc., and P. Michael Williams dated February 10, 2006 (9)
|
|
|
|
10.25
|
|
Consulting Agreement between Remedent, Inc. and Pierre Fabre Medicament S.A. dated December 21, 2005 (10)
|
|
|
|
10.26
|
|
Agreement between Remedent N.V, and Chefaro Pharma Italia S.R.L. dated February 15, 2006 (11)
|
|
|
|
10.27
|
|
Exclusive License and Distribution Agreement between Remedent and Dream Life dated March 22, 2006 (12)
|
|
|
|
10.28
|
|
Employment Agreement between Remedent, Inc. and Judd D. Hoffman (8)
|
|
|
|
10.29
|
|
Employment Severance Agreement between Remedent, Inc. and Judd D. Hoffman (13)
|
|
|
|
10.30
|
|
Fortis Bank General Lending Conditions for Corporate Customers (General Terms and Conditions) (14)
|
|
|
|
10.31
|
|
Line of Credit Agreement by and between Remedent, N.V. and Fortis Bank dated September 8, 2004, subject to the
General Terms and Conditions (14)
|
|
|
|
10.32
|
|
Amendment to Line of Credit Agreement by and Between Remedent, N.V. and Fortis Bank dated March 13, 2006, subject
to the General Terms and Conditions (15)
|
|
|
|
10.33
|
|
Amendment to Line of Credit Agreement by and Between Remedent, N.V. and Fortis Bank dated September 1, 2006,
subject to the General Terms and Conditions (16)
|
|
|
|
10.34
|
|
Purchase Agreement between Remedent, Inc. and certain Investors, dated June 20, 2007 (17)
|
|
|
|
10.35
|
|
Registration Rights Agreement between Remedent, Inc. and certain Investors, dated June 20, 2007 (17)
|
|
|
|
10.36
|
|
Employment Agreement between Remedent, Inc. and Roger Leddington (19)
|
|
|
|
|
|
10.37
|
|
Sales and Distribution Agreement
between Remedent N.V. and Savant Distribution Limited, dated
October 1, 2007
|
|
|
|
|
|
|
|
10.38
|
|
Waiver Agreement between Remedent,
Inc. and Consenting Holders, dated October 18, 2007 (20)
|
|
|
|
|
|
21.1
|
|
List of Subsidiaries (8)
|
|
|
|
23.1
|
|
Consent of PKF Bedrijfsrevisoren, Antwerp, Belgium
|
|
|
|
23.2
|
|
Opinion of Bullivant Houser Bailey (See exhibit 5.1)
|
|
|
II-4
|
|
|
Exhibit No.
|
|
Description
|
|
|
|
99.1
|
|
Declaration of Ian P. Ellis on
behalf of investor MicroCapital Fund Ltd., dated October 15, 2007 (20)
|
|
|
|
99.2
|
|
Declaration of Ian P. Ellis on
behalf of investor MicroCapital Fund LP, dated October 15, 2007 (20)
|
|
|
|
99.3
|
|
Declaration of investor Neal I.
Goldman, dated October 15, 2007 (20)
|
|
|
|
99.4
|
|
Declaration of Austin W. Marxe on
behalf of investor Special Situations Private Equity Fund, L.P., dated October 15, 2007 (20)
|
|
|
|
99.5
|
|
Declaration of Austin W. Marxe on
behalf of investor Special Situations Cayman Fund, L.P., dated October 15, 2007 (20)
|
|
|
|
99.6
|
|
Declaration of Austin W. Marxe on
behalf of investor Special Situations Fund III Q.P., L.P., dated October 15, 2007 (20)
|
|
|
|
99.7
|
|
Declaration of J. Patterson McBaine
on behalf of investor Gruber & McBaine International, dated October 15, 2007 (20)
|
|
|
|
99.8
|
|
Declaration of investor J.
Patterson McBaine, dated October 15, 2007 (20)
|
|
|
|
99.9
|
|
Declaration of Jon D. Gruber on
behalf of investor Jon D. and Linda W. Gruber Trust, dated October 15, 2007 (20)
|
|
|
|
99.10
|
|
Declaration of Paul H. OLeary
on behalf of investor Raffles Associates, LP, dated October 15, 2007 (20)
|
|
|
|
99.11
|
|
Declaration of J. Patterson McBaine
on behalf of investor Lagunitas Partners LP, dated October 15, 2007 (20)
|
|
|
|
99.12
|
|
Declaration of Paul J. Solit on
behalf of investor Potomac Capital Partners LP., dated October 15, 2007 (20)
|
|
|
|
99.13
|
|
Declaration of Paul J. Solit on
behalf of investor Potomac Capital International Ltd., dated October 15, 2007 (20)
|
|
|
|
99.14
|
|
Declaration of Paul J. Solit on
behalf of investor Pleiades Investment Partner-R LP, dated October 15, 2007 (20)
|
|
|
|
|
|
(1)
|
|
Incorporated by reference from Registration Statement on Form SB-2 filed with the SEC on July
24, 2002.
|
|
(2)
|
|
Incorporated by reference from Form 8-K filed with the SEC on June 8, 2005.
|
|
(3)
|
|
Incorporated by reference from Form 10-KSB/A filed with the SEC on February 8, 2005.
|
|
(4)
|
|
Incorporated by reference from Form 10-KSB filed with the SEC on July 15, 2003.
|
|
(5)
|
|
Incorporated by reference from Form 8-K filed with the SEC on July 11, 2005.
|
|
(6)
|
|
Incorporated by reference from Form 10-KSB filed with the SEC on July 14, 2005.
|
|
(7)
|
|
Incorporated by reference from Form SB-2 filed with the SEC on August 4, 2005.
|
|
(8)
|
|
Incorporated by reference from Form SB-2/A filed with the SEC on October 26, 2005
|
|
(9)
|
|
Incorporated by reference from Form 8-K filed with the SEC on February 16, 2006.
|
|
(10)
|
|
Incorporated by reference from Form 10-QSB filed with the SEC on February 21, 2006.
|
|
(11)
|
|
Incorporated by reference from Form 8-K filed with the SEC on February 22, 2006.
|
|
(12)
|
|
Incorporated by reference from Original Filing on Form 10-KSB filed with the SEC on July 14,
2006.
|
|
(13)
|
|
Incorporated by reference from Form 10-QSB filed with the SEC on August 21, 2006.
|
|
(14)
|
|
Incorporated by reference from Form 10-KSB/A2 filed with the SEC on June 11, 2007.
|
|
(15)
|
|
Incorporated by reference from Form 10-KSB/A filed with the SEC on June 11, 2007.
|
|
(16)
|
|
Incorporated by reference from Form 10-QSB/A filed with the SEC on June 11, 2007.
|
|
(17)
|
|
Incorporated by reference from Form 8-K filed with the SEC on June 27, 2007.
|
|
|
(18)
|
|
Incorporated by reference from Form SB-2 filed with the SEC on July 20, 2007.
|
|
|
|
(19)
|
|
Incorporated by reference from Form 8-K filed with the SEC on August 15, 2007.
|
|
|
|
|
(20)
|
|
Incorporated by reference from Form SB-2/A2 filed with the
SEC on October 19, 2007.
|
|
|
II-5
UNDERTAKINGS
The undersigned registrant hereby undertakes to:
(a)
Rule 415 Offering
:
(1) File, during any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the maximum aggregate offering
price set forth in the Calculation of Registration Fee table in the effective Registration
Statement; and
(iii) Include any additional or changed material information with respect to the plan of
distribution.
(2) For determining liability under the Securities Act of 1933, treat each post-effective
amendment as a new registration statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of the securities that
remain unsold at the end of the offering.
(4) For determining liability of the undersigned small business issuer under the Securities
Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned small
business issuer undertakes that in a primary offering of securities of the undersigned small
business issuer pursuant to this registration statement, regardless of the underwriting method used
to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by
means of any of the following communications, the undersigned small business will be a seller to
the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned small business issuer
relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the
undersigned small business issuer or used or referred to by the undersigned small business
issuer;
(iii) The portion of any other free writing prospectus relating to the offering containing
material information about the undersigned small business issuer or its securities, provided by
or on behalf of the undersigned small business issuer; and
(iv) Any other communication that is an offer in the offering made by the undersigned small
business issuer to the purchaser.
(b) Request for Acceleration of Effective Date
. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication of such issue.
(c) Reliance on Rule 430C
. Each prospectus filed pursuant to Rule 424(b) of the Securities Act of
1933 as part of a registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be
deemed to be part of and included in the registration statement as of the date it is first used
after effectiveness.
II-6
Provided, however,
that no statement made in a registration statement or prospectus that is part of
the registration statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration statement will, as
to a purchaser with a time of contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to such date of first use.
II-7
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements of filing on Form
SB-2 and authorized this Amendment No. 3 to Registration Statement on Form SB-2 to be signed on its
behalf by the undersigned in the Deurle, Belgium, on the 23rd day of October, 2007.
|
|
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|
|
|
REMEDENT, INC.,
a Nevada Corporation
|
|
|
Dated: October 23, 2007
|
/s/ Robin List
|
|
|
By: Robin List
|
|
|
Its: Chief Executive Officer (Principal
Executive Officer) and Director
|
|
|
|
POWER OF ATTORNEY
Pursuant
to the requirements of the Securities Act of 1933, as amended, this Amendment No. 3 to
Registration Statement on Form SB-2 has been signed by the following persons in the capacities
and on the dates indicated:
|
|
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|
|
|
|
Dated:
October 23, 2007
|
|
/s/ Robin List
|
|
|
|
|
|
|
|
|
|
Robin List, Chief Executive Officer and Director
|
|
|
|
|
|
|
|
|
|
Dated:
October 23, 2007
|
|
/s/ Philippe Van Acker
|
|
|
|
|
|
|
|
|
|
Philippe Van Acker, Chief Financial
Officer
(Principal Financial Officer and
Principal Accounting Officer)
|
|
|
|
|
|
|
|
|
|
Dated:
October 23, 2007
|
|
*
|
|
|
|
|
|
|
|
|
|
Guy De Vreese
,
Chairman of the Board of Directors
|
|
|
|
|
|
|
|
|
|
Dated:
October 23, 2007
|
|
*
|
|
|
|
|
|
|
|
|
|
Stephen Ross, Secretary and Director
|
|
|
|
|
|
|
|
|
|
Dated:
October 23, 2007
|
|
*
|
|
|
|
|
|
|
|
|
|
Fred Kolsteeg, Director
|
|
|
|
/s/ Philippe Van Acker
|
|
/s/ Robin List
|
|
|
|
|
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* Philippe Van Acker
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* Robin List
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Attorney-in-fact
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Attorney-in-fact
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EXHIBIT INDEX
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Exhibit No.
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Description
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2.1
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Stock Exchange Agreement with Resort World Enterprises, Inc. (1)
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3.1
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Articles of Incorporation of Jofran Confectioners International, Inc., a Nevada corporation, dated July 31, 1986 (1)
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3.2
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Amendment to Articles of Incorporation changing name from Jofran Confectioners International, Inc., a Nevada
corporation, to Cliff Typographers, Inc., a Nevada corporation, dated July 31, 1986 (1)
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3.3
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Amendment to Articles of Incorporation changing name from Cliff Typographers, Inc., a Nevada corporation, to Cliff
Graphics International, Inc., a Nevada corporation, dated January 9, 1987 (1)
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3.4
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Amendment to Articles of Incorporation changing name from Cliff Graphics International, Inc., a Nevada corporation,
to Global Golf Holdings, Inc., a Nevada corporation, dated March 8, 1995 (1)
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3.5
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Amendment to Articles of Incorporation changing name from Global Golf Holdings, Inc., a Nevada corporation, to Dino
Minichiello Fashions, Inc., a Nevada corporation, dated November 20, 1997 (1)
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3.6
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Amendment to Articles of Incorporation changing name from Dino Minichiello Fashions, Inc., a Nevada corporation, to
Resort World Enterprises, Inc., a Nevada corporation, dated August 18, 1998 (1)
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3.7
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Amendment to Articles of Incorporation changing name from Resort World Enterprises, Inc., a Nevada corporation, to
Remedent, Inc., dated October 5, 1998 (1)
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3.8
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Amended and Restated Articles of Incorporation changing name from Remedent, USA, Inc. to Remedent, Inc. and to
effect a one-for-twenty reverse stock split on June 3, 2005 (2)
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3.9
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Amended and Restated Bylaws (2)
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4.1
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Specimen of Stock Certificate (7)
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4.2
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Form of Subscription Agreement (5)
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4.3
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Form of Warrant for Common Stock (5)
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4.4
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Form of Registration Rights Agreement (5)
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4.5
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Form of Warrant for Unit (8)
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4.6
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Form of Warrant for Common Stock (17)
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5.1
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Opinion of Bullivant Houser Bailey (18)
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10.1
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Incentive and Nonstatutory Stock Option Plan, dated May 29, 2001 (1)
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10.2
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2004 Incentive and Nonstatutory Stock Option Plan (8)
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10.3
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Exchange Agreement by and among Remedent, Inc. and Lausha, N.V. and Robin List dated June 3, 2005 (2)
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10.4
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Amendment to Line of Credit Agreement by and Between Remedent, N.V. and Fortis Bank dated May 3, 2005, subject to
General Terms and Conditions (6)
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10.5
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Exclusive License Agreement between Remedent, Inc. and Dan Darnell dated October 11, 2004 (6)
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10.6
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Amendment to Development Agreement between Remedent, Inc. and P. Michael Williams dated August 4, 2004 (6)
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10.7
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Option Agreement between Remedent, N.V. and Lident NV dated July 6, 2004 (6)
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10.8
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Development Agreement between Remedent, Inc. and P. Michael Williams dated March 15, 2004 (6)
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10.9
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Convertible Promissory Note dated March 23, 2004 (3)
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10.10
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Letter Agreement by and between MDB Capital Group, Inc. and Remedent, Inc. dated September 22, 2003 (6)
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10.11
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Stock Purchase Agreement with Dental Advisors, dated September 14, 2001 (1)
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10.12
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Asset Purchase Agreement for IMDS, dated January 15, 2001 (1)
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10.13
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Stock Purchase Agreement, dated January 11, 2002 (1)
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Exhibit No.
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Description
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10.14
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Stock Purchase Agreement, dated May 1, 2002 (1)
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10.15
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Securities Purchase Agreement dated July 6, 2005 (5)
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10.16
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Registration Rights Agreement dated July 6, 2005 (5)
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10.17
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Warrant dated July 6, 2005 (5)
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10.18
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Amendment to Warrant (8)
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10.19
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Employment Agreement between Remedent N.V. and Philippe Van Acker (7)
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10.20
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Agreement between Remedent N.V. and Omega Pharma NV dated as of September 9, 2003(8)
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10.21
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Addendum to Distribution Agreement between Remedent N.V. and Omega Pharma NV dated September 24, 2003 (7)
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10.22
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Addendum to Distribution Agreement between Remedent N.V. and Omega Pharma NV dated February 4, 2004 (7)
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10.23
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Lease Agreement dated December 20, 2001 (7)
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10.24
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Consulting Agreement between Remedent, Inc., and P. Michael Williams dated February 10, 2006 (9)
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10.25
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Consulting Agreement between Remedent, Inc. and Pierre Fabre Medicament S.A. dated December 21, 2005 (10)
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10.26
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Agreement between Remedent N.V, and Chefaro Pharma Italia S.R.L. dated February 15, 2006 (11)
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10.27
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Exclusive License and Distribution Agreement between Remedent and Dream Life dated March 22, 2006 (12)
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10.28
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Employment Agreement between Remedent, Inc. and Judd D. Hoffman (8)
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10.29
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Employment Severance Agreement between Remedent, Inc. and Judd D. Hoffman (13)
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10.30
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Fortis Bank General Lending Conditions for Corporate Customers (General Terms and Conditions) (14)
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10.31
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Line of Credit Agreement by and between Remedent, N.V. and Fortis Bank dated September 8, 2004, subject to the
General Terms and Conditions (14)
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10.32
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Amendment to Line of Credit Agreement by and Between Remedent, N.V. and Fortis Bank dated March 13, 2006, subject
to the General Terms and Conditions (15)
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10.33
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Amendment to Line of Credit Agreement by and Between Remedent, N.V. and Fortis Bank dated September 1, 2006,
subject to the General Terms and Conditions (16)
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10.34
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Purchase Agreement between Remedent, Inc. and certain Investors, dated June 20, 2007 (17)
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10.35
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Registration Rights Agreement between Remedent, Inc. and certain Investors, dated June 20, 2007 (17)
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10.36
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Employment Agreement between Remedent, Inc. and Roger Leddington (19)
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10.37
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Sales and Distribution Agreement
between Remedent N.V. and Savant Distribution Limited, dated
October 1, 2007
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10.38
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Waiver Agreement between Remedent,
Inc. and Consenting Holders, dated October 18, 2007 (20)
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21.1
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List of Subsidiaries (8)
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23.1
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Consent of PKF Bedrijfsrevisoren, Antwerp, Belgium
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23.2
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Opinion of Bullivant Houser Bailey (See exhibit 5.1)
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Exhibit No.
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Description
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99.1
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Declaration of Ian P. Ellis on
behalf of investor MicroCapital Fund Ltd., dated October 15, 2007 (20)
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99.2
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Declaration of Ian P. Ellis on
behalf of investor MicroCapital Fund LP, dated October 15, 2007 (20)
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99.3
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Declaration of investor Neal I.
Goldman, dated October 15, 2007 (20)
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99.4
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Declaration of Austin W. Marxe on
behalf of investor Special Situations Private Equity Fund, L.P., dated October 15, 2007 (20)
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99.5
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Declaration of Austin W. Marxe on
behalf of investor Special Situations Cayman Fund, L.P., dated October 15, 2007 (20)
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99.6
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Declaration of Austin W. Marxe on
behalf of investor Special Situations Fund III Q.P., L.P., dated October 15, 2007 (20)
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99.7
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Declaration of J. Patterson McBaine
on behalf of investor Gruber & McBaine International, dated October 15, 2007 (20)
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99.8
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Declaration of investor J.
Patterson McBaine, dated October 15, 2007 (20)
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99.9
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Declaration of Jon D. Gruber on
behalf of investor Jon D. and Linda W. Gruber Trust, dated October 15, 2007 (20)
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99.10
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Declaration of Paul H. OLeary
on behalf of investor Raffles Associates, LP, dated October 15, 2007 (20)
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99.11
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Declaration of J. Patterson McBaine
on behalf of investor Lagunitas Partners LP, dated October 15, 2007 (20)
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99.12
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Declaration of Paul J. Solit on
behalf of investor Potomac Capital Partners LP., dated October 15, 2007 (20)
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99.13
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Declaration of Paul J. Solit on
behalf of investor Potomac Capital International Ltd., dated October 15, 2007 (20)
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99.14
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Declaration of Paul J. Solit on
behalf of investor Pleiades Investment Partner-R LP, dated October 15, 2007 (20)
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(1)
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Incorporated by reference from Registration Statement on Form SB-2 filed with the SEC on July
24, 2002.
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(2)
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Incorporated by reference from Form 8-K filed with the SEC on June 8, 2005.
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(3)
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Incorporated by reference from Form 10-KSB/A filed with the SEC on February 8, 2005.
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(4)
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Incorporated by reference from Form 10-KSB filed with the SEC on July 15, 2003.
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(5)
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Incorporated by reference from Form 8-K filed with the SEC on July 11, 2005.
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(6)
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Incorporated by reference from Form 10-KSB filed with the SEC on July 14, 2005.
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(7)
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Incorporated by reference from Form SB-2 filed with the SEC on August 4, 2005.
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(8)
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Incorporated by reference from Form SB-2/A filed with the SEC on October 26, 2005
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(9)
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Incorporated by reference from Form 8-K filed with the SEC on February 16, 2006.
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(10)
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Incorporated by reference from Form 10-QSB filed with the SEC on February 21, 2006.
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(11)
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Incorporated by reference from Form 8-K filed with the SEC on February 22, 2006.
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(12)
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Incorporated by reference from Original Filing on Form 10-KSB filed with the SEC on July 14,
2006.
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(13)
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Incorporated by reference from Form 10-QSB filed with the SEC on August 21, 2006.
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(14)
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Incorporated by reference from Form 10-KSB/A2 filed with the SEC on June 11, 2007.
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(15)
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Incorporated by reference from Form 10-KSB/A filed with the SEC on June 11, 2007.
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(16)
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Incorporated by reference from Form 10-QSB/A filed with the SEC on June 11, 2007.
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(17)
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Incorporated by reference from Form 8-K filed with the SEC on June 27, 2007.
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(18)
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Incorporated by reference from Form SB-2 filed with the SEC on July 20, 2007.
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(19)
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Incorporated by reference from Form 8-K filed with the SEC on August 15, 2007.
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(20)
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Incorporated by reference from Form SB-2/A2 filed with the SEC
on October 19, 2007.
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