UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
Quarterly Period Ended June 30, 2010
¨
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from _____ to _____.
Commission File No.
001-15975
REMEDENT,
INC.
(Exact
Name of Registrant as Specified in Its Charter)
|
Nevada
|
|
86-0837251
|
|
(State
or Other Jurisdiction
Of
Incorporation or Organization)
|
|
(I.R.S.
Employer Identification
Number)
|
|
|
|
|
|
Xavier
De Cocklaan 42, 9831 Deurle, Belgium
|
|
N/A
|
|
(Address
of Principal Executive Offices)
|
|
(Zip
Code)
|
Registrant’s
telephone number, including area code
011 32 9
321 70 80
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports); and (2) has been subject to such filing requirements for
the past 90 days.
Yes
x
No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T ( § 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes
¨
No
¨
Indicate
by checkmark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
|
Large
accelerated filer
|
¨
|
Accelerated
filer
|
¨
|
|
|
|
|
|
|
Non-accelerated
filer
|
¨
|
Smaller
reporting company
|
x
|
|
(Do
not check if a smaller reporting company)
|
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.
Yes
¨
No
x
As of
August 6, 2010, there were 19,995,969 outstanding shares of the
registrant’s common stock, includes 723,000 shares of treasury
stock.
REMEDENT,
INC.
FORM
10-Q INDEX
|
|
|
Page Numbe
r
|
|
|
|
|
|
PART
I – FINANCIAL INFORMATION
|
|
|
|
Item
1. Financial Statements
|
|
|
|
Condensed
Consolidated Balance Sheets as of June 30, 2010 (Unaudited) and March 31,
2010
|
|
1
|
|
Condensed
Consolidated Statements of Operations for the Three
Months Ended June 30, 2010 and June 30, 2009
(Unaudited)
|
|
2
|
|
Condensed
Consolidated Statements of Comprehensive Income (Loss) for the Three
Months Ended June 30, 2010 and June 30, 2009
(Unaudited)
|
|
3
|
|
Condensed
Consolidated Statements of Cash Flows for the Three Months Ended June 30,
2010 and June 30, 2009 (Unaudited)
|
|
4
|
|
Notes
to Condensed Consolidated Financial Statements (Unaudited)
|
|
5
|
|
Item
2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
|
21
|
|
Item
3. Quantitative and Qualitative Disclosures About
Market Risk
|
|
24
|
|
Item
4T. Controls and Procedures
|
|
25
|
|
|
|
|
|
PART
II – OTHER INFORMATION
|
|
|
|
Item
1. Legal Proceedings
|
|
25
|
|
Item
1A. Risk Factors
|
|
25
|
|
Item
2. Unregistered Sales of Equity Securities
and Use of Proceeds
|
|
25
|
|
Item
3. Defaults Upon Senior
Securities
|
|
25
|
|
Item
4. [Removed and Reserved].
|
|
25
|
|
Item
5. Other Information
|
|
26
|
|
Item
6. Exhibits
|
|
26
|
|
Signature
Page
|
|
27
|
PART
I – FINANCIAL INFORMATION
Item
1.
REMEDENT,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
June 30, 2010
|
|
|
March 31, 2010
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,196,888
|
|
|
$
|
613,466
|
|
|
Accounts
receivable, net of allowance for doubtful accounts of $59,608 at June 30,
2010 and $65,845 at March 31, 2010
|
|
|
1,982,826
|
|
|
|
806,931
|
|
|
Inventories,
net
|
|
|
1,850,892
|
|
|
|
2,161,692
|
|
|
Prepaid
expenses
|
|
|
938,396
|
|
|
|
920,487
|
|
|
Total
current assets
|
|
|
5,969,002
|
|
|
|
4,502,576
|
|
|
PROPERTY
AND EQUIPMENT, NET
|
|
|
1,553,783
|
|
|
|
1,735,719
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
|
Long
term investments and advances
|
|
|
750,000
|
|
|
|
750,000
|
|
|
Patents,
net
|
|
|
220,314
|
|
|
|
246,992
|
|
|
Goodwill
|
|
|
699,635
|
|
|
|
699,635
|
|
|
Total
assets
|
|
$
|
9,192,734
|
|
|
$
|
7,934,922
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Current
portion, long term debt
|
|
$
|
163,784
|
|
|
$
|
215,489
|
|
|
Line
of Credit
|
|
|
1,887,063
|
|
|
|
674,600
|
|
|
Accounts
payable
|
|
|
1,724,827
|
|
|
|
1,932,684
|
|
|
Accrued
liabilities
|
|
|
486,298
|
|
|
|
491,536
|
|
|
Due
to related parties
|
|
|
265,857
|
|
|
|
268,484
|
|
|
Total
current liabilities
|
|
|
4,527,829
|
|
|
|
3,582,793
|
|
|
Long
term debt less current portion
|
|
|
458,236
|
|
|
|
425,882
|
|
|
Total
liabilities
|
|
|
4,986,065
|
|
|
|
4,008,675
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY:
|
|
|
|
|
|
|
|
|
|
REMEDENT,
INC. STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Preferred
Stock $0.001 par value (10,000,000 shares authorized, none issued and
outstanding)
|
|
|
—
|
|
|
|
—
|
|
|
Common
stock, $0.001 par value; (50,000,000 shares authorized, 19,995,969 shares
issued and outstanding at June 30, 2010 and March 31,
2010)
|
|
|
19,996
|
|
|
|
19,996
|
|
|
Treasury
stock, at cost; 723,000 shares at June 30, 2010 and March 31,
2010
|
|
|
(831,450
|
)
|
|
|
(831,450
|
)
|
|
Additional
paid-in capital
|
|
|
24,843,651
|
|
|
|
24,742,201
|
|
|
Accumulated
deficit
|
|
|
(19,253,792
|
)
|
|
|
(19,565,943
|
)
|
|
Accumulated
other comprehensive (loss) (foreign currency translation
adjustment)
|
|
|
(827,707
|
)
|
|
|
(650,059
|
)
|
|
Obligation
to issue shares
|
|
|
97,500
|
|
|
|
97,500
|
|
|
Total
Remedent, Inc. stockholders’ equity
|
|
|
4,048,198
|
|
|
|
3,812,245
|
|
|
Non-controlling
interest
|
|
|
158,471
|
|
|
|
114,002
|
|
|
Total
stockholders’ equity
|
|
|
4,206,669
|
|
|
|
3,926,247
|
|
|
Total
liabilities and equity
|
|
$
|
9,192,734
|
|
|
$
|
7,934,922
|
|
COMMITMENTS
(Note 19)
The
accompanying notes are an integral part of these consolidated financial
statements.
REMEDENT,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
|
|
|
For the three months ended
|
|
|
|
|
June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
3,436,759
|
|
|
$
|
2,160,803
|
|
|
Cost
of sales
|
|
|
914,337
|
|
|
|
1,096,007
|
|
|
Gross
profit
|
|
|
2,522,422
|
|
|
|
1,064,796
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
65,545
|
|
|
|
26,598
|
|
|
Sales
and marketing
|
|
|
512,976
|
|
|
|
350,935
|
|
|
General
and administrative
|
|
|
1,152,712
|
|
|
|
1,042,764
|
|
|
Depreciation
and amortization
|
|
|
201,202
|
|
|
|
173,444
|
|
|
TOTAL
OPERATING EXPENSES
|
|
|
1,932,435
|
|
|
|
1,593,741
|
|
|
INCOME
(LOSS) FROM OPERATIONS
|
|
|
589,987
|
|
|
|
(528,945
|
)
|
|
OTHER
(EXPENSES) INCOME
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(54,891
|
)
|
|
|
(24,647
|
)
|
|
Other
income
|
|
|
38,860
|
|
|
|
65,998
|
|
|
TOTAL
OTHER (EXPENSES) INCOME
|
|
|
(16,031
|
)
|
|
|
41,351
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) BEFORE TAXES AND NON-CONTROLLING INTEREST
|
|
|
573,956
|
|
|
|
(487,594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
TAXES
|
|
|
(6,229
|
)
|
|
|
—
|
|
|
NET
INCOME (LOSS) BEFORE NON-CONTROLLING INTEREST
|
|
|
567,727
|
|
|
|
(487,594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
LESS:
NET INCOME ATTRIBUTABLE TO THE NON-CONTROLLING INTEREST
|
|
|
255,577
|
|
|
|
61,838
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
(LOSS) INCOME ATTRIBUTABLE TO REMEDENT, INC. Common
Stockholders
|
|
$
|
312,150
|
|
|
$
|
(549,432
|
)
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) PER SHARE
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.02
|
|
|
$
|
(0.03
|
)
|
|
Fully
diluted
|
|
$
|
0.01
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
19,995,969
|
|
|
|
19,995,969
|
|
|
Fully
diluted
|
|
|
33,595,242
|
|
|
|
32,702,274
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
REMEDENT,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
|
For the three months
ended June 30,
(Unaudited)
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Net
Income(Loss) Attributable to Remedent Common Stockholders
|
|
$
|
312,150
|
|
|
$
|
(549,432
|
)
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS):
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
(177,648
|
)
|
|
|
57,568
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
OTHER COMPREHENSIVE (LOSS) INCOME
|
|
|
134,502
|
|
|
|
(491,864
|
)
|
|
|
|
|
|
|
|
|
|
|
|
LESS:
COMPREHENSIVE INCOME ATTRIBUTABLE TO NON-CONTROLLING
INTEREST
|
|
|
(15,865
|
)
|
|
|
42,248
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
(LOSS) INCOME ATTRIBUTABLE TO REMEDENT Common Stockholders
|
|
$
|
150,367
|
|
|
$
|
(534,112
|
)
|
The
accompanying notes are an integral part of these consolidated financial
statements.
REMEDENT,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
For the three months ended
June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
567,727
|
|
|
$
|
(487,594
|
)
|
|
Adjustments
to reconcile net income (loss) to net cash used by operating
activities
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
201,202
|
|
|
|
173,444
|
|
|
Inventory
reserve
|
|
|
(62,904
|
)
|
|
|
864
|
|
|
Allowance
for doubtful accounts
|
|
|
(6,237
|
)
|
|
|
2,222
|
|
|
Value
of stock options issued to employees
|
|
|
101,450
|
|
|
|
101,450
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(1,175,895
|
)
|
|
|
(165,223
|
)
|
|
Inventories
|
|
|
310,800
|
|
|
|
(118,195
|
)
|
|
Prepaid
expenses
|
|
|
(17,909
|
)
|
|
|
(10,800
|
)
|
|
Accounts
payable
|
|
|
(207,856
|
)
|
|
|
109,948
|
|
|
Accrued
liabilities
|
|
|
(5,238
|
)
|
|
|
(603,074
|
)
|
|
Due
to related parties
|
|
|
(2,627
|
)
|
|
|
—
|
|
|
Income
taxes payable
|
|
|
—
|
|
|
|
(2,232
|
)
|
|
Net
cash used by operating activities
|
|
|
(297,487
|
)
|
|
|
(999,190
|
)
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Purchases
of equipment
|
|
|
(118,695
|
)
|
|
|
(68,144
|
)
|
|
Net
cash used by investing activities
|
|
|
(118,695
|
)
|
|
|
(68,144
|
)
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net
(repayments of) capital lease note payable
|
|
|
(56,296
|
)
|
|
|
(19,384
|
)
|
|
Proceeds
from line of credit
|
|
|
1,212,463
|
|
|
|
816,940
|
|
|
Net
cash provided by financing activities
|
|
|
1,156,167
|
|
|
|
797,556
|
|
|
NET
(DECREASE) INCREASE IN CASH
|
|
|
739,985
|
|
|
|
(269,778
|
)
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
(156,563
|
)
|
|
|
60,801
|
|
|
CASH
AND CASH EQUIVALENTS, BEGINNING
|
|
|
613,466
|
|
|
|
1,807,271
|
|
|
CASH
AND CASH EQUIVALENTS, ENDING
|
|
$
|
1,196,888
|
|
|
$
|
1,598,294
|
|
|
Supplemental
Information:
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
27,097
|
|
|
$
|
15,867
|
|
|
Income
taxes paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
SUPPLEMENTAL
NON-CASH FINANCING AND INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from capital lease notes payable
|
|
$
|
36,945
|
|
|
$
|
—
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
REMEDENT,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2010 (unaudited)
|
1.
|
DESCRIPTION
OF THE COMPANY AND BASIS OF
PRESENTATION
|
The
Company is a manufacturer and distributor of cosmetic dentistry products,
including a full line of professional dental and retail “Over-The-Counter” tooth
whitening products which are distributed in Europe, Asia and the United States.
The Company manufactures many of its products in its facility in Deurle, Belgium
as well as outsourced manufacturing in its facility in Beijing, China and in
France. The Company distributes its products using both its own
internal sales force and through the use of third party
distributors.
The
Company’s financial statements have been prepared on an accrual basis of
accounting, in conformity with accounting principles generally accepted in the
United States of America.
In these
notes, the terms “Remedent”, “Company”, “we”, “us” or “our” mean Remedent, Inc.
and all of its subsidiaries, whose operations are included in these consolidated
financial statements.
The
Company has conducted a subsequent events review through the date the financial
statements were issued, and has concluded that there were no subsequent events
requiring adjustments or additional disclosures to the Company's financial
statements at June 30, 2010.
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Organization
and Principles of Consolidation
The
accompanying consolidated financial statements include the accounts of: Remedent
N.V. (incorporated in Belgium) located in Deurle, Belgium, Remedent
Professional, Inc. (incorporated in California), Glamtech-USA, Inc. (a Delaware
corporation acquired effective August 24, 2008) and its 50.98% owned subsidiary,
Glamsmile Asia Ltd.(with its subsidiaries, a GlamSmile Studio in Hong Kong, a
GlamSmile Studio in Mainland China (Beijing) and our GlamSmile production Lab,
also located in China (Beijing)) , Remedent OTC B.V. (a Dutch Holding company)
and a 50% owned subsidiary, Sylphar Holding B.V. (a Dutch holding company), a
37.50% owned and controlled subsidiary of Remedent Inc., Sylphar N.V., a 100%
owned company by Sylphar Holding BV, Sylphar USA, a 100% owned Nevada
corporation by Sylphar Holding BV. And Sylphar Asia Pte, a 100% owned Asian
company owned by Sylphar Holding BV (collectively, the “Company”).
Remedent,
Inc. is a holding company with headquarters in Deurle, Belgium. Remedent
Professional, Inc. and Remedent Professional Holdings, Inc. have been dormant
since inception.
For all
periods presented, all significant inter-company accounts and transactions have
been eliminated in the consolidated financial statements and corporate
administrative costs are not allocated to subsidiaries.
Interim
Financial Information
The
interim consolidated financial statements of Remedent, Inc. and Subsidiaries
(the “Company”) are condensed and do not include some of the information
necessary to obtain a complete understanding of the financial data. Management
believes that all adjustments necessary for a fair presentation of results have
been included in the unaudited consolidated financial statements for the interim
periods presented. Operating results for the three months ended June 30, 2010,
are not necessarily indicative of the results that may be expected for the year
ended March 31, 2011. Accordingly, your attention is directed to footnote
disclosures found in the Annual Report on Form 10-K for the year ending
March 31, 2010, and particularly to Note 2, which includes a summary of
significant accounting policies.
Pervasiveness
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the Company to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. On an on-going basis, the Company evaluates estimates and
judgments, including those related to revenue, bad debts, inventories, fixed
assets, intangible assets, stock based compensation, income taxes, and
contingencies. Estimates are based on historical experience and on various other
assumptions that the Company believes reasonable in the circumstances. The
results form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results
could differ from those estimates.
Goodwill
impairment
The
Company performs impairment tests related to goodwill annually and whenever
events or changes in circumstances suggest that it is more likely than not that
the fair value of the reported unit is below its carrying value. To June 30,
2010, management has not identified any impairment of goodwill.
Fair
Value of Financial Instruments
The
Company’s financial instruments consist of cash and cash equivalents, accounts
receivable, accounts payable, accrued liabilities, line of credit and long-term
debt. The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities approximate their respective fair
values because of the short maturities of those instruments. The Company’s
long-term debt consists of its revolving credit facility and long-term capital
lease obligations. The carrying value of the revolving credit facility
approximates fair value because of its variable short-term interest
rates. The fair value of the Company’s long-term capital lease
obligations is based on current rates for similar financing.
Computation
of Earnings (Loss) per Share
The
Company computes net income (loss) per share as follows: Basic
earnings per share (“EPS”) is computed by dividing net income (loss) available
to common shareholders (numerator) by the weighted average number of common
shares outstanding (denominator) during the period. Diluted EPS gives effect to
all dilutive potential common shares outstanding during the period including
stock options, using the treasury stock method, and convertible notes, using the
if-converted method. In computing diluted EPS, the average stock price for the
period is used in determining the number of shares assumed to be purchased from
the exercise of stock options or warrants. Diluted EPS excludes all dilutive
potential common shares if their effect is anti-dilutive.
Liquidity
and Management Plans
Historically,
the Company has relied on a combination of fundraising from the sale and
issuance of equity securities and cash generated from product and service
revenues to provide funding for its operations. As of June 30, 2010, the Company
had cash and cash equivalents of $1,196,888. The Company believes that these
balances, along with its line of credit, will provide sufficient financing in
order to fund its working and other capital requirements over the course of the
next twelve months. The Company will continue to review its expected cash
requirements, make all efforts to collect any aged receivables, and take
appropriate cost reduction measures to ensure that it has sufficient working
capital to fund its operations. In the event additional needs for cash arise,
the Company may seek to raise additional funds from a combination of sources
including issuance of debt or equity securities. Additional financing may not be
available on terms favorable to the Company, or at all. Any additional financing
activity could be dilutive to the Company's current stockholders. If adequate
funds are not available or are not available on acceptable terms, the Company's
ability to take advantage of unanticipated opportunities or respond to
competitive pressures could be limited.
Recent
Accounting Pronouncements
With the
exception of those discussed below, there are no unadopted accounting
pronouncements and there have been no recent accounting pronouncements or
changes in accounting pronouncements during the three months ended June 30,
2010, as compared to the recent accounting pronouncements described in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31,
2010, that are of significance, or potential significance, to the
Company.
In
January 2010, the Financial Accounting Standards Board ("FASB") issued
additional guidance on fair value disclosures. The new guidance clarifies two
existing disclosure requirements and requires two new disclosures as follows:
(1) a "gross" presentation of activities (purchases, sales, and
settlements) within the Level 3 rollforward reconciliation, which will replace
the "net" presentation format; and (2) detailed disclosures about the
transfers in and out of Level 1 and 2 measurements. This guidance is effective
for the first interim or annual reporting period beginning after
December 15, 2009, except for the gross presentation of the Level 3
rollforward information, which is required for annual reporting periods
beginning after December 15, 2010, and for interim reporting periods
thereafter. The Company adopted the amended fair value disclosures guidance on
April 1, 2010, except for the gross presentation of the Level 3 rollforward
information, which the Company is not required to adopt until April 1,
2011. The adoption of this standard has had no impact upon the
Company’s consolidated financial statements.
In
October 2009, the FASB issued new standards for revenue recognition with respect
to multiple-deliverable arrangements. As a result of the new standards,
multiple-deliverable arrangements will be separated in more circumstances than
under existing revenue recognitions standards. The new standards establish a
selling price hierarchy for determining the selling price of a deliverable. Such
selling price for each deliverable will be based on vendor-specific objective
evidence if available, third-party evidence if vendor-specific objective
evidence is not available, or estimated selling price if neither vendor-specific
objective evidence nor third-party evidence is available. The new standards also
replaces the term fair value in the revenue allocation guidance with selling
price to clarify that the allocation of revenue is based on entity-specific
assumptions rather than assumptions of a marketplace participant. The new
standards are effective for revenue arrangements that begin or are changed in
fiscal years starting after June 15, 2010 and early adoption is permitted. The
Company is currently evaluating the impact of this amendment on its revenue
recognition policies as well as the impact on its financial
statements.
|
3.
|
ACQUISITION
OF GLAMSMILE ASIA LTD.
|
Effective
January 1, 2010 the Company acquired 50.98% of the issued and outstanding shares
of Glamsmile Asia Ltd. (“Glamsmile Asia”), a private Hong Kong company, with
subsidiaries in Hong Kong and Mainland China, in exchange for the following
consideration:
|
|
1.
|
325,000
Euro (US$466,725). As of March 31, 2010, the Company owed a
balance of $71,885 on its purchase of the shares of Glamsmile Asia, which
amount was recorded as due to related
parties;
|
|
|
2.
|
250,000
shares of common stock to be issued during the fiscal year ended March 31,
2011($97,500 was recorded as an obligation to issue shares as at June 30,
2010 and March 31, 2010);
|
|
|
3.
|
100,000
options on closing (issued);
|
|
|
4.
|
100,000
options per opened store at closing
(issued);
|
|
|
5.
|
100,000
options for each additional store opened before the end of 2011 at the
price of the opening date of the
store;
|
|
|
6.
|
Assumption
of Glamsmile’s January 1, 2010 deficit of $73,302. The non-controlling
interest is non-participating until such time as the net profit from
Glamsmile Asia exceeds prior losses of $73,302;
and
|
|
|
7.
|
Repayment
of the founding shareholder’s original advances in the amount of
$196,599. The balance of $196,599, recorded as due to related
parties as at June 30, 2010 and March 31, 2010, is unsecured, non-interest
bearing and has no specific terms of repayment other than it will be paid
out of revenues from Glamsmile, as working capital
allows.
|
All
options reside under the Company’s option plan and are five year
options.
Also
pursuant to the agreement, the Company has granted irrevocable right to
Glamsmile Asia to use the Glamsmile trademark in Greater China.
In
connection with this acquisition the Company has recorded goodwill of
$699,635. If new information is received by the Company during the
measurement period, the goodwill recorded may be subject to change.
During
the three months ended June 30, 2010, the Company recorded $150,023 as due to
the Glamsmile non-controlling interest, net of the assumption of prior losses,
as described in point 6 above.
|
4.
|
DISTRIBUTION
AGREEMENTS
|
Den-Mat
Distribution Agreement
On August
24, 2008, the Company entered into a distribution agreement (the “Distribution
Agreement”) with Den-Mat Holdings, LLC, a Delaware limited liability company
(“Den-Mat”). Under the Distribution, the Company appointed
Den-Mat to be the sole and exclusive distributor to market, license and sell
certain products relating to the Company’s GlamSmile tray technology, including,
but not limited to, its GlamSmile veneer products and other related veneer
products (the “Products”), throughout the world, with the exception of
Australia, Austria, Belgium, Brazil, France (including all French overseas
territories “Dom-Tom”), Germany, Italy, New Zealand, Oman, Poland, Qatar, Saudi
Arabia, Singapore, Switzerland, Thailand, and United Arab Emirates (collectively
the “Excluded Markets”) and the China Market (the “Territory”).
As
consideration for such distribution, licensing and manufacturing rights, Den-Mat
will pay the Company:
|
|
(i)
|
an
initial payment of $2,425,000;
|
|
|
(ii)
|
a
payment of $250,000 for each of the first three contract periods in the
initial Guaranty Period, subject to certain terms and
conditions;
|
|
|
(iii)
|
certain
periodic payments as additional paid-up royalties in the aggregate amount
of $500,000;
|
|
|
(iv)
|
a
payment of $1,000,000 promptly after Den-Mat manufactures a limited
quantity of products at a facility owned or leased by
Den-Mat;
|
|
|
(v)
|
a
payment of $1,000,000 promptly upon completion of certain training of
Den-Mat’s personnel;
|
|
|
(vi)
|
a
payment of $1,000,000 upon the first to occur of (a) February 1, 2009
or (b) the date thirty (30) days after den-Mat sells GlamSmile
Products incorporating twenty thousand (20,000) Units/Teeth to customers
regardless of whether Den-Mat has manufactured such Units/Teeth in a
Den-Mat facility or has purchased such Units/Teeth from the
Company;
|
|
|
(vii)
|
certain
milestone payments; and
|
|
|
(viii)
|
certain
royalty payments.
|
Further,
as consideration for Den-Mat’s obligations under the Distribution Agreement, the
Company agreed to, among other things:
|
|
(i)
|
issue
to Den-Mat or an entity to be designated by Den-Mat, warrants to purchase
up to 3,378,379 shares of the Corporation’s common stock, par value $0.001
per share (the “Warrant Shares”) at an exercise price of $1.48 per share,
exercisable for a period of five years (the “Den-Mat Warrant”) (issued in
the period ended September 30,
2008);
|
|
|
(ii)
|
execute
and deliver to Den-Mat a registration rights agreement covering the
registration of the Warrant Shares (the “Registration Rights Agreement”)
which as of March 31, 2009 has not yet been filed;
and
|
|
|
(iii)
|
cause
its Chairman of the Board, Guy De Vreese, to execute and deliver to
Den-Mat a non-competition
agreement.
|
On June
3, 2009, the Distribution Agreement was amended and restated (the “Amended
Agreement”). The Amended Agreement modifies and clarifies certain terms and
provisions which among other things includes:
|
|
(1)
|
the
expansion of the list of Excluded Markets to include Spain, Japan,
Portugal, South Korea and South Africa for a period of
time;
|
|
|
(2)
|
clarification
that Den-Mat’s distribution and license rights are non-exclusive to
market, sell and distribute the Products directly to consumers through
retail locations (“B2C Market”) in the Territory and an undertaking to
form a separate subsidiary to and to issue warrants to Den-Mat in the
subsidiary in the event that the Company decides to commercially exploit
the B2C Market in North America after January 1,
2010;
|
|
|
(3)
|
subject
to certain exceptions, a commitment from the Company to use Den-Mat as its
supplier to purchase all of its, and its licensee’s, GlamSmile products in
the B2C Market from Den-Mat, with reciprocal commitment from Den-Mat to
sell such products;
|
|
|
(4)
|
modification
of certain defined terms such as “Guaranty Period,” “Exclusivity Period”
and addition of the term “Contract Period”;
and
|
|
|
(5)
|
the
“Guaranty Period” (as defined therein) is no longer a three
year period but has been changed to the first three “Contract
Periods”. The first Contract Period commences on the first day
of the Guaranty Period (which the Parties agreed has commenced as of April
1, 2009), and continues for fifteen (15) months or such longer period that
would be necessary in order for Den-Mat to purchase a certain minimum
number of Units/Teeth as agreed upon in the Amended Agreement (“Minimum
Purchase Requirement”) in the event that the Company’s manufacturing
capacity falls below a certain threshold. The second and each
subsequent GlamSmile Contract Period begins on the next day following the
end of the preceding “Contract Period” and continues for twelve (12)
months or such longer period that would be necessary in order for Den-Mat
to meet its Minimum Purchase Requirement in the event that the Company’s
manufacturing capacity falls below a certain
threshold.
|
In August
2009, the Distribution Agreement was further amended (the “August Amendment”).
The August Amendment expands the Company’s products covered under the
Distribution Agreement to include the Company’s new Prego System Technology
(“Prego System”), also commonly known as “Glamstrip”. Under the Amendment, the
$250,000 payment which was originally due upon the expiration of the first
Contract Period (as defined in the Distribution Agreement) is now due on the
earlier occurrence of (i) sixty days from August 11, 2009 or (ii) the
performance of the Company’s live patient clinical demonstration of the Prego
System to be performed at Den-Mat’s reasonable satisfaction.
The
August Amendment also provides for (a) the royalty rate for products
manufactured and sold by Den-Mat using the Prego System after the Guaranty
Period (as defined in the Distribution Agreement), (b) Den-Mat’s right to elect
to manufacture or purchase from a third party manufacturer any or all portion of
the minimum purchase requirements under the Distribution Agreement provided
however, that if Den-Mat fails to purchase the minimum number of Units/Teeth as
required during any month, Den-Mat may cure such default by paying the Company a
certain royalty on the difference between the minimum purchase requirement and
the amount actual purchased by Den-Mat during such month, with such royalties
accruing and being due and payable upon the earlier occurrence of either (1) one
hundred twenty days from August 11, 2009 or (2) the successful performance
of the Company’s live patient demonstration of the First Fit
Technology licensed to Den-Mat pursuant to the First Fit-Crown Distribution
and License Agreement, to be performed at Den-Mat’s reasonable
satisfaction; and all shortfall payments thereafter being due and payable within
15 days after the end of the month in which shortfall occurred, and (c)
Den-Mat’s option to purchase a certain number of Prego Systems in lieu of Trays
during each of the first three Contract Periods pursuant to the terms, including
price and conditions, set forth in the Amendment so long as such option is
exercised during the period commencing on August 11, 2009 and ending on the
later of either 91 days or 31 days after the Company demonstrates to Den-Mat
that it has the capacity to produce a certain number of Prego System per
Contract Period. Furthermore under the Amendment, if Den-Mat fails to purchase
the required minimum Trays during any Contract Period, such failure may be cured
by payment equal to the difference between the aggregate purchase price that
would have been paid had Den-Mat purchased the required minimum and the
aggregate purchase price actually paid for such Contract Year within 30 days
after the end of such Contract Period. With the exception of the provisions
amended by the Amendment, the Distribution Agreement remains in full force and
effect.
First
Fit Distribution Agreement
On June
3, 2009, the Company entered into the First Fit-Crown Distribution and License
Agreement (the “First Fit Distribution Agreement”) with
Den-Mat. Under the terms of the First Fit Distribution Agreement, the
Company appointed Den-Mat to be its sole and exclusive distributor to market,
license and sell certain products relating to the Company’s proprietary First
Fit technology (the “First Fit Products”), in the United States, Canada and
Mexico (the “First Fit Territory”). In connection therewith, the
Company also granted Den-Mat certain non-exclusive rights to manufacture and
produce the First Fit Products in the First-Fit Territory; and a sole and
exclusive transferable and sub-licensable right and license to use the Company’s
intellectual property rights relating to the First Fit Products to perform its
obligations as a distributor (provided the Company retains the right to use and
license related intellectual property in connection with the manufacture of the
First Fit Products for sale outside of the First Fit
Territory).
Consummation
of the First Fit Distribution Agreement is subject to: completion of Den-Mat’s
due diligence; execution and delivery of Non-Competition Agreements; and the
delivery of the Development Payment and first installment of the License Payment
(the “Development Payment” and License Payment” are defined below).
Under the
First Fit Distribution Agreement, the Company granted such distribution rights,
licensing rights and manufacturing rights, in consideration for the
following: (i) a non-refundable development fee of Four Hundred
Thousand Dollars ($400,000) (the “Development Payment”) payable in two
installments of $50,000 each, one within seven days after the effective date of
the First Fit Distribution Agreement, and another $350,000 payment within twenty
one days after the Effective Date ($400,000 received as at June 30, 2009); (ii)
a non-refundable license fee of $600,000 payable in three equal installments of
$200,000 each, with the first installment payable on the Closing Date, and with
the second and third installments payable on the 30
th
and 60
th
day, respectively, after the Closing Date (received); (iii) certain royalty
payments based on the sales of the First Fit Products by Den-Mat or its
sub-licensees; and (iv) certain minimum royalty payments to maintain
exclusivity.
Den-Mat’s
rights as an exclusive distributor and licensee will continue at least through
the first Contract Period (defined below) and until the termination of the First
Fit Distribution Agreement. Den-Mat’s exclusivity ends at the end of
any Contract Period in which Den-Mat fails to make certain minimum royalty
payments. In the event that such exclusivity is terminated, Den-Mat
has the option to either terminate the First Fit Distribution Agreement upon
ninety (90) days written notice, or become a non-exclusive distributor and
licensee, in which event Den-Mat’s obligation to pay certain agreed upon
royalties would continue. “Contract Period” means the
following periods: (A) the first eighteen months beginning on the first day of
the month following the month in which the Closing occurs, provided that if
Den-Mat is not fully operational within sixty days after the Closing Date, the
first Contract Period will be extended by one day for each day after the
sixtieth day until Den-Mat becomes fully operational; (B) the subsequent twelve
months; and (C) each subsequent twelve month period thereafter, in each case
during which the First Fit Distribution Agreement is in effect.
On March
29, 2010, a certain Amendment No. 1 was made to the First Fit Distribution
Agreement dated June 3, 2009. The terms of Amendment No. 1 are as
follows:
The total
purchase price for the First Fit IP consists of installment payments and royalty
payments. The cash component of the purchase price of the First
Fit IP is $2,850,000 to be paid in the form of cash in the following
installments: (a) $50,000 upon delivery by Remedent to Den-Mat of a working
prototype of the First Fit crown (received); (b) $525,000 on or before March 15,
2010 (received); (c) $700,000 on June 30, 2010 ($675,000 received
subsequent to June 30, 2010); and (d) $500,000 on December 31, 2010, June
30, 2011 and December 31, 2011. In connection with the execution of the First
Fit Agreement, Den-Mat also agreed to make an advance cash payment of $75,000 to
the Company towards the purchase price (received). In addition to the
cash component, Den-Mat agreed to pay Remedent a capital payment equal to a
certain percent of Den-Mat’s net revenues generated by the sale of the First Fit
products.
Concurrently
with the execution of the First Fit Amendment, the Company and Den-Mat entered
into Amendment No. 2 to the Amended and Restated Distribution, License and
Manufacturing Agreement (“Glamsmile Amendment”) with Den-Mat pursuant to which
certain provisions of a certain Amended and Restated Distribution, License and
Manufacturing Agreement previously entered into by the Company and Den-Mat on
June 3, 2009 and subsequently amended on August 11, 2009, were
amended. The Glamsmile Amendment became effective concurrently with
the effectiveness of the First Fit Amendment on February 16, 2010 (the
“Amendment No. 2 Effective Date”). Among other things, the Glamsmile
Amendment (1) permits the Company to purchase its requirements for GlamSmile
Products from another party, other than Den-Mat, provided the Company
pays Den-Mat a royalty payment on net revenues received by the Company per
unit/tooth, (2) decreases the percentage of securities to be covered in a
warrant to purchase securities of B2C Market Subsidiary and the exercise price
of such warrant to be issued to Den-Mat in the event a B2C Market
Subsidiary is formed under the terms set forth in such agreement, (3) expands
the definition of “Excluded Market” to include Australia, Belgium, France and
United Arab Emirates, and (4) provides a consulting fee, equal to a percentage
of net revenues received by Den-Mat from the Sale of unit/teeth and trays, to
the Company for its services, support and certain additional
consideration, (5) terminates certain provisions relating to minimum requirement
obligations and rights, and (6) amends the formula for calculation of a certain
exit fee in the event of a change of control. The parties further
agreed that an advance of $25,000 against the Consulting Fees shall be paid to
Remedent upon execution of this Amendment, which amount shall be promptly
refunded to Den-Mat if this Amendment does not become binding on or before the
end of the 30 day period commencing February 16, 2010.
Financial
Instruments — Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of trade accounts
receivable.
Concentrations
of credit risk with respect to trade receivables are normally limited due to the
number of customers comprising the Company’s customer base and their dispersion
across different geographic areas. At June 30, 2010, five customers
accounted for 72% of the Company’s trade accounts receivables, and one customer
accounted for 40%. At June 30, 2009, two customers accounted for a
total of 55% of the Company’s trade accounts receivable. The Company
performs ongoing credit evaluations of its customers and normally does not
require collateral to support accounts receivable.
Purchases
— The Company has diversified its sources for product components and finished
goods and, as a result, the loss of a supplier would not have a material impact
on the Company’s operations. For the three months ended June 30, 2010
the Company had five suppliers who accounted for 26% of gross purchases. For the
three months ended June 30, 2009 the Company had five suppliers who accounted
for 28% of gross purchases.
Revenues
— For the three months ended June 30, 2010 the Company had five
customers that accounted for 47% of total revenues. For the three months ended
June 30, 2009 the Company had five customers that accounted for 64% of total
revenues.
|
6.
|
ACCOUNTS
RECEIVABLE AND ALLOWANCE FOR DOUBTFUL
ACCOUNTS
|
The
Company’s accounts receivable at June 30, 2010 and March 31, 2010 were as
follows:
|
|
|
June
30, 2010
|
|
|
March 31, 2010
|
|
|
Accounts
receivable, gross
|
|
$
|
2,042,434
|
|
|
$
|
872,776
|
|
|
Less:
allowance for doubtful accounts
|
|
|
(59,608
|
)
|
|
|
(65,845
|
)
|
|
Accounts
receivable, net
|
|
$
|
1,982,826
|
|
|
$
|
806,931
|
|
Inventories
at June 30, 2010 and March 31, 2010 are stated at the lower of cost (first-in,
first-out) or net realizable value and consisted of the following:
|
|
|
June
30, 2010
|
|
|
March 31, 2010
|
|
|
Raw
materials
|
|
$
|
51,303
|
|
|
$
|
20,641
|
|
|
Components
|
|
|
689,567
|
|
|
|
1,024,908
|
|
|
Finished
goods
|
|
|
1,129,453
|
|
|
|
1,198,478
|
|
|
|
|
|
1,870,323
|
|
|
|
2,244,027
|
|
|
Less:
reserve for obsolescence
|
|
|
(19,431
|
)
|
|
|
(82,335
|
)
|
|
Net
inventory
|
|
$
|
1,850,892
|
|
|
$
|
2,161,692
|
|
Prepaid
expenses are summarized as follows:
|
|
|
June
30, 2010
|
|
|
March 31, 2010
|
|
|
Prepaid
materials and components
|
|
$
|
708,497
|
|
|
$
|
701,035
|
|
|
Prepaid
income taxes
|
|
|
29,825
|
|
|
|
4,332
|
|
|
Prepaid
consulting
|
|
|
26,951
|
|
|
|
22,095
|
|
|
VAT
payments in excess of VAT receipts
|
|
|
96,929
|
|
|
|
98,702
|
|
|
Royalties
|
|
|
36,125
|
|
|
|
39,905
|
|
|
Prepaid
trade show expenses
|
|
|
—
|
|
|
|
10,000
|
|
|
Prepaid
rent
|
|
|
1,094
|
|
|
|
1,409
|
|
|
Other
|
|
|
38,975
|
|
|
|
43,009
|
|
|
|
|
$
|
938,396
|
|
|
$
|
920,487
|
|
|
9.
|
PROPERTY
AND EQUIPMENT
|
Property
and equipment are summarized as follows:
|
|
|
June
30, 2010
|
|
|
March 31, 2010
|
|
|
Furniture
and Fixtures
|
|
$
|
436,978
|
|
|
$
|
436,978
|
|
|
Machinery
and Equipment
|
|
|
2,616,082
|
|
|
|
2,461,659
|
|
|
Tooling
|
|
|
188,450
|
|
|
|
188,450
|
|
|
|
|
|
3,241,510
|
|
|
|
3,087,087
|
|
|
Accumulated
depreciation
|
|
|
(1,687,727
|
)
|
|
|
(1,351,368
|
)
|
|
Property
& equipment, net
|
|
$
|
1,553,783
|
|
|
$
|
1,735,719
|
|
Tooling
includes a payment made to a company called Sensable, in reference to the
development of a tailored veneer modeling solution, referred to as “GlamSmile
Design Software”.
|
10.
|
LONG
TERM INVESTMENTS AND ADVANCES
|
Innovative
Medical & Dental Solutions, LLC (“IMDS, LLC”)
Effective
July 15, 2007 the Company entered into a Limited Liability Company Merger and
Equity Reallocation Agreement (the “Participation Agreement”) through its
subsidiary, Remedent N.V. Pursuant to the terms of the Participation Agreement,
the Company acquired a 10% equity interest in IMDS, LLC in consideration for
$300,000 which was converted against IMDS receivables.
The
agreement stipulates certain exclusive worldwide rights to certain tooth
whitening technology, and the right to purchase at standard cost certain
whitening lights and accessories and to sell such lights in markets not served
by the LLC. The terms of the Participation Agreement also provide that Remedent
N.V. has the first right to purchase additional equity. Parties to the
Participation Agreement include two officers of IMDS, LLC, and an individual who
is both an officer and director of Remedent Inc., and certain unrelated
parties.
IMDS, LLC
is registered with the Secretary of the State of Florida as a limited liability
company and with the Secretary of the State of California as a foreign
corporation authorized to operate in California. IMDS, LLC is merging with White
Science World Wide, LLC, a limited liability company organized under the laws of
the State of Georgia. The merged companies are operating as a single entity as
IMDS, LLC, a Florida limited liability company.
As of
June 30, 2010 the Company had recorded a 100% allowance against its investment
in IMDS because IMDS financial information is unavailable. The
provision will be re-evaluated as soon as information becomes
available.
Soca
Networks Singapore (“Soca”)
Pursuant
to the terms of a letter of intent dated December 17, 2007, the Company has
agreed to purchase 20% of Soca for a total purchase price of $750,000. Half of
the purchase price has been advanced $375,000 to Soca as a down payment, pending
completion of the agreement terms. The balance of $375,000 was paid through the
issuance of 220,588 common shares of the Company’s common stock. The final
agreement is currently being negotiated and management expects to close the
agreement, and issue the 220,588 common shares during the fiscal year ended
March 31, 2011.
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 $37,375 of accumulated amortization for this
patent as of June 30, 2010. The Company accrues this royalty when it becomes
payable to inventory therefore no provision has been made for this obligation as
of June 30, 2010.
Universal
Applicator Patent
In
September 2004, the Company entered into an agreement with Lident N.V.
(“Lident”), a company controlled by Mr. De Vreese, the Company’s Chairman, to
obtain an option, exercisable through December 31, 2005, to license an
international patent (excluding the US) and worldwide manufacturing and
distribution rights for a potential new product which Lident had been assigned
certain rights by the inventors of the products, who are unrelated parties,
prior to Mr. De Vreese association with the Company. The patent is an Italian
patent which relates to a single use universal applicator for dental pastes,
salves, creams, powders, liquids and other substances where manual application
could be relevant. The Company has filed to have the patent approved throughout
Europe. The agreement required the Company to advance to the inventors through
Lident a fully refundable deposit of €100,000 subject to the Company’s due
diligence regarding the enforceability of the patent and marketability of the
product, which, if viable, would be assigned to the Company for additional
consideration to the inventors of €100,000 and an ongoing royalty from sales of
products related to the patent equal to 3% of net sales and, if not viable, the
deposit would be repaid in full by Lident. The consideration the Company had
agreed to pay Lident upon the exercise of the option is the same as the
consideration Lident is obligated to pay the original inventors. Consequently,
Lident would not have profited from the exercise of the option. Furthermore, at
a meeting of the Company’s Board of Directors on July 13, 2005, the Board
accepted Lident’s offer to facilitate an assignment of Lident’s intellectual
property rights to the technology to the Company in exchange for the
reimbursement of Lident’s actual costs incurred relating to the intellectual
property. Consequently, when the Company exercises the option, all future
payments, other than the reimbursement of costs would be paid directly to the
original inventors and not to Lident.
On
December 12, 2005, the Company exercised the option and the Company and the
patent holder agreed to revise the assignment agreement whereby the Company
agreed to pay €50,000 additional compensation in the form of prepaid royalties
instead of the €100,000 previously agreed, €25,000 of which was paid by the
Company in September 2005 and the remaining €25,000 is to be paid upon the
Company’s first shipment of a product covered by the patent. As of June 30,
2010 the Company has not yet received the final Product. The patent is being
amortized over five (5) years and accordingly, the Company has recorded $108,955
of accumulated amortization for this patent as of June 30, 2010.
On
October 8, 2004, the Company’s 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 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. On January 3, 2008,
an amendment was made decreasing the mixed-use line of credit to €2,050,000, to
be used by Remedent NV and/or Sylphar NV. Each line of credit carries its own
interest rates and fees as provided in the Facility and varies from the current
prevailing bank rate.
The
latest amendment to the Facility, dated June 7, 2010, amended and split the line
of credit to €1,250,000, to be used by Remedent NV and €1,000,000 to be used
Sylphar NV. Each line of credit carries its own interest rates and fees as
provided in the Facility and vary from the current prevailing bank rate of
approximately 2.9%, for draws on the credit line, to 8.4% for advances on
accounts receivable concerning Remedent N.V. and similar for Sylphar N.V.
Remedent N.V and Sylphar NV are currently only utilizing two lines of credit,
advances based on account receivables and the straight loan. As of June 30, 2010
and March 31, 2010, Remedent N.V. and Sylphar N.V. had in aggregate, $1,887,063
and $674,600 in advances outstanding, respectively, under the mixed-use line of
credit facilities.
On June
15, 2005, the Company entered into two five year capital lease agreements for
manufacturing equipment totaling €70,296 (US $85,860). On October 24, 2006, the
Company entered into another five year capital lease agreement for additional
manufacturing equipment totaling €123,367 (US $150,680). On May 15, 2008, the
Company entered into a third capital lease agreement over a three year period
for additional manufacturing equipment totaling €63,395 (US $77,431). On August
18, 2009, the Company entered into a fourth capital lease agreement over a three
year period for additional manufacturing equipment totaling € 170,756 (US
$208,561). On January 15, 2010, the Company entered into a fifth capital lease
agreement over a 5 year period for veneer manufacturing equipment totaling €
251,903 (US $307,674). On June 16, 2010, the Company entered into a sixth
capital lease agreement over a 5 year period for additional veneer manufacturing
equipment totaling € 30,248 (US $36,945).
The
leases require monthly payments of principal and interest at 7.43% of €1,172 (US
$1,431 at June 30, 2010) for the first two leases and 9.72% of €2,056 (US $2,511
at June 30, 2010) and provide for buyouts at the conclusion of the five year
term of €2,820 (US$3,444) or 4.0% of original value for the first two contracts
and €4,933 (US $6,025) or 4.0% of the original value for the second contract.
The third lease contract requires monthly payments of principal and interest at
9.40% of €1,761 (US $2,151 at June 30, 2010) and provides for buyout at the
conclusion of the three year term of €634 (US $774) or 1% of the original value
of this contract.
The
fourth lease contract requires monthly payments of principal and interest at
8.18% of €5,052 (US $6,171 at June 30, 2010) and provides for buyout at the
conclusion of the three year term of €1,728 (US $2,111) or 1% of the original
value of this contract.
The fifth
lease contract requires monthly payments of principal and interest at 8.39% of
€4,551 (US $5,559 at June 30, 2010) and provides for buyout at the
conclusion of the five year term of €5,038 (US $6,153) or 2% of the original
value of this contract.
The sixth
lease contract requires monthly payments of principal and interest at 8.39% of
€572 (US $699 at June 30, 2010) and provides for buyout at the conclusion
of the five year term of €605 (US $739) or 2% of the original value of this
contract.
The net
book value as of June 30, 2010 and March 31, 2010 of the equipment subject to
the foregoing leases are $572,323 and $641,371 respectively.
|
14.
|
DUE
TO RELATED PARTIES AND RELATED PARTY
TRANSACTIONS
|
Transactions
with related parties not disclosed elsewhere in these financial statements
consisted of the following:
Compensation:
During
the three month periods ended June 30, 2010 and 2009 respectively, the Company
incurred $185,661 and $171,460 respectively, as compensation for all directors
and officers.
Sales
Transactions:
One of
the Company’s directors owns a minority interest in a client company, IMDS Inc.
Accounts receivable at period end with this customer totaled $31,895 and $31,895
as at June 30, 2010 and March 31, 2010 respectively.
As of
June 30, 2010 the Company had recorded a 100% allowance against its investment
in IMDS because IMDS financial information is unavailable. The
provision will be re-evaluated as soon as information becomes
available
All
related party transactions involving provision of services or tangible assets
were recorded at the exchange amount, which is the value established and agreed
to by the related parties reflecting arms length consideration payable for
similar services or transfers.
Accrued
liabilities are summarized as follows:
|
|
|
June
30, 2010
|
|
|
March 31, 2010
|
|
|
Accrued
employee benefit taxes and payroll
|
|
$
|
137,913
|
|
|
$
|
182,137
|
|
|
Accrued
travel
|
|
|
9,161
|
|
|
|
31,891
|
|
|
Advances
and deposits
|
|
|
173,301
|
|
|
|
116,687
|
|
|
Commissions
|
|
|
17,743
|
|
|
|
21,597
|
|
|
Accrued
audit and tax preparation fees
|
|
|
12,787
|
|
|
|
11,152
|
|
|
Reserve
for warranty costs
|
|
|
18,321
|
|
|
|
20,238
|
|
|
Accrued
interest
|
|
|
286
|
|
|
|
168
|
|
|
Accrued
consulting fees
|
|
|
39,201
|
|
|
|
47,382
|
|
|
Other
accrued expenses
|
|
|
77,586
|
|
|
|
60,284
|
|
|
|
|
$
|
486,298
|
|
|
$
|
491,536
|
|
|
16.
|
EQUITY
COMPENSATION PLANS
|
As of
June 30, 2010, the Company had three equity compensation plans approved by its
stockholders (1) the 2001 Incentive and Non-statutory Stock Option Plan (the
“2001 Plan”), (2) the 2004 Incentive and Non-statutory Stock Option Plan (the
“2004 Plan”); and (3) the 2007 Equity Incentive Plan (the “2007 Plan”). The
Company’s stockholders approved the 2001 Plan reserving 250,000 shares of common
stock of the Company pursuant to an Information Statement on Schedule 14C filed
with the Commission on August 15, 2001. In addition, the Company’s stockholders
approved the 2004 Plan reserving 800,000 shares of common stock of the Company
pursuant to an Information Statement on Schedule 14C filed with the Commission
on May 9, 2005. Finally, the Company’s stockholders approved the 2007
Plan reserving 1,000,000 shares of common stock of the Company pursuant to a
Definitive Proxy Statement on Schedule 14A filed with the Commission on October
2, 2007.
In
addition to the equity compensation plans approved by the Company’s
stockholders, the Company has issued options and warrants to individuals
pursuant to individual compensation plans not approved by our
stockholders. These options and warrants have been issued in exchange
for services or goods received by the Company.
The
following table provides aggregate information as of June 30, 2010 with respect
to all compensation plans (including individual compensation arrangements) under
which equity securities are authorized for issuance.
A summary
of the option activity for the three month period ended June 30, 2010 pursuant
to the terms of the plans is as follows:
Exercise
Price
|
|
|
2001 Plan
|
|
|
2004 Plan
|
|
|
2007 Plan
|
|
|
Other
|
|
|
|
|
Outstanding
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Outstanding
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Outstanding
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Outstanding
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding, March 31, 2010 and June 30, 2010
|
|
|
250,000
|
|
|
|
1.20
|
|
|
|
668,166
|
|
|
|
0.89
|
|
|
|
1,000,000
|
|
|
|
1.15
|
|
|
|
350,000
|
|
|
|
.87
|
|
|
Options
exercisable, June 30, 2010
|
|
|
231,667
|
|
|
|
1.20
|
|
|
|
555,666
|
|
|
|
1.65
|
|
|
|
863,331
|
|
|
|
1.04
|
|
|
|
300,000
|
|
|
|
.70
|
|
|
Exercise
price range
|
|
$
|
0.50
- $2.39
|
|
|
|
|
|
|
$
|
0.50
- $4.00
|
|
|
|
|
|
|
$
|
0.50 - $1.75
|
|
|
|
|
|
|
$
|
.39
- 1.75
|
|
|
|
|
|
|
Weighted
average remaining life
|
|
2.5
years
|
|
|
|
|
|
|
4.7 years
|
|
|
|
|
|
|
7.8 years
|
|
|
|
|
|
|
4.7
years
|
|
|
|
|
|
A summary
of the Company’s equity compensation plans approved and not approved by
shareholders is as follows:
|
Plan Category
|
|
Number of
securities to
be
issued upon
exercise of
of
outstanding
options,
warrants
and rights
|
|
|
Weighted-average
exercise price of
outstanding
options
warrants and
rights
|
|
|
Number of
securities
remaining
available for
future
issuance
under
equity
compensation
plans
(excluding
securities
reflected
in column (a))
|
|
|
Equity
Compensation Plans approved by security holders
|
|
|
1,918,166
|
|
|
$
|
1.15
|
|
|
|
131,834
|
|
|
Equity
Compensation Plans not approved by security holders
|
|
|
820,000
|
|
|
$
|
.97
|
|
|
|
NA
|
|
|
Total
|
|
|
2,738,166
|
|
|
$
|
1.19
|
|
|
|
131,834
|
|
For the
three month period ended June 30, 2010 the Company recognized $101,450 (2009 —
$101,450) in compensation expense in the consolidated statement of
operations. No stock options were granted or cancelled/expired in the
three month period ended June 30, 2010.
|
17.
|
COMMON
STOCK WARRANTS AND OTHER OPTIONS
|
As of
June 30, 2010, the Company has warrants to purchase the Company’s common stock
outstanding that were not granted under shareholder approved equity compensation
plans as follows:
|
|
|
Outstanding
Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Warrants
and options outstanding, March 31, 2010
|
|
|
11,108,305
|
|
|
$
|
1.55
|
|
|
Cancelled
or expired
|
|
|
(247,298
|
)
|
|
|
1.20
|
|
|
Warrants
outstanding June 30, 2010
|
|
|
10,861,007
|
|
|
|
1.56
|
|
|
Warrants
exercisable June 30, 2010
|
|
|
10,861,007
|
|
|
$
|
1.56
|
|
|
Exercise
price range
|
|
$
|
1.00
to $3.00
|
|
|
|
|
|
|
Weighted
average remaining life
|
|
1.85 Years
|
|
|
|
|
|
The
Company’s only operating segment consists of dental products and oral hygiene
products sold by Remedent Inc., Remedent N.V., Sylphar N.V., GlamSmile Beijing
Dental Clinic Co. Ltd. and Remedent Asia Ltd. Since the Company only
has one segment, no further segment information is presented.
Customers
Outside of the United States
|
|
|
June
30, 2010
|
|
|
June
30, 2009
|
|
|
U.S.
sales
|
|
$
|
1,176,871
|
|
|
$
|
487,845
|
|
|
Foreign
sales
|
|
|
2,259,888
|
|
|
|
1,672,958
|
|
|
|
|
$
|
3,436,759
|
|
|
$
|
2,160,803
|
|
Real
Estate Lease
The
Company leases its 26,915 square feet office and warehouse facility in Deurle,
Belgium from an unrelated party pursuant to a nine year lease commencing
December 20, 2001 at a base rent of €7,266 per month ($8,875 per month at
June 30, 2010).
The
Company leases a smaller office facility of 2,045 square feet in Gent, Belgium
to support the sales and marketing division of our veneer business, from an
unrelated party pursuant to a nine year lease commencing September 1, 2008.
Additionally, to support and house our Research and Development Division, as of
October 15, 2009, an additional 2,290 square feet are being leased from the same
unrelated party from which we lease our sales and marketing division, at a
base rent of €4,930 per month for the total location ($6,022 per month at June
30, 2010).
Minimum
monthly lease payments for real estate, and all other leased equipment are as
follows based upon the conversion rate for the (Euro) at June 30,
2010:
|
March
31, 2011
|
|
|
413,489
|
|
|
March
31, 2012
|
|
|
259,484
|
|
|
March
31, 2013
|
|
|
185,755
|
|
|
March
31, 2014
|
|
|
154,240
|
|
|
March
31, 2015
|
|
|
72,254
|
|
|
After
five years
|
|
|
198,699
|
|
|
Total:
|
|
$
|
1,283,910
|
|
OEM
Agreement
On June
30, 2008, the Company entered into an OEM Agreement (“Agreement”) with SensAble
Technologies, Inc., a corporation under the laws of Delaware (“SensAble”)
whereby the Company will integrate SensAble products and technology into the
Company’s system. The Agreement provides the Company with the exclusive right to
distribute certain SensAble products throughout the world for a period of twelve
months from the date of the Agreement. The Company has the option and right to
extend the initial twelve month exclusivity period for another twelve months.
The term of the Agreement will be for two years and began on June 30, 2008. On
July 2009, the Company renewed the first half of the second year. The
Company is currently in negotiation with SensAble for the development of new
enhanced software.
|
20.
|
FINANCIAL
INSTRUMENTS
|
The FASB
ASC topic 820 on fair value measurement and disclosures establishes three levels
of inputs that may be used to measure fair value: quoted prices in active
markets for identical assets or liabilities (referred to as Level 1), observable
inputs other than Level 1 that are observable for the asset or liability either
directly or indirectly (referred to as Level 2), and unobservable inputs to the
valuation methodology that are significant to the measurement of fair value of
assets or liabilities (referred to as Level 3).
The
carrying values and fair values of our financial instruments are as
follows:
|
|
|
|
|
June
30, 2010
|
|
|
March 31, 2010
|
|
|
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
|
Level
|
|
value
|
|
|
value
|
|
|
value
|
|
|
value
|
|
|
Cash
|
|
1
|
|
$
|
1,196,888
|
|
|
$
|
1,196,888
|
|
|
$
|
613,466
|
|
|
$
|
613,466
|
|
|
Accounts
receivable
|
|
2
|
|
$
|
1,982,826
|
|
|
$
|
1,982,826
|
|
|
$
|
811,009
|
|
|
$
|
811,009
|
|
|
Line
of credit
|
|
2
|
|
$
|
1,887,063
|
|
|
$
|
1,887,063
|
|
|
$
|
674,600
|
|
|
$
|
674,600
|
|
|
Accounts
payable
|
|
2
|
|
$
|
1,724,827
|
|
|
$
|
1,724,287
|
|
|
$
|
1,932,683
|
|
|
$
|
1,932,683
|
|
|
Accrued
liabilities
|
|
2
|
|
$
|
486,298
|
|
|
$
|
486,298
|
|
|
$
|
1,016,220
|
|
|
$
|
1,016,220
|
|
|
Due
to related parties
|
|
2
|
|
$
|
265,857
|
|
|
$
|
265,857
|
|
|
$
|
268,484
|
|
|
$
|
268,484
|
|
|
Long
term debt
|
|
2
|
|
$
|
622,020
|
|
|
$
|
622,020
|
|
|
$
|
641,371
|
|
|
$
|
641,371
|
|
The
following method was used to estimate the fair values of our financial
instruments:
The
carrying amount approximates fair value because of the short maturity of the
instruments.
Item
2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Forward Looking
Statements
The
discussion contained herein is for the three months ended June 30, 2010 and
2009. The following discussion should be read in conjunction with the Company’s
condensed consolidated financial statements and the notes to the condensed
consolidated financial statements included elsewhere in this Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2010. In addition
to historical information, this section contains “forward-looking” statements,
including statements regarding the growth of product lines, optimism regarding
the business, expanding sales and other statements. Words such as expects,
anticipates, intends, plans, believes, sees, estimates and variations of such
words and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and
involve certain risks and uncertainties that are difficult to predict. Actual
results could vary materially from the description contained herein due to many
factors including continued market acceptance of our products. In addition,
actual results could vary materially based on changes or slower growth in the
oral care and cosmetic dentistry products market; the potential inability to
realize expected benefits and synergies; domestic and international business and
economic conditions; changes in the dental industry; unexpected difficulties in
penetrating the oral care and cosmetic dentistry products market; changes in
customer demand or ordering patterns; changes in the competitive environment
including pricing pressures or technological changes; technological advances;
shortages of manufacturing capacity; future production variables impacting
excess inventory and other risk factors. Factors that could cause or
contribute to any differences are discussed in “Risk Factors” and elsewhere in
the Company’s annual report on Form 10-K filed on July 13, 2010 with the
Securities and Exchange Commission. Except as required by applicable
law or regulation, the Company undertakes no obligation to revise or update any
forward-looking statements contained in this Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 2010. The information contained in this
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010 is
not a complete description of the Company’s business or the risks associated
with an investment in the Company’s common stock. Each reader should carefully
review and consider the various disclosures made by the Company in this
Quarterly Report on Form 10-Q and in the Company’s other filings with the
Securities and Exchange Commission.
Overview
We
specialize in the research, development, and manufacturing of oral care and
cosmetic dentistry products. We are one of the leading manufacturers
of cosmetic dentistry products in Europe. Leveraging our knowledge of
regulatory requirements regarding dental products and management’s experience in
the needs of the professional dental community, we design, develop, manufacture
and distribute our cosmetic dentistry products, including a full line of
professional dental products that are distributed in Europe, Asia and the United
States. We 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.
Result
of Operations
Comparative
detail of results as a percentage of sales, is as follows:
|
|
|
For the three months
ended June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
NET
SALES
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
|
COST
OF SALES
|
|
|
26.60
|
%
|
|
|
50.72
|
%
|
|
GROSS
PROFIT
|
|
|
73.40
|
%
|
|
|
49.28
|
%
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
1.91
|
%
|
|
|
1.23
|
%
|
|
Sales
and marketing
|
|
|
14.93
|
%
|
|
|
16.24
|
%
|
|
General
and administrative
|
|
|
33.54
|
%
|
|
|
48.26
|
%
|
|
Depreciation
and amortization
|
|
|
5.85
|
%
|
|
|
8.03
|
%
|
|
TOTAL
OPERATING EXPENSES
|
|
|
56.23
|
%
|
|
|
73.76
|
%
|
|
INCOME
(LOSS) FROM OPERATIONS
|
|
|
17.17
|
%
|
|
|
(24.48
|
)%
|
|
Other
income (expense)
|
|
|
(0.47
|
)%
|
|
|
(1.91
|
)%
|
|
INCOME
(LOSS) BEFORE TAXES AND NON-CONTROLLING INTEREST
|
|
|
16.7
|
%
|
|
|
(22.57
|
)%
|
|
Income
taxes
|
|
|
(0.18
|
)%
|
|
|
-
|
%
|
|
INCOME
(LOSS) BEFORE NON-CONTROLLING INTEREST
|
|
|
16.52
|
%
|
|
|
(22.57
|
)%
|
|
Non-controlling
interest
|
|
|
7.44
|
%
|
|
|
2.86
|
%
|
|
NET
INCOME (LOSS)
|
|
|
9.08
|
%
|
|
|
(25.43
|
)%
|
Net
Sales
We experienced a sales increase for the
three months ended June 30, 2010 of $1,275,956, or 59.1%, to $3,436,759 as
compared to $2,160,803 for the three months ended June 30, 2009. The
increase in sales was mainly due to increased sales in the Asian GlamSmile
facilities in Beijing and Hong Kong. Our sales also increased as a
result of the launch of new, higher margin, OTC products.
Cost
of Sales
Our cost
of sales decreased for the three months ended June 30, 2010 by $181,670, or
16.6%, to $914,337 as compared to $1,096,007 for the three months ended June 30,
2009. Cost of sales, as a percentage of net sales, has decreased to 26.6% in the
quarter ended June 30, 2010 as opposed to 50.7% in the quarter ended June 30,
2009. Cost of sales as a percentage of sales has decreased
because of reduced production costs of our veneer product.
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
$1,457,626 or 136.9%, to $2,522,422 for the three month period ended
June 30, 2010 as compared to $1,064,796 for the three month period ended
June 30, 2009. Our gross profit as a percentage of sales increased to 73.4% in
the three months ended June 30, 2010 as compared to 49.3% for the three months
ended June 30, 2009. The increase in gross profit is the result of our
sales in our Asian facilities where we sell direct instead of indirect, thereby
creating higher margins. Also, the launch of new higher margin OTC products had
a positive impact upon our gross profit.
Operating
Expenses
Research and Development
. Our
research and development expenses increased by $38,947 to $65,545, or 146.4%,
for the three months ended June 30, 2010 as compared to $26,598 for the three
months ended June 30, 2009. Our current levels of research and
development expenditures are reflective of an average year. Research
and Development expenses have increased primarily because of our work with
respect to the new milling machine and the ‘First-Fit Concept’.
Sales and marketing costs
. Our
sales and marketing costs increased by $162,041 or 46.2%, to $512,976 for the
three months ended June 30, 2010 as compared to $350,935 for the three months
ended June 30, 2010. The increase is largely due to our new Asian GlamSmile
Sales Facilities.
General and administrative
costs
. Our general and administrative costs for the three months
ended June 30, 2010 and 2009 were $1,152,712 and $1,042,764, respectively,
representing an increase of $109,948 or 10.5%. The Company’s general and
administrative costs have increased as a result of our Asian GlamSmile
facilities.
Depreciation and amortization
.
Our depreciation and amortization increased $27,758 or 16%, to $201,202 for the
three months ended June 30, 2010 as compared to $173,444 for the three months
ended June 30, 2009. The increase is largely because of amortization
and depreciation associated with our Asian GlamSmile Production Lab
in Beijing.
Other
income (expense). Our other income (expense)
was
$(16,031) for the three months ended June 30, 2010 as compared to $41,351 for
the three months ended June 30, 2009, a decrease of $57,382. Interest expense
has increased primarily because of increased utilization of our available bank
credit line, offset by interest revenue earned on outstanding bank
balances.
Internal
and External Sources of Liquidity
As of
June 30, 2010, we had current assets of $5,969,002 compared to $4,502,576 at
March 31, 2010. This increase of $1,466,426 was primarily due to an increase in
accounts receivable of $1,175,895 and an increase in cash of $583,422, offset by
a decrease in inventories of $310,800. Current liabilities at June 30, 2010 were
$4,527,829 as compared to $3,582,792 at March 31, 2010. The increase
in current liabilities of $945,037 was primarily as a result of the increased in
use of our line of credit by $1,212,463, offset by a decrease in our accounts
payable of $207,856 and a decrease of the current portion or our long term debt
by $51,705.
The
increase in our use of our line of credit is approximately equal to the
decrease in our accounts payable and the increase in our accounts
receivable. At June 30, 2010 we believe we have approximately
$861,000 available under our line of credit.
As of June 30, 2010, we had cash and
cash equivalents of $1,196,888. We believe that these balances, along with
our line of credit, will provide sufficient financing in order to
fund our working and other capital requirements over the course of the next
twelve months. We will continue to review our expected cash
requirements, make all efforts to collect any aged receivables, and take
appropriate cost reduction measures to ensure that we have sufficient
working capital to fund our operations. In the event additional needs for cash
arise, we may seek to raise additional funds from a combination of
sources including issuance of debt or equity securities. Additional financing
may not be available on terms favorable to us, or at all. Any additional
financing activity could be dilutive to our current stockholders. If
adequate funds are not available or are not available on acceptable terms,
our ability to take advantage of unanticipated opportunities or
respond to competitive pressures could be limited.
At this time, we do not expect to
purchase or sell any property or equipment over the next 12 months. We do not
currently expect a significant change in the number of its employees over
the next 12 months.
Cash
and Cash equivalents
Our balance sheet at June 30, 2010
reflects cash and cash equivalents of $1,196,888 as compared to $613,466 as of
March 31, 2010, an increase of $583,422. The increase of cash and cash
equivalents is primarily as a result of a decrease in our inventories of
$310,800 and an increase in the use of our line of credit, as described
above.
Operations
Net cash used by operations was
$297,487 for the three months ended June 30, 2010 as compared to net cash used
by operations of $997,190 for the three months ended June 30, 2009. The decrease
in net cash used by operations for the three months ended June 30, 2010 as
compared to the three months ended June 30, 2009 is primarily as a result of an
increase of $428,995 in the amount of cash realized from the sale of inventories
and a decrease in cash outflows of $597,836 for the payment of accrued
liabilities, offset by an increase of $317,804 in the amount of cash outflows
for the payment of accounts payable.
Investing
activities
Net cash used in investing activities
totaled $118,695 for the three months ended June 30, 2010 as compared to net
cash used in investing activities of $68,144 for the three months ended June 30,
2009. Cash used in the three months ended June 30, 2010 was mainly for
additional equipment for the production of veneers.
Cash used in investing activities in
the three months ended June 30, 2009 was mainly for machinery and related
software to support our increasing number of veneer designers.
Financing
activities
Net cash provided by financing
activities totaled $1,154,898 for the three months ended June 30, 2010, as
compared to $797,556 for the three months ended June 30, 2009. Net
cash provided by financing activities in the three month period ended June 30,
2010 was higher than in the three months ended June 30, 2009 because of
increased use of our credit line.
During the three months ended June 30,
2010 and June 30, 2009, we recognized an increase/(decrease) in cash and cash
equivalents of $(155,294) and $60,801, respectively, from the effect of exchange
rates between the Euro and the US Dollar.
Off-Balance
Sheet Arrangements
At June 30, 2010, we did not have any
transactions, obligations or relationships that could be considered off-balance
sheet arrangements.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
Not
Applicable.
Item
4T. Controls and Procedures
Disclosure
Controls and Procedures
We maintain disclosure controls and
procedures designed to ensure that information required to be disclosed in our
reports filed under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), is recorded, processed, summarized, and reported within the
required time periods and that such information is accumulated and communicated
to our management, including our Chief Executive Officer and our Chief Financial
Officer, as appropriate, to allow for timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and
procedures, management recognizes that any controls and procedures, no matter
how well designed and operated, can only provide reasonable assurance of
achieving the desired control objective, and management is required to exercise
its judgment in evaluating the cost-benefit relationship of possible controls
and procedures
.
Management conducted an evaluation,
under the supervision and with the participation of the Chief Executive Officer
and the Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as of June 30,
2010. Based on this evaluation, the Chief Executive Officer and the
Chief Financial Officer have concluded that our disclosure controls and
procedures were effective as of June 30, 2010.
Changes
in Internal Control Over Financial Reporting
There have been no material changes in
our internal controls over financial reporting identified in
connection with the evaluation of disclosure controls and procedures discussed
above that occurred during the quarter ended June 30, 2010 or subsequent to that
date that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART
II - OTHER INFORMATION
Item
1. Legal Proceedings
To the best knowledge of
management, there are no material legal proceedings pending against the
Company.
Item
1A. Risk Factors
Not
Applicable.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
None.
Item
3. Defaults Upon Senior Securities
None.
Item
4. [Removed and Reserved]
Item
5. Other Information
None.
Item
6. Exhibits
EXHIBIT
INDEX
|
Exhibit No
|
|
Description
|
|
|
|
|
|
31.1
|
|
Certifications
of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley
Act.*
|
|
|
|
|
|
31.2
|
|
Certifications
of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley
Act.*
|
|
|
|
|
|
32.1
|
|
Certifications
of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley
Act.*
|
|
|
|
|
|
32.2
|
|
Certifications
of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley
Act.*
|
* Filed
herewith.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934 the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
|
REMEDENT,
INC.
|
|
|
|
|
Date: August
16, 2010
|
By:
|
/S/
Guy De Vreese
|
|
|
|
Name: Guy
De Vreese
|
|
|
|
Title: Chief
Executive Officer
(Principal
Executive Officer)
|
|
|
|
|
Date: August
16, 2010
|
By:
|
/s/
Stephen Ross
|
|
|
|
Name: Stephen
Ross
|
|
|
|
Title: Chief
Financial Officer
(Principal
Accounting Officer)
|
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