The accompanying notes are an integral part
of these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
1.
|
DESCRIPTION OF THE COMPANY
AND BASIS OF PRESENTATION
|
The Company is a manufacturer
and distributor of cosmetic dentistry products, including a full line of professional dental tooth whitening products which are
distributed in Europe, Asia and the United States. The Company manufactures many of its products in Ghent, Belgium as well as outsourced
manufacturing in its facility in Beijing, China. The Company distributes its products using both its own internal sales force
and through the use of third party distributors.
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’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 the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein.
These financial statements of
the Company are prepared using accounting principles generally accepted in the United States of America applicable to a going concern,
which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Despite the net profit
for the accounting years ending March 31, 2017 and March 31, 2016, the accumulated losses of the past affect the financial situation
of the Company. The continuation of the Company as a going concern is dependent upon the Company’s ability to continue to
generate profitable operations. As of December 31, 2017 the Company had a working capital deficit of $246,423, and an accumulated
deficit of $19,805,434. Additional funding may be required in order to support the Company’s operations and the execution
of its business plan.
There can be no assurance that
the Company will be successful in raising the required capital or that it will ultimately attain a successful level of operations.
These risks, among others, are also discussed in ITEM 1A – Risk Factors in the Company’s annual report on Form 10-K
filed on June 29, 2017 with the SEC.
The Company has conducted a
subsequent events review through the date the financial statements were issued, and has concluded that there were no subsequent
events requiring adjustments or additional disclosures to the Company's financial statements at December 31, 2017.
|
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
|
The accounting policies of the
Company, as applied in the interim consolidated financial statements presented herein are substantially the same as presented in
the Company’s Form 10-K for the year ended March 31, 2017, except as may be indicated below:
The accompanying consolidated
financial statements include the accounts of: Remedent N.V. (incorporated in Belgium) located in Ghent, Belgium, Remedent Professional,
Inc. and Remedent Professional Holdings, Inc. (both incorporated in California and inactive), Glamtech-USA, Inc. (a Delaware corporation
acquired effective August 24, 2008), Remedent N.V.’s 50 % owned subsidiary, Biotech Dental Benelux N.V., a Belgium private
company located in Ghent, Remedent N.V.’s 51% owned subsidiary, GlamSmile Deutschland GmbH, a German private company located
in Munich (effective March 31, 2014 this subsidiary is inactive) and Remedent N.V.’s 80 % owned subsidiary, GlamSmile Rome,
an Italian private company located in Rome (effective March 31, 2014 this subsidiary is inactive).
Remedent N.V. owns 21.51 % of
Glamsmile Dental Technology Ltd., a Cayman Islands company (“Glamsmile Dental”). The subsidiaries of Glamsmile Dental
include: Glamsmile (Asia) Limited, a company organized and existing under the laws of Hong Kong, Beijing Glamsmile Technology Development
Ltd., a 100% owned subsidiary or GlamSmile Asia, its 80% owned subsidiary Beijing Glamsmile Trading Co., Ltd. and its 98% owned
subsidiary Beijing Glamsmile Dental Clinic Co., Ltd., including its 100% owned Shanghai Glamsmile Dental Clinic Co., Ltd., its
100% owned Guangzhou Dental Clinic Co., Ltd. and its 50% owned Whenzhou GlamSmile Dental Clinic Ltd., which are accounted for using
the equity method after January 31, 2012 (see Note 3 – Long-term Investment).
Remedent, Inc. is a holding
company with headquarters in Ghent, Belgium. Remedent Professional, Inc. and Remedent Professional Holdings, Inc. have been dormant
since inception.
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 thethree and nine months ended December 31, 2017, are not necessarily indicative of the results that may
be expected for the year ended March 31, 2017. Accordingly, your attention is directed to footnote disclosures found in the
Annual Report on Form 10-K for the year ending March 31, 2017, and particularly to Note 2, which includes a summary of significant
accounting policies.
Warranties
The Company typically warrants
its products against defects in material and workmanship for a period of 24 months from shipment.
A tabular reconciliation of
the Company’s aggregate product warranty liability for the reporting periods is as follows:
|
|
|
Nine months
ended
December 31,
2017
|
|
|
Year ended
March 31,
2017
|
|
|
Product warranty liability:
|
|
|
|
|
|
|
|
|
|
Opening balance
|
|
$
|
5,333
|
|
|
|
$5, 695
|
|
|
Accruals for product warranties issued in the period
|
|
|
690
|
|
|
|
—
|
|
|
Adjustments to liabilities for pre-existing warranties
|
|
|
—
|
|
|
|
(362
|
)
|
|
Ending liability
|
|
$
|
6,023
|
|
|
$
|
5,333
|
|
Based upon historical trends
and warranties provided by the Company’s suppliers and sub-contractors, the Company has made a provision for warranty costs
of $6,023 and $5,333 as of December 31, 2017 and March 31, 2017, respectively.
Computation of Earnings (Loss)
per Share
Basic net income (loss) per
common share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares
of common stock outstanding during the period. Net income (loss) per common share attributable to common stockholders assuming
dilution is computed by dividing net income by the weighted average number of shares of common stock outstanding plus the number
of additional common shares that would have been outstanding if all dilutive potential common shares had been issued.
On April 1, 2009, the Company
adopted changes issued by the FASB to the calculation of earnings per share. These changes state that unvested share-based payment
awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities
and shall be included in the computation of earnings per share pursuant to the two-class method for all periods presented. The
adoption of this change had no impact on the Company’s basic or diluted net loss per share because the Company has never
issued any share-based awards that contain non-forfeitable rights.
At each of December 31, 2017
and March 31, 2017, the Company had 19,995,969, shares of common stock issued and outstanding. At December 31, 2017
and March 31, 2017, the Company did not have any warrants outstanding but had 787,500 and 1,357,500 options outstanding respectively.
Further, pursuant to ASC 260-10-50-1(c),
if a fully diluted share calculation was computed for the three and nine month periods ended December 31, 2017 and December 31,
2016 respectively, it would have excluded all options respectively since the Company’s average share trading price during
the three month and nine month periods ended December 31, 2017 and December 31, 2016 were less than the exercise price of all options.
Conversion of Foreign Currencies
The reporting and functional
currency for the consolidated financial statements of the Company is the U.S. dollar. The home currency for the Company’s
European subsidiaries, Remedent N.V., Biotech Dental Benelux N.V.,GlamSmile Rome and GlamSmile Deutschland GmbH, is the Euro, for
Glamsmile Asia Ltd., and its subsidiaries, the Hong Kong dollar and the Chinese Renmimbi (“RMB”) for Mainland China.
The assets and liabilities of companies whose functional currency is other that the U.S. dollar are included in the consolidation
by translating the assets and liabilities at the exchange rates applicable at the end of the reporting period. The statements of
income of such companies are translated at the average exchange rates during the applicable period. Translation gains or losses
are accumulated as a separate component of stockholders’ equity.
Comprehensive Income (Loss)
The Company’s only component
of other comprehensive income is the accumulated foreign currency translation consisting of gains/(losses) of $25,285 and $(66,458)
for the nine months ended December 31, 2017 and 2016, respectively. These amounts have been recorded as a separate component of
stockholders’ equity (deficit).
New Accounting Pronouncements
Recent Accounting Pronouncements
Not Yet Adopted
In May 2014, the FASB issued
ASU 2014-09, “
Revenue from Contracts with Customers
” (ASC 606). The standard, as subsequently amended, is intended
to clarify the principles for recognizing revenue for U.S. GAAP by creating a new Topic 606, “Revenue from Contracts with
Customers”. This guidance supersedes the revenue recognition requirements in ASC 605, “Revenue Recognition”,
and supersedes some cost guidance included in Subtopic 605-35, “Revenue Recognition—Construction-Type and Production-Type
Contracts”. The core principle of the accounting standard is that an entity recognizes revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled
in exchange for those good or services. The amendments should be applied by either (1) retrospectively to each prior reporting
period presented; or (2) retrospectively with the cumulative effect of initially applying this ASU recognized at the date of initial
application. The new guidance is effective for fiscal years beginning after December 15, 2017, which, for the Company, means the
fiscal year beginning April 1, 2018. The Company is currently evaluating the new guidance to determine the impact it will have
on its consolidated financial statements.
In February 2016, the FASB issued
ASU No. 2016-02, “
Leases
” (Topic 842). The FASB issued this update to increase transparency and comparability
among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about
leasing arrangements. The updated guidance is effective for annual periods beginning after December 15, 2018, including interim
periods within those fiscal years. Early adoption of the standard is permitted. We are currently evaluating the impact of the adoption
of this guidance on our consolidated financial statements. However, we do not expect the adoption will have a material increase
in the assets and liabilities of our consolidated balance sheet.
The Company has reviewed other
recent accounting pronouncements and concluded that they are either not applicable to the business, or that no material effect
is expected on the consolidated financial statements as a result of future adoption.
|
|
3
.
|
LONG-TERM INVESTMENTS
|
Acquisition
Effective January 1, 2010 the
Company acquired 50.98% of the issued and outstanding shares of Glamsmile Asia Ltd. (“Glamsmile Asia” or “Glamsmile”),
a private Hong Kong company, with subsidiaries in Hong Kong and Mainland China, in exchange for the following consideration:
|
|
1.
|
325,000 Euro (US$466,725). As of March 31, 2011 the full amount was paid.
|
|
|
2.
|
250,000 shares of common stock to be issued during the fiscal year ended March 31, 2011 ($97,500 was recorded as an obligation to issue shares as at March 31, 2010). The parties have agreed that the shares will be issued during fiscal year ended March 31, 2015.
|
|
|
3.
|
100,000 options on closing (issued);
|
|
|
4.
|
100,000 options per opened store at closing (issued);
|
|
|
5.
|
100,000 options for each additional store opened before the end of 2011 at the price of the opening date of the store;
|
|
|
6.
|
Assumption of Glamsmile’s January 1, 2010 deficit of $73,302; and
|
|
|
7.
|
Repayment of the founding shareholder’s original advances in the amount of $196,599. The balance of $196,599, recorded as due to related parties at March 31, 2010, is unsecured, non-interest bearing and has no specific terms of repayment other than it will be paid out of revenues from Glamsmile, as working capital allows. During the year ended March 31, 2011 a total of $101,245 was paid to the founding shareholder, leaving a balance due of $95,354 on June 27, 2011. As at March 31, 2012 the full amount was paid.
|
All options
reside under the Company’s option plan and are five year options.
Also pursuant to the agreement, the Company
granted irrevocable right to Glamsmile Asia to use the Glamsmile trademark in Greater China.
The Company acquired a 50.98% interest
in GlamSmile Asia Ltd. (“GlamSmile Asia”) in order to obtain a platform in the Chinese Market to expand and introduce
our GlamSmile Asia concept into the Chinese Market. In order to sell into the Chinese Market, an approval by Chinese Authorities
is required, in the form of licenses. As GlamSmile Asia was already the owner of such licenses prior to the acquisition, this was
an important advantage. We obtained control of GlamSmile Asia through the acquisition of the 50.98% interest and the appointment
of our CEO as a Board member of GlamSmile Asia.
On January 30, 2014, the Company has sold
a total of 2,500,000 ordinary shares of its investment in GlamSmile Dental Technology Ltd for $3,000,000 and recognized a gain
on the sale in the amount of $1,582,597. As of March 31, 2014 the Company has received $1,850,000 and has recorded the balance
of $1,150,000 as an amount receivable.
Effective March 31, 2014 the Company has
retained a 21.51% ownership in GlamSmile Asia Ltd.
Deconsolidation
On January 28, 2012, the Company entered
into a Preference A Shares and Preference A-1 Shares Purchase Agreement (“Share Purchase Agreement”) with Glamsmile
Dental Technology Ltd., a Cayman Islands company and a subsidiary of the Company (“Glamsmile Dental”), Glamsmile (Asia)
Limited, a company organized and existing under the laws of Hong Kong and a substantially owned subsidiary of Glamsmile Dental,
Beijing Glamsmile Technology Development Ltd., Beijing Glamsmile Trading Co., Ltd., Beijing Glamsmile Dental Clinic Co., Ltd.,
and Shanghai Glamsmile Dental Clinic Co., Ltd., Gallant Network Limited, a shareholder of Glamsmile Dental (“Gallant”),
and IDG-Accel China Growth Fund III L.P. (“IDG Growth”), IDG-Accel China III Investors L.P.(“IDG Investors”)
and Crown Link Group Limited (“Crown”)(“IDG Growth, IDG Investors and Crown collectively referred to as the “Investors”),
pursuant to which the Investors agreed to (i) purchase from the Company an aggregate of 2,857,143 shares of Preference A-1 Shares
of Glamsmile Dental, which represents all of the issued and outstanding Preference A-1 Shares of Glamsmile Dental, for an aggregate
purchase price of $2,000,000, and (ii) purchase from Glamsmile Dental an aggregate of 5,000,000 shares of Preference A Shares for
an aggregate purchase price of $5,000,000.
Under the terms of the Share Purchase Agreement,
the Company agreed (a) to indemnify the Investors and their respective affiliates for losses arising out of a breach, or inaccuracy
or misrepresentation in any representation or warranty made by the Company or a breach or violation of a covenant or agreement
made by the Company for up to $1,500,000, and (b) to transfer 500,000 shares of Glamsmile Dental owned by the Company to the Investors
in the event of breach of certain covenants by the Company. In connection with the Share Purchase Agreement, the Company also agreed
to enter into an Investor’s Rights Agreement, Right of First Refusal and Co-Sale Agreement, and Voting Agreement with the
parties.
In addition, in connection with the contemplated
transactions in the Share Purchase Agreement on January 20, 2012, the Company entered into a Distribution, License and Manufacturing
Agreement with Glamsmile Dental pursuant to which the Company appointed Glamsmile Dental as the exclusive distributor and licensee
of Glamsmile Veneer Products bearing the “Glamsmile” name and mark in the B2C Market in the People’s Republic
of China (including Hong Kong and Macau) and Republic of China (Taiwan) and granted related manufacturing rights and licenses in
exchange for the original issuance of 2,857,143 shares of Preference A-1 Shares of Glamsmile Dental and $250,000 (the receipt of
which was acknowledged as an offset to payment of certain invoices of Glamsmile (Asia) Limited).
On February 10, 2012, the sale of the Preference
A-1 Shares and the Preference A Shares was completed. As a result of the closing, the equity ownership of Glamsmile Dental, on
an as converted basis, is as follows: 31.4% by the Investors, 39.2 % by Gallant, and 29.4% by the Company. Mr. De Vreese, our chairman,
will remain as a director of Glamsmile Dental along with Mr. David Lok, who is the Chief Executive Officer and director of Glamsmile
Dental and principal of Gallant. The Investors have a right to appoint one director of Glamsmile Dental, and accordingly the Board
of Directors of Glamsmile Dental will consist of Mr. De Vreese, Mr. Lok and a director appointed by the Investors.
In conjunction with the transaction and
resulting deconsolidation of Glamsmile Dental, the Company recorded a gain of $1,470,776, calculated as follows:
|
Consideration received
|
|
$
|
2,000,000
|
|
|
Fair value of 29.4% interest
|
|
|
2,055,884
|
|
|
Carrying value of non-controlling interest
|
|
|
1,117,938
|
|
|
Less: carrying value of former subsidiary’s net assets
|
|
|
(2,002,329
|
)
|
|
Goodwill
|
|
|
(699,635
|
)
|
|
Investment China & Hong Kong
|
|
|
(1,082
|
)
|
|
Rescission agreement Excelsior (Note 11)
|
|
|
(1,000,000
|
)
|
|
|
|
$
|
1,470,776
|
|
For the nine month periods
ended December 31, 2017 and December 31, 2016 the Company recorded equity income of $250,455 and $344,430 respectively as “Other
income” for its portion of the net income recorded by GlamSmile Dental Technology Ltd.
The following tables represent the summary
financial information of GlamSmile Asia as derived from its financial statements and prepared under US GAAP:
|
Operating data:
|
|
Nine months ended
December 31, 2017
|
|
|
Nine months ended
December 31, 2016
|
|
|
Revenues
|
|
$
|
5,393,457
|
|
|
$
|
5,561,925
|
|
|
Gross profit
|
|
|
4,620,453
|
|
|
|
5,055,836
|
|
|
Income (loss) from operations
|
|
|
1,327,759
|
|
|
|
3,973,737
|
|
|
Net income
|
|
$
|
1,164,370
|
|
|
$
|
1,601,254
|
|
CONDOR TECHNOLOGIES NV (formerly Medical
Franchises & Investments (“MFI”)
Effective March 31, 2013, the Company acquired
6.12 % of the issued and outstanding shares of Medical Franchises & Investments N.V., a Belgium corporation ("MFI NV")
in exchange for a cash prepayment of $314,778 that was made during the fiscal year ended March 31, 2012. The Company’s
investment in 70,334 shares of MFI NV has been recorded at the fair value of $787,339 which is the quoted market price of approximately
USD $11.19 (€8.70) per share. Because the investment is being recognized as an available-for-sale investment, an unrecognized
profit of $399,188 (2016-loss of $27,724) has been recorded in accumulated other comprehensive income due to fair value per share
at March 31, 2017, being $17.07 (€16,00) per share. Future unrealized gains and losses on the investment in MFI will also
be recognized in other comprehensive income until realized.
Per ASC-320-10-25-1, investments in debt
and equity securities that have readily determinable fair values and are not classified as trading or held-to-maturity securities,
are classified as available-for-sale securities.
MFI NV has been founded to market an advance
in dental technology which has the potential to replace the process of making mechanical impressions of teeth and bite structures
with a digital/optical scan. During November 2016, the name of the Company MFI NV was changed to Condor Technologies NV.
Financial Instruments — Financial
instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade accounts receivable.
Concentrations of credit risk with respect
to trade receivables are normally limited due to the number of customers comprising the Company’s customer base and their
dispersion across different geographic areas. At December 31, 2017, five customers accounted for 75.45% of the Company’s
trade accounts receivables, and two customers accounted for 62.66%. At December 31, 2016, five customers accounted for 78.51%
of the Company’s trade accounts receivables, and two customers accounted for 60.10%. The Company performs ongoing
credit evaluations of its customers and normally does not require collateral to support accounts receivable.
Purchases — The Company has diversified
its sources for product components and finished goods and, as a result, the loss of a supplier would not have a material impact
on the Company’s operations. For the nine months ended December 31, 2017 the Company had five suppliers who accounted
for 57.49% of accounts payable. For the nine months ended December 31, 2016 the Company had five suppliers who accounted for 68.55%
of accounts payable.
Revenues — For the nine
months ended December 31, 2017 the Company had five customers that accounted for 54.67% of total revenues. Two of the five customers
accounted for 41.24% of total revenues. For the nine months ended December 31, 2016 the Company had five customers that accounted
for 63.59% of total revenues. Two of the five customers accounted for 52.94% of total revenues.
|
|
5.
|
ACCOUNTS RECEIVABLE
AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
|
The Company’s
accounts receivable at period end were as follows:
|
|
|
December 31, 2017
|
|
|
March 31, 2017
|
|
|
Accounts receivable, gross
|
|
$
|
1,287,898
|
|
|
$
|
1,107,572
|
|
|
Less: allowance for doubtful accounts
|
|
|
(185,566
|
)
|
|
|
(164,321
|
)
|
|
Accounts receivable, net
|
|
$
|
1,102,332
|
|
|
$
|
943,251
|
|
Inventories at period end are
stated at the lower of cost (first-in, first-out) or net realizable value and consisted of the following:
|
|
|
December 31, 2017
|
|
|
March 31, 2017
|
|
|
Raw materials
|
|
$
|
18,746
|
|
|
$
|
12,254
|
|
|
Components
|
|
|
131,352
|
|
|
|
132,741
|
|
|
Finished goods
|
|
|
619,752
|
|
|
|
544,813
|
|
|
|
|
|
769,850
|
|
|
|
689,808
|
|
|
Less: reserve for obsolescence
|
|
|
(644,756
|
)
|
|
|
(579,404
|
)
|
|
Net inventory
|
|
$
|
125,094
|
|
|
$
|
110,404
|
|
Prepaid expenses are
summarized as follows:
|
|
|
December 31, 2017
|
|
|
March 31, 2017
|
|
|
Prepaid materials and components
|
|
$
|
343,747
|
|
|
$
|
13,023
|
|
|
VAT payments in excess of VAT receipts
|
|
|
1,694
|
|
|
|
44,842
|
|
|
Prepaid consulting
|
|
|
948
|
|
|
|
15,354
|
|
|
Prepaid rent
|
|
|
4,739
|
|
|
|
3,266
|
|
|
Other
|
|
|
6,972
|
|
|
|
7,654
|
|
|
|
|
$
|
358,100
|
|
|
$
|
84,139
|
|
|
|
8.
|
PROPERTY AND EQUIPMENT
|
Property and equipment
are summarized as follows:
|
|
|
December 31, 2017
|
|
|
March 31, 2017
|
|
|
Furniture and Fixtures
|
|
$
|
476,936
|
|
|
$
|
472,530
|
|
|
Machinery and Equipment
|
|
|
2,104,720
|
|
|
|
2,104,720
|
|
|
|
|
|
2,581,656
|
|
|
|
2,577,250
|
|
|
Accumulated depreciation
|
|
|
(2,383,521
|
)
|
|
|
(2,302,893
|
)
|
|
Property & equipment, net
|
|
$
|
198,135
|
|
|
$
|
274,357
|
|
Secured Debt Agreement
On June 3, 2011, the Company
obtained a loan in the principal amount of $1,000,000 (the “Loan”) from an unrelated private company, Excelsior Medical
(HK) (“EM”). In connection with the Loan, the Company issued a promissory note, with a simple interest rate of 5% per
annum, secured by certain assets of the Company (the “Note”). The maturity date of the Loan is June 3, 2014. Interest
of $50,000 per annum is payable in cash on an annual basis.
Effective as of January 11,
2012, the Company entered into a Rescission Agreement with EM and Asia Best Healthcare Co., Ltd. Under the Rescission Agreement,
the Company agreed to repay a total of $1,000,000 received under the Distribution Agreement, plus a simple interest rate of 5%,
beginning on June 30, 2012, according to the following payment schedule: (i) $250,000 to be paid no later than June 30, 2012, (ii)
$250,000 plus interest on June 30, 2012, (iii) $250,000 plus interest on December 31, 2012, and (iv) $250,000 plus interest on
June 30, 2013. The Company also agreed to secure such obligations owed to EM with certain collateral of the Company. During the
period ended December 31, 2012 a partial payment of $20,000 in interest has been made.
Final settlement agreements
were re-negotiated with EM and Asia Best Healthcare Co, Ltd. during January 2017. The Company agreed to pay a total amount of $500,000
to EM as final settlement and simultaneously agreed to pay a total amount of $500,000 to Asia Best Healthcare co., Ltd as final
settlement of the loan agreement. Both payments were executed on March 6, 2017 as final settlement.
|
|
10.
|
DUE TO RELATED PARTIES
AND RELATED PARTY TRANSACTIONS
|
Transactions with
related parties not disclosed elsewhere in these financial statements consisted of the following:
Compensation:
During the nine month periods
ended December 31, 2017 and 2016 respectively, the Company incurred $165,500 and $129,096 respectively, as compensation for all
directors and officers.
All related party transactions
involving provision of services or tangible assets were recorded at the exchange amount, which is the value established and agreed
to by the related parties and reflects arms’ length consideration payable for similar services or transfers.
Accrued liabilities
are summarized as follows:
|
|
|
December 31, 2017
|
|
|
March 31, 2017
|
|
|
Accrued employee benefit taxes and payroll
|
|
$
|
133,580
|
|
|
$
|
126,767
|
|
|
Accrued travel
|
|
|
6,023
|
|
|
|
5,333
|
|
|
Accrued audit and tax preparation fees
|
|
|
14,335
|
|
|
|
38,960
|
|
|
Accrued commission
|
|
|
29,770
|
|
|
|
—
|
|
|
Reserve for warranty costs
|
|
|
6,023
|
|
|
|
5,333
|
|
|
Accrued consulting fees
|
|
|
128,276
|
|
|
|
120,000
|
|
|
Tax reserve
|
|
|
175
|
|
|
|
—
|
|
|
VAT to be paid
|
|
|
16,822
|
|
|
|
5,009
|
|
|
Other accrued expenses
|
|
|
8,420
|
|
|
|
139,848
|
|
|
|
|
$
|
343,424
|
|
|
$
|
441,250
|
|
|
|
12.
|
EQUITY COMPENSATION
PLANS
|
As of December 31, 2017, the
Company had two equity compensation plans approved by its stockholders (1) the 2004 Incentive and Non-statutory Stock Option Plan
(the “2004 Plan”); and (2) the 2007 Equity Incentive Plan (the “2007 Plan”). The Company approved the 2004
Plan reserving 800,000 shares of common stock of the Company pursuant to an Information Statement on Schedule 14C filed with the
Commission on May 9, 2005. Finally, the Company’s stockholders approved the 2007 Plan reserving 1,000,000 shares
of common stock of the Company pursuant to a Definitive Proxy Statement on Schedule 14A filed with the Commission on October 2,
2007.
In addition to the equity compensation
plans approved by the Company’s stockholders, the Company has issued options and warrants to individuals pursuant to individual
compensation plans not approved by our stockholders. These options and warrants have been issued in exchange for services
or goods received by the Company.
The following table provides
aggregate information as of December 31, 2017 with respect to all compensation plans (including individual compensation arrangements)
under which equity securities are authorized for issuance.
|
|
|
2004 Plan
|
|
|
2007 Plan
|
|
|
|
|
Outstanding
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Outstanding
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding and exercisable March 31, 2017
|
|
|
357,500
|
|
|
$
|
0.96
|
|
|
|
1,000,000
|
|
|
$
|
1.21
|
|
|
Options expired
|
|
|
—
|
|
|
|
|
|
|
|
(570,000
|
)
|
|
|
|
|
|
Options outstanding and exercisable December 31 , 2017
|
|
|
357,500
|
|
|
$
|
0.50
|
|
|
|
430,000
|
|
|
$
|
0.50
|
|
|
Exercise price range
|
|
$
|
0.50
|
|
|
|
|
|
|
$
|
0.50
|
|
|
|
|
|
|
Weighted average remaining life
|
|
|
1.22 years
|
|
|
|
|
|
|
|
1.22 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
|
|
|
787,000
|
|
|
$
|
0.50
|
|
|
|
1,175,000
|
|
For the nine month periods ended
December 31, 2017 and December 31, 2016 the Company recognized $Nil and $Nil in stock based compensation expense in the consolidated
statement of operations. No stock options were granted or cancelled/expired in the nine month periods ended December
31, 2017 and December 31, 2016.
The Company’s only operating segment consists
of dental products and oral hygiene products sold by Remedent Inc., Condor North America LLC., Remedent N.V., and Biotech Dental
Benelux N.V. Our operations are primarily in Europe and Asia and 82.5% of our sales for the nine months ended December 31, 2017
and 100% of our sales for the nine months ended December 31, 2016 were generated from customers outside of the United States.
Real Estate Lease:
The Company leases an office facility of 5,187 square
feet in Ghent, Belgium from an unrelated party pursuant to a nine year lease commencing September 1, 2008 at a base rent of
€5,712 per month for the total location ($6,880 per month at December 31, 2017).
Secondly, the Company leases an office facility of
635 square feet in Brussels, Belgium from an unrelated party pursuant to a nine year lease commencing July 1, 2012 at a base rent
of €969 per month for the total location ($1,167 per month at December 31, 2017).
Real Estate Lease and All Other Leased Equipment:
Minimum monthly lease payments for real estate, and
all other leased equipment are as follows based upon the conversion rate for the (Euro) at December 31, 2017:
|
March 31, 2018
|
|
$
|
30,816
|
|
|
March 31, 2019
|
|
|
123,264
|
|
|
March 31, 2020
|
|
|
123,264
|
|
|
March 31, 2021
|
|
|
100,306
|
|
|
Balance
|
|
|
9,310
|
|
|
Total:
|
|
$
|
386,960
|
|
|
|
15.
|
FINANCIAL INSTRUMENTS
|
The FASB ASC topic 820 on fair value measurement
and disclosures establishes three levels of inputs that may be used to measure fair value: quoted prices in active markets for
identical assets or liabilities (referred to as Level 1), observable inputs other than Level 1 that are observable for the asset
or liability either directly or indirectly (referred to as Level 2), and unobservable inputs to the valuation methodology that
are significant to the measurement of fair value of assets or liabilities (referred to as Level 3).
The carrying values and fair values of our financial instruments
are as follows:
|
|
|
|
|
|
December 31, 2017
|
|
|
March 31, 2017
|
|
|
|
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
|
Level
|
|
|
Value
|
|
|
Value
|
|
|
value
|
|
|
value
|
|
|
Cash
|
|
|
1
|
|
|
$
|
59,299
|
|
|
$
|
59,299
|
|
|
$
|
147,106
|
|
|
$
|
147,106
|
|
|
Accounts receivable
|
|
|
2
|
|
|
$
|
1,102,332
|
|
|
$
|
1,102,332
|
|
|
$
|
943,251
|
|
|
$
|
943,251
|
|
|
Long Term investment and advance - GlamSmile Dental Technology Asia
|
|
|
2
|
|
|
$
|
2,220,700
|
|
|
$
|
2,220,700
|
|
|
$
|
1,970,245
|
|
|
$
|
1,970,245
|
|
|
Long term investments and advances Condor
|
|
|
1
|
|
|
$
|
1,200,292
|
|
|
$
|
1,200,292
|
|
|
$
|
1,200,292
|
|
|
$
|
1,200,292
|
|
|
Deferred revenue
|
|
|
2
|
|
|
$
|
94,893
|
|
|
$
|
94,893
|
|
|
$
|
72,235
|
|
|
$
|
72,235
|
|
|
Accounts payable
|
|
|
2
|
|
|
$
|
1,452,931
|
|
|
$
|
1,452,931
|
|
|
$
|
1,038,686
|
|
|
$
|
1,038,686
|
|
|
Accrued liabilities
|
|
|
2
|
|
|
$
|
343,424
|
|
|
$
|
343,424
|
|
|
$
|
441,250
|
|
|
$
|
441,250
|
|
The following method was used to estimate the fair values of
our financial instruments:
The carrying amount of level 1 and level 2 financial instruments
approximates fair value because of the short maturity of the instruments.
Financial assets are considered Level 3
when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least
one significant model assumption or input is unobservable. Level 3 financial assets also include certain investment securities
for which there is limited market activity such that the determination of fair value requires significant judgment or estimation.
The Company reviews the fair value hierarchy
classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels
for certain securities within the fair value hierarchy. The Company’s policy is to recognize transfers into and out of levels
within the fair value hierarchy at the end of the fiscal quarter in which the actual event or change in circumstances that caused
the transfer occurs. There were no significant transfers between Level 1, Level 2, or Level 3 during the six month period ended
December 31, 2017. When a determination is made to classify an asset or liability within Level 3, the determination is based upon
the significance of the unobservable inputs to the overall fair value measurement. The following table provides a reconciliation
of the beginning and ending balances of the item measured at fair value on a recurring basis in the table above that used significant
unobservable inputs (Level 3):
|
|
|
Nine month period
ended
December 31,
2017
|
|
|
Long term investments and advances:
|
|
|
|
|
|
Beginning balance
|
|
$
|
1,970,245
|
|
|
Gains (losses) included in net loss
|
|
|
250,455
|
|
|
Transfers in (out of level 3)
|
|
|
—
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
2,220,700
|
|
