U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE
AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Remedent, Inc.
(Name of small business issuer in its charter)
Nevada 3843 86-0837251
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
|
Xavier de Cocklaan 42, 9831 Deurle, Belgium
011-329-321-70-80
(Address and telephone number of principal executive offices)
Xavier de Cocklaan 42, 9831 Deurle, Belgium
(Address of principal place of business)
Copies to:
Approximate date of proposed sale to the public:
From time to time after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
=============================== =================== ======================= ======================= ================
Title of each class of Amount of shares Proposed maximum Proposed maximum Amount of
offering price per aggregate offering registration
securities to be registered to be Registered share price fee
------------------------------- ------------------- ----------------------- ----------------------- ----------------
Common Stock 2,767,959 $1.87(1) $5,176,083.30 $609.23(1)
------------------------------- ------------------- ----------------------- ----------------------- ----------------
Common Stock underlying 3,272,092(2) $1.87((1)) $6,118,812.00 $720.18(1)
warrants
------------------------------- ------------------- ----------------------- ----------------------- ----------------
Common Stock 50,001(2) $3.83(3) $191,503.83 $22.54 (3)
underlying warrants
------------------------------- ------------------- ----------------------- ----------------------- ----------------
Total 6,090,052 $11,486,399.13 $1,351.95
=============================== =================== ======================= ======================= ================
|
(1) Calculated in accordance with Rule 457(c) of the Securities Act of 1933, as amended ("Securities Act"). Estimated for the sole purpose of calculating the registration fee and based upon the average of the bid and ask price per share of our common stock on August 1, 2005, as reported on the Over-The-Counter Bulletin Board. The registration fee was paid with the original submission of the Form SB-2 on August 4, 2005.
(2) Represents the number of shares of common stock offered for resale following the exercise of warrants.
(3) Calculated in accordance with Rule 457(c) of the Securities Act of 1933, as amended ("Securities Act"). Estimated for the sole purpose of calculating the registration fee and based upon the average of the bid and ask price per share of our common stock on October 19, 2005, as reported on the Over-The-Counter Bulletin Board.
Remedent, Inc. hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until it shall file a
further amendment that specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act or until the registration statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to Section
8(a), may determine.
SUBJECT TO COMPLETION, DATED ____________, 2005
PROSPECTUS
6,090,052 Shares
This Prospectus relates to the sale of 6,090,052 shares of common stock, $.001 par value, by the Selling Stockholders listed under "Selling Stockholders" on page 41. This Prospectus also covers the sale of 3,322,093 shares of our common stock by the Selling Stockholders upon the exercise of outstanding warrants. We will receive gross proceeds of $5,677,132 if all of the warrants are exercised for cash by the Selling Stockholders. We will not receive any proceeds from the resale of any common stock by the Selling Stockholders.
Our common stock trades on the Over-The-Counter Bulletin Board, under the symbol "REMI.OB." On October 19, 2005, the last reported sale price for our common stock was $3.75. There is no public market for the warrants.
The information in this Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission becomes effective. This Prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such state.
The date of this Prospectus is _____________, 2005.
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY................................................................................................1
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS...................................................................4
RISK FACTORS......................................................................................................4
Risks Relating to Our Business.................................................................................4
Risks Relating To Our Common Stock............................................................................12
USE OF PROCEEDS..................................................................................................12
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS........................................................12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................14
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.......................................................................14
DESCRIPTION OF BUSINESS..........................................................................................23
DESCRIPTION OF PROPERTY..........................................................................................31
LEGAL PROCEEDINGS................................................................................................31
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.....................................................31
EXECUTIVE COMPENSATION...........................................................................................33
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................................................35
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................................................................38
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.............................41
SELLING STOCKHOLDERS.............................................................................................41
PLAN OF DISTRIBUTION.............................................................................................44
DESCRIPTION OF SECURITIES........................................................................................46
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES.....................47
LEGAL MATTERS....................................................................................................47
EXPERTS..........................................................................................................48
TRANSFER AGENT AND REGISTRAR.....................................................................................48
WHERE YOU CAN FIND MORE INFORMATION..............................................................................48
FINANCIAL STATEMENTS...............................................................................................
PART II INFORMATION NOT REQUIRED IN PROSPECTUS................................................................II-1
INDEMNIFICATION OF DIRECTORS AND OFFICERS......................................................................II-1
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION....................................................................II-1
RECENT SALES OF UNREGISTERED SECURITIES........................................................................II-2
UNDERTAKINGS...................................................................................................II-5
|
You should rely only on the information contained in this Prospectus. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information provided by this Prospectus is accurate as of any date other than the date on the front cover page of this Prospectus.
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed information and the financial statements appearing elsewhere in this Prospectus. This Prospectus contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus.
Our Business
We are a leading provider of cosmetic dentistry products, including a full line of professional dental and retail "Over-The-Counter" tooth whitening products in Europe. We manufacture many of our products in our facility in Deurle, Belgium. We distribute our products ourselves and through the use of third party distributors. For the last three fiscal years, substantially all of our revenue has been generated by our Belgian subsidiary, Remedent N.V. Although we have always had effective "control" over our subsidiary, we have owned only twenty two percent (22%) of our subsidiary until June 3, 2005, at which time we acquired the remaining seventy eight percent (78%) of our subsidiary through the issuance of 7,715,703 post-split shares of our common stock, in the aggregate, to Robin List, our Chief Executive Officer, and Lausha, N.V., a company controlled by Guy De Vreese, our Chairman.
Our initial product was the RemeCure curing light offered to professional dentists in Europe. However, after just three years, we have broadened our product line to include a full line of professional dental and retail "Over-The-Counter" tooth whitening products.
Our principal executive offices are located at Xavier de Cocklaan 42, 9831 Deurle, Belgium. Our telephone number is 011-32-9-321-7080. Our website is at http://www.remedent.be.
Offering Summary
Common Stock outstanding before the offering....................................12,857,645
Common Stock offered by the Selling Stockholders
not underlying the Warrants (the "Offered Common Stock")........................2,767,959
Common Stock offered by the Selling Stockholders
after the exercise of all the Warrants..........................................6,090,052
Common Stock outstanding after the offering
assuming no Warrants are exercised and all Offered Common
Stock is sold...................................................................15,625,604
Common Stock outstanding after the offering assuming
all warrants are exercised and all Offered Common Stock
is sold.........................................................................18,947,697
Use of Proceeds.................................................................We will not receive any proceeds
from the sale of common stock by the
Selling Stockholders. Proceeds we
may receive from the exercise of
warrants will be used for working
capital.
Over-The-Counter Bulletin Board Symbol..........................................REMI.OB
|
Summary of Financial Information
The following table sets forth certain summary financial data. The summarized financial data for the year end March 31, 2005 and March 31, 2004 have been derived from our audited consolidated financial statements, and the summarized financial data for the three month periods ended June 30, 2005 and June 30, 2004 have been derived from our unaudited consolidated financial statements, which are included elsewhere in this Prospectus.
Consolidated Statements of Operations
Data
For the years ended For the three month period ended
June 30,
March 31 March 31, June 30, 2004
2005 2004 2005 (Unaudited)
(Audited) (Restated) (Unaudited) (Restated)
Net sales $ 7,072,300 $ 5,234,855 $ 1,378,308 $ 1,756,641
Gross profit 4,089,985 2,820,935 $747,623 $945,792
Income (loss) from operations 887,763 718,589 $ (972,467) $312,177
Minority interest in Remedent N.V. (587,273) (591,318) $ - $ (238,738)
Net income (loss) $ (103,428) $ 16,149 $(1,012,388) $ 51,382
Income (loss) per share
Basic $ (0.05) $ 0.01 $ (0.32) $ (0.03)
Fully diluted $ (0.05) $ 0.01 $ (0.32) $ (0.02)
Weighted average shares outstanding
Basic 2,047,470 1,963,927 3,164,856 1,978,958
Fully diluted 2,047,470 2,448,856 3,164,856 2,067,708
|
Consolidated Balance Sheet Data March 31, 2005 June 30, 2005
(Audited) (Unaudited)
Cash and cash equivalents $ 40,442 $ 23,433
Total assets $ 2,712,615 $ 2,495,844
Total current liabilities $ 1,807,935 $ 1,665,659
Minority interest in Remedent N.V. $ 1,178,590 -
Total stockholders' equity (deficit) $ ( 273,910) $ 757,974
|
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains statements that constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. The words "expect," "estimate," "anticipate," "predict," "believe," and similar expressions and variations thereof are intended to identify forward-looking statements. Such statements appear in a number of places in this Prospectus and include statements regarding our intent, belief or current expectations regarding our strategies, plans and objectives, our product release schedules, our ability to design, develop, manufacture and market products, our intentions with respect to strategic acquisitions, the ability of our products to achieve or maintain commercial acceptance and our ability to obtain financing for our obligations. Any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those projected in this Prospectus, for the reasons, among others, described within the various sections of this Prospectus, specifically the section entitled "Risk Factors" on page 4. You should read this Prospectus carefully, and should not place undue reliance on any forward-looking statements, which speak only as of the date of this Prospectus. We undertake no obligation to release publicly any updated information about forward-looking statements to reflect events or circumstances occurring after the date of this Prospectus or to reflect the occurrence of unanticipated events.
The risks described below are the ones we believe are most important for you to consider, these risks are not the only ones that we face. If events anticipated by any of the following risks actually occur, our business, operating results or financial condition could suffer and the trading price of our common stock could decline.
RISK FACTORS
Investment in our common stock involves risk. You should carefully consider the risks we describe below before deciding to invest. The market price of our common stock could decline due to any of these risks, in which case you could lose all or part of your investment. In assessing these risks, you should also refer to the other information included in this Prospectus, including our consolidated financial statements and the accompanying notes. You should pay particular attention to the fact that we are a holding company with substantial operations in Belgium and are subject to legal and regulatory environments that in many respects differ from that of the United States. Our business, financial condition or results of operations could be affected materially and adversely by any of the risks discussed below and any others not foreseen. This discussion contains forward-looking statements.
Risks Relating To Our Business
We have a history of losses and we could suffer losses in the future.
With the exception of a small profit of $16,149 on revenue of $5,234,855 for the fiscal year ended March 31, 2004, we have incurred substantial losses. Our losses were $1,963,806 on revenue of $733,853 for the fiscal year ended March 31, 2002; $1,006,374 on revenue of $1,969,144 for the fiscal year ended March 31, 2003; and $103,428 on revenues of $7,072,300 for the fiscal year ended March 31, 2005.
Although we have experienced substantial growth in our revenues since 2002, we cannot assure you that we will attain sustainable profitability on a quarterly or annual basis in the future. We expect to continue to incur increasing cost of revenues, research and development expenses, sales and marketing and general and administrative expenses commensurate with our growth in revenue. In order to achieve and sustain profitability, we will need to generate and sustain increased revenues.
Our quarterly sales and operating results may fluctuate in future periods and we may fail to meet expectations, which may cause the price of our common stock to decline.
Our quarterly sales and operating results have fluctuated and are likely to continue to vary from quarter to quarter due to a number of factors, many of which are not within our control. Factors that might cause quarterly fluctuations in our sales and operating results include, but are not limited by the following:
o variation in demand for our products, including variation due to seasonality;
o our ability to research, develop, introduce, market and gain market acceptance of new products and product enhancements in a timely manner;
o our ability to control costs;
o the size, timing, rescheduling or cancellation of orders from distributors;
o the introduction of new products by competitors;
o long sales cycles and fluctuations in sales cycles;
o the availability and reliability of components used to manufacture our products;
o changes in our pricing policies or those of our suppliers and competitors, as well as increased price competition in general;
o the risks and uncertainties associated with our international business;
o costs associated with any future acquisitions of technologies and businesses;
o developments concerning the protection of our proprietary rights; and
o general global economic, political, international conflicts, and acts of terrorism.
During the quarter ending June 30, 2005, we recorded a non-cash restructuring expense of approximately $764,151 relating to the issuance of shares and warrants to our financial advisor for services rendered in connection with our corporate restructuring and an additional non-cash interest expense of $100,000 in connection with the conversion of a convertible note that will have a substantial adverse affect on our net income for the period.
The government extensively regulates our products and failure to comply with applicable regulations could result in fines, suspensions, seizure actions, product recalls, injunctions and criminal prosecutions.
Before most medical devices can be marketed in the United States, they are
required by the United States Food and Drug Administration ("FDA") to secure
either clearance of a pre-market notification pursuant to Section 510(k) of the
Federal Food, Drug and Cosmetic Act ("FDC Act") (a "510(k) Clearance") or
approval of a pre-market approval application ("PMA"). Obtaining approval of a
PMA application can take several years. In contrast, the process of obtaining
510(k) Clearance generally requires a submission of substantially less data and
generally involves a shorter review period. As discussed more specifically under
the subsection title "Regulatory Issue," most Class I and Class II devices enter
the market via the 510(k) Clearance procedure, while new Class III devices
ordinarily enter the market via the more rigorous PMA procedure. Approval of a
PMA application for a new medical device usually requires, among other things,
extensive clinical data on the safety and effectiveness of the device. PMA
applications may take years to be approved after they are filed. In addition to
requiring clearance or approval for new medical devices, FDA rules also require
a new 510(k) filing and review period, prior to marketing a changed or modified
version of an existing legally marketed device, if such changes or modifications
could significantly affect the safety or effectiveness of that device. FDA
prohibits the advertisement or promotion of any approved or cleared device for
uses other than those that are stated in the device's approved or cleared
application.
We have received approval from the FDA to market our RemeCure dental curing lamp in the United States. We submitted our application for approval on FDA Form 510(k) on October 30, 2002 and received FDA approval for this product on January 9, 2003. None of our other products have FDA approval for marketing in the United States. Although we intend to file applications for FDA approval for the following products: MetaTrayTM and iWhiteTM this fiscal year, if such approval is required, there is no assurance that our applications will be approved by the FDA in such an event. If we are unable to obtain FDA approval, if required, we will be unable to sell our products in the United States. However, we believe that our products: MetaTrayTM and iWhiteTM will not require a 510(k) submission because the products fall within an exemption under the 510(k) regulation.
International sales of medical devices are also subject to the regulatory requirements of each country. In Europe, the regulations of the European Union require that a device have a CE Mark, a mark that indicates conformance with European Union laws and regulations before it can be sold in that market. The regulatory international review process varies from country to country. We rely upon our distributors and sales representatives in the foreign countries in which we market our products to ensure we comply with the regulatory laws of such countries. Failure to comply with the laws of such country could have a material adverse effect on our operations and, at the very least, could prevent us from continuing to sell products in such countries.
We may not have effective internal controls if we fail to remedy any deficiencies we may identify in our system of internal controls.
In preparation for the annual report of management regarding our evaluation of our internal controls that is required to be included in our annual report for the year ended March 31, 2007 by Section 404 of the Sarbanes-Oxley Act of 2002, we will need to assess the adequacy of our internal control, remediate any weaknesses that may be identified, validate that controls are functioning as documented and implement a continuous reporting and improvement process for internal controls. We may discover deficiencies that require us to improve our procedures, processes and systems in order to ensure that our internal controls are adequate and effective and that we are in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. If the deficiencies are not adequately addressed, or if we are unable to complete all of our testing and any remediation in time for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the SEC rules under it, we would be unable to conclude that our internal controls over financial reporting are designed and operating effectively, which could adversely affect our investor confidence in our internal controls over financial reporting.
The loss of or a substantial reduction in, or change in the size or timing of, orders from distributors could harm our business.
Our international sales are principally comprised of sales through independent distributors, although we sell products in certain European countries through direct sales representatives. A significant amount of our sales may consist of sales through distributors. The loss of a substantial number of our distributors or a substantial reduction in, cancellation of or change in the size or timing of orders from our current distributors could harm our business, financial condition and results of operations. The loss of a key distributor could affect our operating results due to the potential length of time that might be required to locate and qualify a new distributor or to retain direct sales representatives for the territory.
A control group of customers account for a significant portion of our sales and since we do not have long term purchase commitments from our customers our revenues will be adversely affected by any loss of such customers.
We have one controlled group of customers whose sales have exceeded 30% of our total revenues for the last two fiscal years. This number represents the collective sales for the group Omega Pharma, which includes Omega Pharma NV (Belgium), Chefaro UK, Ltd, Chefaro Espanola SA, Chefaro Nederland BV, Chefaro Portuguesa and Deutsche Chefaro Pharma GmbH. Our customers generally do not provide us with firm, long-term volume purchase commitments. We make significant decisions based on our estimates of customer requirements. No assurances can be given that our distributors will continue to purchase our products or will perform as expected and we may experience lengthy delays and incur substantial costs if we are required to replace distributors in the future. If we lose any of our significant customers, our revenues and results of operations could be adversely affected.
We do not have long term commitments from our suppliers and manufacturers.
We may experience shortages of supplies and inventory because we do not have long-term agreements with our suppliers or manufacturers. The success of our Company is dependent on our ability to provide our customers with our products. Although we manufacture most of our products, we are dependent on our suppliers for component parts which are necessary for our manufacturing operations. In addition, certain of our present and future products and product components are (or will be) manufactured by third party manufacturers. Since we have no long-term contracts or other contractual assurances with these manufacturers for continued supply, pricing or access to component parts, no assurance can be given that such manufacturers will continue to supply us with adequate quantities of products at acceptable levels of quality and price. While we believe that we have good relationships with our suppliers and our manufacturers, if we are unable to extend or secure manufacturing services or to obtain component parts or finished products from one or more manufacturers on a timely basis and on acceptable terms, our results of operations could be adversely affected.
We face intense competition, and many of our competitors have substantially greater resources than we do.
We operate in a highly competitive environment. In addition, the competition in the market for teeth whitening products and services may intensify in the future as we enter into the United States market. There are numerous well-established companies and smaller entrepreneurial companies based in the United States with significant resources who are developing and marketing products and services that will compete with our products. In addition, many of our current and potential competitors have greater financial, technical, operational and marketing resources. These resources may make it difficult for us to compete with them in the development and marketing of our products, which could harm our business.
Our success will depend on our ability to update our technology to remain competitive.
The dental device and supply industry is subject to technological change. As technological changes occur in the marketplace, we may have to modify our products in order to become or remain competitive. While we are continuing our research and development in new products in efforts to strengthen our competitive advantage, no assurances can be given that we will successfully implement technological improvements to our products on a timely basis, or at all. If we fail to anticipate or respond in a cost-effective and timely manner to government requirements, market trends or customer demands, or if there are any significant delays in product development or introduction, our revenues and profit margins may decline which could adversely affect our cash flows, liquidity and operating results.
We depend on market acceptance of the products of our customers. If our products do not gain market acceptance, our ability to compete will be adversely affected.
We launched our MetaTrayTM products in August 2005 and are working on launching two new products: iWhiteTM and RemeSmileTM. Our success will depend in large part on our ability to successfully market our line of products and our ability to receive all regulatory approvals. Although we intend to differentiate our products from our competitors by targeting different channels of distribution, no assurances can be given that we will be able to successfully market our products or achieve consumer acceptance. Moreover, failure to successfully develop, manufacture and commercialize our products on a timely and cost-effective basis will have a material adverse effect on our ability to compete in our targeted market segments. In addition, medical and dental insurance policies generally do not cover teeth whitening procedures, including our products, which may have an adverse impact upon the market acceptance of our products.
Failure to meet customers' expectations or deliver expected performance of our products could result in losses and negative publicity, which will harm our business.
If our products fail to perform in the manner expected by our customers, then our revenues may be delayed or lost due to adverse customer reaction, negative publicity about us and our products, which could adversely affect our ability to attract or retain customers. Furthermore, disappointed customers may initiate claims for substantial damages against us, regardless of our responsibility for such failure.
If product liability lawsuits are successfully brought against us, we may incur substantial liabilities and may be required to limit commercialization of our products.
Although we have not been a party to any product liability lawsuits and are currently not aware of any anticipated product liability claims with respect to our products, the nature of our business exposes us to product liability lawsuits arising out of the commercialization of our products. In the future, an individual may bring a liability claim against us if one of our products causes, or merely appears to have caused, an injury. If we cannot successfully defend ourselves against the product liability claim, we may incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
o decreased demand for our products;
o injury to our reputation;
o costs of related litigation;
o substantial monetary awards to customers;
o product recalls;
o loss of revenue; and
o the inability to commercialize our products.
We may have difficulty managing our growth.
We have been experiencing significant growth in the scope of our operations and the number of our employees. This growth has placed significant demands on our management as well as our financial and operational resources. In order to achieve our business objectives, we anticipate that we will need to continue to grow. If this growth occurs, it will continue to place additional significant demands on our management and our financial and operational resources, and will require that we continue to develop and improve our operational, financial and
other internal controls. Further, to date our business has been primarily in Europe and were we to launch sales and distribution in the United States, we would further increase the challenges involved in implementing appropriate operational and financial systems, expanding manufacturing capacity and scaling up production, expanding our sales and marketing infrastructure and capabilities and providing adequate training and supervision to maintain high quality standards. The main challenge associated with our growth has been, and we believe will continue to be, our ability to recruit and integrate skilled sales, manufacturing and management personnel. Our inability to scale our business appropriately or otherwise adapt to growth would cause our business, financial condition and results of operations to suffer.
It may be difficult to enforce a United States judgment against us, our officers and directors and some of the experts named in this Prospectus, or to assert United States securities laws claims in Belgium and to serve process on substantially all our of our directors and officers and these experts.
A majority of our directors and our executive officers and some of the experts named in this Prospectus are nonresidents of the United States. A substantial portion of our assets and all or a substantial portion of the assets of these officers and directors and experts are located outside of the United States. As a result, it may be difficult to effect service of process within the United States with respect to matters arising under the United States securities laws or to enforce, in the United States courts, judgments predicated upon civil liability under the United States securities laws. It also may be difficult to enforce in Belgium, in original actions or in actions for enforcement of judgment of United States courts, civil liabilities predicated upon United States securities laws.
If we are unable to protect our intellectual property rights or our intellectual property rights are inadequate, our competitive position could be harmed or we could be required to incur expenses to enforce our rights.
Our future success will depend, in part, on our ability to obtain and maintain patent protection for our products and technology, to preserve our trade secrets and to operate without infringing the intellectual property of others. In part, we rely on patents to establish and maintain proprietary rights in our technology and products. While we hold licenses to a number of issued patents and have other patent applications pending on our products and technology, we cannot assure you that any additional patents will be issued, that the scope of any patent protection will be effective in helping us address our competition or that any of our patents will be held valid if subsequently challenged. Other companies also may independently develop similar products, duplicate our products or design products that circumvent our patents.
In addition, if our intellectual property rights are inadequate, we may be exposed to third-party infringement claims against us. Although we have not been a party to any infringement claims and are currently not aware of any anticipated infringement claim, we cannot predict whether third parties will assert claims of infringement against us, or whether any future claims will prevent us from operating our business as planned. If we are forced to defend against third-party infringement claims, whether they are with or without merit or are determined in our favor, we could face expensive and time-consuming litigation. If an infringement claim is determined against us, we may be required to pay monetary damages or ongoing royalties. In addition, if a third party successfully asserts an infringement claim against us and we are unable to develop suitable non-infringing alternatives or license the infringed or similar intellectual property on reasonable terms on a timely basis, then our business could suffer.
If we are unable to meet customer demand or comply with quality regulations, our sales will suffer.
We manufacture many of our products at our Deurle, Belgium production facilities. In order to achieve our business objectives, we will need to significantly expand our manufacturing capabilities to produce the systems and accessories necessary to meet demand. We may encounter difficulties in scaling-up production of our products, including problems involving production capacity and yields, quality control and assurance, component supply and shortages of qualified personnel. In addition, our manufacturing facilities are subject to periodic inspections by foreign regulatory agencies. Our success will depend in part upon our ability to manufacture our products in compliance with regulatory requirements. Our business will suffer if we do not succeed in manufacturing our products on a timely basis and with acceptable manufacturing costs while at the same time maintaining good quality control and complying with applicable regulatory requirements.
We are dependent on Guy De Vreese, our Chairman, and/or Robin List, our Chief Executive Officer, and any loss of such key personnel could result in the loss of a significant portion of our business.
Our success is highly dependent upon the key business relations and expertise of Guy De Vreese, our Chairman, and/or Robin List, our Chief Executive Officer. Unlike larger companies, we rely heavily on a small number of officers to conduct a large portion of our business. The loss of service of our Chairman and/or Chief Executive Officer along with the loss of their numerous contacts and relationships in the industry would have a material adverse effect on our business. We do not have employment agreements with Guy De Vreese or Robin List.
Substantially all of our assets are secured under a credit facility with Fortis Bank, a bank located outside of the United States, and in the event of default under the credit facility we may lose all of our assets.
On October 8, 2004, Remedent, N.V. obtained a new line of credit facility with Fortis Bank, a Belgian bank, which consisted of a (Euro) 800,000 (US $1,037,200) credit line based on the eligible accounts receivable and a (Euro) 250,000 (US $324,125) general line of credit. This line of credit facility was secured by the assets of the Company. As of May 3, 2005, the Company and the bank agreed to increase the general line of credit to (Euro) 500,000 ($648,250) and decrease the credit line based on the eligible accounts receivable to (Euro ) 550,000 ($713,075). As of March 31, 2005, Remedent N.V. had no advances outstanding under this line of credit facility. Although we do not anticipate defaulting on the credit facility, upon the occurrence of an event of default, Fortis Bank will have a right to foreclose on all of the assets of the Company.
We may not be able to secure additional financing to meet our future capital needs.
We anticipate needing significant capital to introduce new products, further develop our existing products, increase awareness of our brand names and expand our operating and management infrastructure as we grow sales in Europe, Asia and South America and potentially launch sales and distribution activities in the United States. We may use capital more rapidly than currently anticipated. Additionally, we may incur higher operating expenses and generate lower revenue than currently expected, and we may be required to depend on external financing to satisfy our operating and capital needs. We may be unable to secure additional debt or equity financing on terms acceptable to us, or at all, at the time when we need such funding. If we do raise funds by issuing additional equity or convertible debt securities, the ownership percentages of existing stockholders would be reduced, and the securities that we issue may have rights, preferences or privileges senior to those of the holders of our common stock or may be issued at a discount to the market price of our common stock which would result in dilution to our existing stockholders. If we raise
additional funds by issuing debt, we may be subject to debt covenants, such as the debt covenants under our secured credit facility, which could place limitations on our operations including our ability to declare and pay dividends. Our inability to raise additional funds on a timely basis would make it difficult for us to achieve our business objectives and would have a negative impact on our business, financial condition and results of operations.
Our results of operations may be adversely impacted by currency fluctuations.
We currently have operations in Belgium and distributors in Europe, the Middle East, South America and Asia. A significant portion of our revenue is in currencies other than United States dollars, primarily in Euros. Because our financial statements are reported in United States dollars, fluctuations in Euro s against the United States dollar may cause us to recognize foreign currency transaction gains and losses, which may be material to our operations and impact our reported financial condition and results of operations.
Substantially all of our operations are located outside of the United States, substantially all of our sales are generated outside of the United States and substantially all of our assets are located outside of the United States, subjecting us to risks associated with international operations.
Our operations are in Belgium and 99% of our sales for the fiscal year end March 31, 2005 were generated from customers outside of the United States. The international nature of our business subjects us to the laws and regulations of the jurisdictions in which we operate and sell our products. In addition, we are subject to risks inherent in international business activities, including:
o difficulties in collecting accounts receivable and longer collection periods,
o changes in overseas economic conditions,
o fluctuations in currency exchange rates,
o potentially weaker intellectual property protections,
o changing and conflicting local laws and other regulatory requirements,
o political and economic instability,
o war, acts of terrorism or other hostilities,
o potentially adverse tax consequences,
o difficulties in staffing and managing foreign operations, or
o tariffs or other trade regulations and restrictions.
If we cannot build and maintain strong brand loyalty our business may suffer. We believe that the importance of brand recognition will increase as more companies produce competing products. Development and awareness of our brands will depend largely on our ability to advertise and market successfully. If we are unsuccessful, our brands may not be able to gain widespread acceptance among consumers. Our failure to develop our brands sufficiently would have a material adverse effect on our business, results of operations and financial condition.
Risks Relating To Our Common Stock
There is a limited public trading market for our common stock.
Our Common Stock presently trades on the Over-The-Counter Bulletin Board under the symbol "REMI.OB." We cannot assure you, however, that such market will continue or that you will be able to liquidate your shares acquired in this offering at the price you paid or otherwise. We also cannot assure you that any other market will be established in the future. The price of our common stock may be highly volatile and your liquidity may be adversely affected in the future.
The ownership of our stock is highly concentrated in our management.
As of October 17, 2005, our present directors and executive officers, and their respective affiliates beneficially owned approximately 65% of our outstanding common stock, including underlying options that were exercisable or which would become exercisable within 60 days of October 17, 2005. As a result of their ownership, our directors and executive officers and their respective affiliates collectively are able to significantly influence all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying or preventing a change in control.
We have a substantial number of shares authorized but not yet issued.
Our Articles of Incorporation authorize the issuance of up to 50,000,000 shares of common stock and 10,000,000 shares of preferred stock. Our Board of Directors has the authority to issue additional shares of common stock and preferred stock and to issue options and warrants to purchase shares of our common stock and preferred stock without stockholder approval. Future issuance of common stock and preferred stock could be at values substantially below current market prices and therefore could represent further substantial dilution to our stockholders. In addition, the Board could issue large blocks of voting stock to fend off unwanted tender offers or hostile takeovers without further shareholder approval.
We have historically not paid dividends and do not intend to pay dividends.
We have historically not paid dividends to our stockholders and management does not anticipate paying any cash dividends on our common stock to our stockholders for the foreseeable future. The Company intends to retain future earnings, if any, for use in the operation and expansion of our business.
USE OF PROCEEDS
We will not receive any proceeds from the sale of common shares by the Selling Stockholders. We will receive gross proceeds of approximately $5,677,132 if all of the outstanding warrants are exercised by the Selling Stockholders for cash. Any proceeds from the cash exercise of warrants will be used for working capital.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
Our common stock is traded on the Over-The-Counter Bulletin Board under the symbol "REMI.OB." As of October 13, 2005, the number of stockholders of record was approximately 216, not including beneficial owners whose shares are held by banks, brokers and other nominees. As of October 17, 2005, we had a total of 3,848,091 shares of our common stock underlying outstanding options and warrants.
The following table shows the range of the high and low bid for our common stock as reported by the Over-The-Counter Bulletin Board for the time periods indicated giving effect to a 20 for 1 reverse stock split effective June 3, 2005.
High Low
Quarter ended June 30, 2003 $0.60 $0.60
Quarter ended September 30, 2003 $2.40 $2.40
Quarter ended December 31, 2003 $1.60 $1.60
Quarter ended March 31, 2004 $2.00 $2.00
Quarter ended June 30, 2004 $2.40 $1.40
Quarter ended September 30, 2004 $2.40 $1.06
Quarter ended December 31, 2004 $1.40 $0.60
Quarter ended March 31, 2005 $2.20 $0.84
Quarter ended June 30, 2005 $3.00 $0.94
Quarter ended September 30, 2005 $4.00 $1.78
|
Dividend Policy
We have paid no dividends on our common stock since our inception and may not do so in the future.
Securities Authorized for Issuance under Equity Compensation Plans
As of March 31, 2005, we had one equity compensation plan in place, our Incentive and Nonstatutory Stock Option Plan enacted in 2001. The following table contains information regarding this stock option plan as of March 31, 2005:
------------------------------- -------------------------- -------------------------- ----------------------------
Number of securities
remaining available for
Number of securities future issuance under
to be issued upon Weighted-average equity compensation
exercise of outstanding exercise price of plans (excluding
options, warrants and outstanding options, securities reflected
Plan Category rights Warrants and rights in column (a))
------------------------------- -------------------------- -------------------------- ----------------------------
Equity Compensation 222,500 $1.29 27,500
Plans approved
by security holders
------------------------------- -------------------------- -------------------------- ----------------------------
Equity Compensation
Plans not approved -0- -0- -0-
by security holders
------------------------------- -------------------------- -------------------------- ----------------------------
Total 222,500 $1.29 27,500
------------------------------- -------------------------- -------------------------- ----------------------------
|
In February and December 2004, in an action taken by written consent of the holders of a majority of the issued and outstanding shares of our common stock, we authorized the implementation of a 2004 Incentive and Nonstatutory Stock Option Plan, following the implementation of the reverse stock split (so as not to be affected by the reverse stock split), reserving 800,000 shares of common stock for issuance to employees, directors and consultants of the Company or any subsidiaries. This action became effective June 3, 2005. To date, options to purchase 400,000 shares of Common Stock have been issued to Judd Hoffman under the 2004 Incentive and Statutory Stock Option Plan.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for statements of historical facts, this section contains forward-looking statements involving risks and uncertainties. You can identify these statements by forward-looking words including "believes," "considers," "intends," "expects," "may," "will," "should," "forecast," or "anticipates," or the negative equivalents of those words or comparable terminology, and by discussions of strategies that involve risks and uncertainties. Forward-looking statements are not guarantees of our future performance or results, and our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors." This section should be read in conjunction with our consolidated financial statements.
The discussion and financial statements contained herein are for the fiscal years ended March 31, 2005 and 2004, and the three month periods ended June 30, 2005 and 2004. The following discussion regarding our financial statements should be read in conjunction with the financial statements included in this Prospectus.
Overview
During the quarter ended March 31, 2002, through our Belgium based subsidiary, Remedent N.V., we initiated our entrance into the high technology dental equipment market, with the introduction of the RemeCure high-speed dental curing light. Since that time, the majority of our operations have been conducted through our subsidiary, Remedent N.V. In just three years, we capitalized on our initial success with the RemeCure curing light and broadened our product line to include a full line of professional dental and retail "Over-The-Counter" tooth whitening products. We expanded our distribution to encompass over 35 countries throughout Europe, Asia and South America.
For the last three fiscal years, substantially all of our revenue has been generated by our Belgian subsidiary, Remedent N.V., which has experienced substantial growth in its revenues. Because the controlling stockholders of Remedent N.V. consist of our executive officers or companies owned by our executive officers, we have always had effective "control" over Remedent N.V., as defined by APB 51"Consolidated Financial Statements," even though we had owned only twenty two percent (22%) of this subsidiary.
On June 3, 2005, we consummated the acquisition of the remaining 78% of our subsidiary, Remedent N.V., and issued 7,715,703 post -split shares of our restricted common stock in exchange for all of the issued and outstanding shares of Remedent N.V. owned or controlled by our executive officers. As a result of this acquisition, Remedent N.V. is now our wholly-owned subsidiary.
In connection with our restructuring for the quarter ended June 30, 2005, we recorded a non-cash restructuring expense of $764,151 relating to the issuance of shares and warrants to MDB Capital Group, LLC, our financial advisor, for services rendered in connection with our corporate restructuring and an additional non-cash interest expense of $100,000 in connection with the conversion of a convertible note held by MDB Capital Group, LLC into 197,839 shares of our common stock.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis for Presentation
Our financial statements have been prepared on an accrual basis of accounting, in conformity with accounting principles generally accepted in the
United States of America. These principles contemplate the realization of assets and liquidation of liabilities in the normal course of business. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Revenue Recognition
Sales are recorded when products are shipped to customers. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period that related sales are recorded. We recognize revenue in accordance with Staff Accounting Bulletin 101.
Impairment of Long-Lived Assets
Long-lived assets consist primarily of property and equipment and patents. The recoverability of long-lived assets is evaluated by an analysis of operating results and consideration of other significant events or changes in the business environment. If impairment exists, the carrying amount of the long-lived assets is reduced to its estimated fair value, less any costs associated with the final settlement. As of June 30, 2005, we believed there was no impairment of our long-lived assets.
Pervasiveness of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate estimates and judgments, including those related to revenue, bad debts, inventories, investments, fixed assets, intangible assets, income taxes, and contingencies. Estimates are based on historical experience and on various other assumptions that we believe reasonable under the circumstances. The results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.
Accounts Receivable and Allowance for Doubtful Accounts
We sell professional dental equipment to various companies, primarily to distributors located in Western Europe and Asia. The terms of sales vary by customer, however, generally are 2% 10 days, net 30 days. Accounts receivable is reported at net realizable value and net of allowance for doubtful accounts.
Research and Development Costs
We expense research and development costs as incurred.
Inventories
We purchase certain of our products in components that require assembly prior to shipment to customers. All other products are purchased as finished goods ready to ship to customers.
We write down inventories for estimated obsolescence to estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected, then additional inventory write-downs may be required.
Patents
Patents consist of the costs incurred to purchase patent rights and costs incurred to internally develop patents are reported net of accumulated amortization. Patents are amortized using the straight-line method over a period based on their contractual lives.
Conversion of Foreign Currencies
The reporting currency for our consolidated financial statements is the United States dollar. The functional currency for our European subsidiary, Remedent N.V. is the Euro . We translate foreign currency statements to the reporting currency in accordance with FASB 52. The assets and liabilities whose functional currency is other that the United States dollar are included in the consolidation by translating the assets and liabilities at the exchange rates applicable at the end of the reporting period. The statements of income are translated at the average exchange rates during the applicable period. Translation gains or losses are accumulated as a separate component of stockholders' deficit.
Results of Operations
For the Three Month Period Ended June 30, 2005 and June 30, 2004
The following table presents our consolidated statements of income (loss), as a percentage of sales, for the periods indicated.
Three Months Ended
June 30,
--------------------------------
2005 2004
-------------- --------------
NET SALES 100.00% 100.00%
COST OF SALES 45.76% 46.16%
GROSS PROFIT 54.24% 53.84%
OPERATING EXPENSES
Research and development 3.76% 1.68%
Sales and marketing 7.90% 4.40%
General and administrative 56.74% 29.60%
Non cash restructuring expense 55.44% 0.00%
Depreciation and amortization 0.95% 0.39%
TOTAL OPERATING EXPENSES 124.80% 36.07%
INCOME (LOSS) FROM OPERATIONS (70.56%) 17.77%
Other income (expense) (4.65%) (1.26%)
INCOME (LOSS) BEFORE INCOME
TAXES AND MINORITY INTEREST (75.20%) 16.52%
Minority interest 0.00% (13.59%)
Income tax benefit (expense) 1.75% 0.00%
NET INCOME (LOSS) (73.45%) 2.93%
|
Net sales decreased for the three months ended June 30, 2005 by $378,333, or 21.5%, to $1,378,308 as compared to $1,756,641 for the three months ended June 30, 2004. The decrease in net sales for the three months is substantially the result of a sixty day delay in launching of our new MetaTrayTM products. This delay is the result of startup manufacturing issues. We began to ship MetaTrayTM products in August 2005. In addition, further contributing to the decline in sales,, our retail customers have begun reducing their on hand inventories of our existing CleverWhiteTM product in anticipation of the launch of our iWhiteTM products scheduled to begin towards the end of calendar year 2005.
Cost of sales decreased for the three months ended June 30, 2005 by $180,164, or 22.2%, to $630,865 as compared to $810,849 for the three months ended June 30, 2004. The decrease in cost of sales is attributable to the reduction in sales revenue and volume during the initial three months of the current fiscal year as described above. Cost of sales as a percentage of net sales remained constant at 46% for three months ended June 30, 2005 and 2004.
Gross profit decreased by $198,169 to $747,623 for the three month period ended June 30, 2005 as compared to $945,792 for the three month period ended June 30, 2004. Gross profit as a percentage of net sales remained constant at 54% for the three month periods ended June 30, 2005 and 2004. The leveling off of our gross profit percentage as compared to the improvements recognized in the three previous quarters is the result of the higher percentage of total sales being from the sales of professional dentist products, as opposed to the higher margin retail products, which were lower due to the anticipated launch of the iWhiteTM product.
Research and development expenses increased $22,312, or 75.6%, to $51,814 for the three months ended June 30, 2005 as compared to $29,502 for the three months ended June 30, 2004, due primarily to our continuing efforts to expand and improve our product line as well as accelerated development costs related to our MetaTrayTM launched in August 2005 and iWhiteTM products anticipated to launch in November 2005.
Sales and marketing costs for the three months ended June 30, 2005 and 2004 were $108,886 and $77,205, respectively, representing an increase of $31,681, or 41%. The increase during the three months ended June 30, 2005 is primarily the result of marketing and promotional materials developed and purchased to support the launching of the MetaTrayTM products.
General and administrative costs for the three months ended June 30, 2005 and 2004 were $782,096 and $519,986, respectively, representing an increase of $262,110 or 41%. The increase in actual costs for the three months ended June 30, 2005 as compared to the prior year is the result of our investment in corporate governance and instituting improvements in financial reporting and internal controls resulting in increased expenditures for legal and financial consulting expenditures of $42,000, an additional $110,000 in additional personnel costs for the three months ended June 30, 2005 as compared to the prior year related to increased personnel in product development, sales and manufacturing activities, effectively increasing our employee count from 10 employees as of June 30, 2004 to 21 employees as of June 30, 2005. Also contributing to the increase in general and administrative costs was an increase in travel costs of $80,000 related to our startup manufacturing activities, our increased sales force and our efforts to raise additional capital as well as prepare the foundation for our establishment of operations in the United States.
In conjunction with our corporate restructuring as of June 3, 2005, MDB Capital Group, LLC ("MDB") received for financial advisory services rendered to us, shares of our common stock equal to 2.5% of our issued and outstanding
shares as of June 3, 2005 and five year common stock purchase warrants equal to another 2.5% of our outstanding shares as of June 3, 2005 that will be exercisable beginning ninety (90) days after June 3, 2005 with an exercise price of $1.20 per share. Accordingly, as of June 3, 2005, we issued to MDB or its designee, 247,298 shares of the Company's common stock and 247,298 five year common stock purchase warrants. The market value of our common stock on June 3, 2005 was $1.60 per share, resulting in a value attributable to the stock issued to MDB of $395,677. The value of the warrants, determined in accordance with the Black-Scholes pricing model utilizing an historic volatility factor of 1.52, a risk free interest rate of 6.0% and an expected life for the warrants of five years, is $1.49 per warrant, for a total of $368,474 for the warrants. Accordingly, recognized a non-cash restructuring expense as of June 3, 2005 of $764,151.
Net interest expense increased by $80,735 to $102,792 from $22,057 during the three months ended June 30, 2005 over the comparable three months ended June 30, 2004. Included in interest expense for the three months ended June 30, 2005 is $100,000 of non-cash interest equal to the value of the beneficial conversion feature on a $100,000 note payable that was converted to common stock on June 3, 2005 computed by taking the difference between the effective conversion price, $0.56 per share (based upon $100,000 in principal and $11,173 in accrued interest, divided by 197,839 shares, the amount of shares required to be issued) and the fair market value of our common stock as of the date of the note was issued ($1.60 per share as of March 23, 2004) times 197,839 shares issued in conversion of the note, not to exceed the original principal value of the convertible note. Not including the $100,000 non cash interest described in the preceding sentence, interest expense decreased $19,265 as a result of our improved cash position resulting in decreased utilization of our available bank credit lines as well as conversion into our common stock of convertible debentures totaling $127,580 in principal at December 31, 2004.
For the Year Ended March 31, 2005 and March 31, 2004
Comparative details of results of operations for the years ended March 31, 2005 and 2004 as a percentage of sales are as follows:
2005 2004
--------------- --------------
NET SALES 100.00% 100.00%
COST OF SALES 42.17% 46.58%
GROSS PROFIT 57.83% 53.42%
OPERATING EXPENSES
Research and development 3.72% 1.73%
Sales and marketing 4.60% 3.05%
General and administrative 36.44% 34.46%
Depreciation and amortization 0.52% 0.45%
TOTAL OPERATING EXPENSES 45.28% 39.69%
INCOME FROM OPERATIONS 12.55% 13.73%
Other expense -0.58% -2.12%
INCOME BEFORE INCOME
TAXES AND MINORITY INTEREST 11.98% 11.60%
Minority interest -8.30% -11.30%
Income tax expense -5.13% 0.00%
NET INCOME (LOSS) -1.46% 0.31%
|
Net sales increased by approximately 35% to $7,072,300 in the year ended March 31, 2005 as compared to $5,234,855 in the year ended March 31, 2004. The increase in sales was due to the result of continuing sales efforts and growing market acceptance in: (a) the dental market for our high-speed curing light, as well as after-market products, including accessories, repair services, and proprietary whitening products used with the curing lights and; (b) the consumer market for our tooth whitening products, inclusive of the launch during the latter part of the quarter ended December 31, 2004 of our new CleverWhite Stick product which contributed approximately $675,000 in revenues for the year ended March 31, 2005.
Cost of sales increased approximately 24% to $2,982,315 in the year ended March 31, 2005 as compared to $2,413,920 in the year ended March 31, 2004. The increase in cost of sales is attributable to the increase in sales for the current fiscal year offset in part by our efforts to reduce components costs as well as perform an increasing amount the manufacturing and assembly functions in house as opposed to outsourcing these functions to third parties. Accordingly, cost of sales, as a percentage of net sales, decreased from 46% for the year ended March 31, 2004 to 42% for the year ended March 31, 2005.
Gross profit was $4,089,985 in 2005 as compared to $2,820,935 in 2004, an increase of $1,269,050 or 45%. Gross profit as a percentage of sales increased 5%, from 53% of sales for the year ended March 31, 2004 to 58% of sales for the year ended March 31, 2005. The increase in gross profit is the result of our increased sales of the RemeCure curing light which is now assembled and packaged in-house at a lower cost than the previously outsourced product, coupled with a substantial increase in the sales of our higher-margin teeth whitening products which we began assembling and packaging in house in September 2004.
Research and development expenses were $263,137 for the year ended March 31, 2005 as compared to $90,700 for the year ended March 31, 2004, an increase of $172,437, or 190%, over the prior fiscal year. This increase is attributable to the development costs associated with our new MetaTrayTM product planned for launch in the coming year targeted primarily at the professional dentist tooth whitening market. We expect to continue to increase our investment in research and development in future periods as we develop other products for both the dental equipment and Over-The-Counter market.
Sales and marketing costs for the years ended March 31, 2005 and 2004 were $325,175 and $159,723 respectively, which represents an increase of $165,452 or 104%. As a percentage of sales, sales and marketing expenses increased from 3% to 5% for the years ended March 31, 2005 and March 31, 2004. The increase in sales and marketing expenses are related to the increase in overall sales activity resulting from expansion of our product lines as well as marketing costs associated with the launch of our CleverStick product.
General and administrative costs for the years ended March 31, 2005 and 2004 were $ 2,578,274 and $1,828,383 respectively, an increase of $749,891 or 41%. As a percentage of sales, general and administrative expenses increased from 35% of sales for the year ended March 31, 2004 to 36% of sales for the year ended March 31, 2005. The increase in general and administrative costs as a percentage of net sales reflects our investment in corporate governance and instituting improvements in financial reporting and internal controls resulting in increased expenditures for legal and financial consulting of $90,000. In addition, the increase in general and administrative costs included an additional $482,000 in personnel costs for the year ended March 31, 2005 related to expanded product development and sales activities as compared the personnel costs for the year ended March 31, 2004. Also, travel expenditures increased $90,000 for the year ended March 31, 2005 as compared to the year ended March 31, 2004 as a result of increasing sales and corporate management activities.
Net interest expense was $66,390 for the year ended March 31, 2005 as compared to $130,422 for the year ended March 31, 2004, a decrease of $64,032, or 76%. The decrease in interest expense is the result of our improved cash position resulting in decreased utilization of our available bank credit lines as well as conversion into our common stock of convertible debentures totaling $127,580 in principal at December 31, 2004.
Inflation has not had a material effect on our revenue and income from continuing operations in the past two years. We do not expect inflation to have a material future effect.
Liquidity and Capital Resources
For the last three years, the majority of our operations were conducted by our subsidiary based in Belgium, Remedent N.V. In order for Remedent N.V. to continue the expansion of its product line and customer base, as well as allow our other companies to establish operations in markets other than Europe, including establishment of a sales and distribution capability in the United States we required additional financing either in the form of additional debt or through the sale of additional equity securities.
On July 20, 2005 we completed a private placement of 2,520,661 Units for an aggregate offering price of $3,780,976 (the "Offering"). Each Unit consists of one share of restricted Common Stock (the "Shares") and one Common Stock Purchase Warrant (the "Warrants") at a price of $1.50 per Unit. The Warrants are exercisable for a period of five years and entitle the holder to purchase one share of restricted Common Stock (the "Warrant Shares") for $1.75 per Warrant Share. We also have the right to redeem the Warrants for $0.01 per Warrant Share covered by the Warrants if the Shares trade on the Over-The-Counter Bulletin Board or similar market above $3.50 per share for 30 consecutive trading days based upon the closing bid price for the Shares for each trading day (the "Redemption Right"), provided, however, that the Warrant Shares have been registered with the Securities and Exchange Commission (the "Commission"). Once the Redemption Right vests, we have the right, but not the obligation, to redeem the Warrants for $0.01 per Warrant Share covered by the Warrants upon 30 days written notice to the holders of the Warrants. The Units were offered and sold by us to accredited investors in reliance on Section 506 of Regulation D of the Securities Act of 1933, as amended.
We engaged MDB Capital Group, LLC, as our exclusive agent to offer the Units (the "Placement Agent"). The Placement Agent was entitled to a fee equal to ten percent (10%) of the gross proceeds derived from the sale of the Units together with a five year warrant to purchase up to ten percent (10%) of the number of Units sold in the Offering at an exercise price of $1.50 per Unit. In addition, we agreed to reimburse the Placement Agent for its out-of-pocket expenses related to the Offering and to register the Placement Agent's warrants together with the Shares and Warrant Shares to be registered in connection with the Offering. We have also agreed to indemnify the Placement Agent against various liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments the Placement Agent may be required to make in respect of any of those liabilities.
Our strategy is to utilize the funds from the private placement of the Units to launch new products for the professional dentist teeth whitening and Over-The-Counter markets for which development has been substantially completed. These product launches will include our existing markets in Europe and Asia, as well as an initial introduction of our products in the United States market.
Three Month Period Ended June 30, 2004 and June 30, 2005
Our balance sheet at June 30, 2005 reflects cash and cash equivalents of $23,433 as compared to $40,442 as of March 31, 2005, a decrease of $17,009. Net cash provided from operations decreased by $521,797 to $129,957 for the three months ended June 30, 2005 as compared to net cash provided from operations of
$651,474 for the three months ended June 30, 2004. The decrease in net cash provided from operations for the three months ended June 30, 2005 as compared to the three months ended June 30, 2004 is attributable to the increase in net loss before minority interest of $1,326,667 offset by the non cash items included in net loss for the three months ended June 30, 2005 of $395,677 in common stock and $368,474 in warrants issued to MDB for consulting fees related to our restructuring and $100,000 in non cash interest on the beneficial conversion of a $100,000 note payable to the Christopher T. Marlett Living Trust as well as currency exchange losses on net asset balances at March 31, 2005 as a result of the 7% reduction in value of the Euro against the US Dollar during the three months ended June 30, 2005.
Net cash used in investing activities increased $234,661 to $237,943 for the three months ended June 30, 2005 as compared to net cash used in investing activities of $3,282 for the three months ended June 30, 2004. The increase in net cash used in investing activities is attributable to the purchase of $237,943 in manufacturing and office equipment and during the three months ended June 30, 2005 as a result of our expansion of our manufacturing capabilities and corporate infrastructure.
Net cash provided by financing activities increased by $719,318 to $120,047 for the three months ended June 30, 2005 as compared to net cash used in investing activities of $599,271 for the three months ended June 30, 2004. The increase in net cash provided from financing activities is attributable to our net borrowings under our line of credit during the three months ended June 30, 2005 as compared with our net repayments under our line of credit during the three months ended June 30, 2004, as well as our additional borrowings for capital leases for manufacturing equipment totaling $89,320 for the three months ended June 30, 2005.
During the three months ended June 30, 2005, we recognized a reduction in cash and cash equivalents of $29,069 from the effect of exchange rates between the Euro and the US Dollar as a result of the strengthening of the US Dollar of approximately 7% during the three months ended June 30, 2005. During the six months ended June 30, 2004, the effect of exchange rates between the Euro and the US Dollar resulted in a reduction of cash and cash equivalents of $9,758.
For the Year Ended March 31, 2005 and March 31. 2004
In August 2005, we received a letter from the Securities and Exchange Commission regarding questions and comments related to our annual report on Form 10-KSB for the year ended March 31, 2005 filed on July 14, 2005. The letter addressed an issue related to our presentation of the effect of exchange rate changes on cash and cash equivalents and our compliance with SFAS 95 which discusses presentation of foreign currency exchange rate changes on the Statement of Cash Flows. Upon investigation, it was determined that we had not properly presented the effect of exchange rate changes on cash and cash equivalents for the year ended March 31, 2005 resulting in an overstatement of the effect of exchange rate changes on cash and cash equivalents of $34,991. In addition, as a result of the restatement, for the year ended March 31, 2005 net cash provided by operations increased by $50,178, net cash provided by investing activities increased $24,768 and net cash used by financing activities increased $39,956. The primary effects of the restatement are discussed in "Notes to Consolidated Financial Statements - Note 3 - Restatement - March 31, 2005." The following discussion and analysis gives effect to the restatement.
Our balance sheet at March 31, 2005 reflects cash and cash equivalents of $40,442 as compared to $172,382 as of March 31, 2004, a decrease of $131,940. Net cash provided by operations was $633,908 for the year ended March 31, 2005 as compared to net cash used in operations of $536,471 for the year ended March 31, 2004. The increase in net cash provided from operations for the year ended March 31, 2005 as compared to the year ended March 31, 2004 is attributable primarily to the reductions in the amount of cash generated by current period operating income required to support accounts receivable and inventory balances.
This is evidenced by an increase in accounts receivable of $115,185 during the year ended March 31, 2005 as compared to an increase in accounts receivable of $1,106,336 for the year ended March 31, 2004, and an increase in inventories during the year ended March 31, 2005 of $101,318 as compared to an increase in inventories of $343,165 during the year ended March 31, 2004. Partially offsetting the foregoing reductions in cash resources to support accounts receivable and inventories was an increase in prepaid expenses of $166,473 for the year ended March 31, 2005 as compared to a decrease in prepaid expenses of $17,301 for the year ended March 31, 2004, primarily the result of increases in recoverable VAT taxes ($76,493), prepaid Belgium income taxes ($64,825) and prepayments to suppliers for components and other services ($18,827).
Net cash provided by investing activities was $36,749 for the year ended March 31, 2005 as compared to net cash used in investing activities of $68,558 for the year ended March 31, 2004. On October 8, 2004, we obtained a new line of credit facility with a new Belgian bank which no longer required the (Euro) 235,000 ($288,651 at March 31, 2004) in fixed income securities that had collateralized our previous line of credit. This investment was sold at cost during the quarter ended March 31, 2005 and the proceeds used for general working capital purposes. Cash used in investing activities included $70,299 for the purchase of manufacturing equipment used to expand our manufacturing and assembly capabilities as well as office equipment for additional personnel hired during the year. In addition, in October 2004, we invested $65,000 to acquire from the inventor the exclusive, perpetual license to two issued United States patents which are applicable to several teeth whitening products currently under development. In September 2004, we paid to Lident N.V., a company controlled by Mr. De Vreese, our Chairman, a refundable deposit of (Euro) 100,000 ($129,650) in consideration for an option, exercisable through December 31, 2005, to license a patent and worldwide manufacturing and distribution rights for a potential new product which Lident had rights to prior to Mr. De Vreese' association with us. This advance is subject to our due diligence regarding the enforceability of the patent and marketability of the product, which, if viable, will be assigned to us for additional consideration of (Euro ) 100,000 ($129,650) and an ongoing royalty from sales of products related to the patent equal to 3% of net sales and, if not viable, the deposit will be repaid in full by Lident. The consideration we had agreed to pay Lident upon the exercise of the option is the same as the consideration Lident is obligated to pay the original inventors. Consequently, Lident will not profit from the exercise of the option. Furthermore, at a meeting of our Board of Directors on July 13, 2005, the Board accepted Lident's offer to facilitate an assignment of Lident's intellectual property rights to the technology to us in exchange for the reimbursement of Lident's actual costs incurred relating to the intellectual property. Consequently, if we exercise the option, it is anticipated that all future payments, other than the reimbursement of costs, would be paid directly to the original inventors and not to Lident.
Net cash used by financing activities was $866,945 for the year ended March 31, 2005 as compared to net cash provided by financing activities of $767,681 for the year ended March 31, 2004. The increase in net cash used in financing activities is attributable to our improved cash flow which allowed us to reduce our bank line of credit by $822,097 for year ended March 31, 2005 as well as reduce the balance due on three loans payable to unrelated parties by $197,111 and make repayments under new loans borrowed during the year ended March 31, 2005 of $105,535. These reductions in outstanding debt were partially offset by our obtaining a two installment loans from a Belgium bank including one in October 2004 in the original principal amount of (Euro) 150,000 ($201,750) payable in 12 equal monthly installments of (Euro) 12,783 ($17,193) and one in January 2005 in the original principal amount of (Euro) 50,000 ($64,825) payable in 12 equal monthly installments of (Euro) 4,166 ($5,402).
On October 8, 2004, we obtained a new line of credit facility with a new Belgian bank for (Euro) 1,050,000 (US $1,361,325 at March 31, 2005) line of credit, replacing our prior facility, which no longer required as collateral the fixed income securities or the guarantee of Mr. De Vreese, the Company's Chairman. This new line of credit consisted of a (Euro) 800,000 ($1,037,200) credit line based on the eligible accounts receivable and a (Euro) 250,000
($324,125) general line of credit. Advances are approved by the bank based upon dated bills of exchange issued and signed by the customer for shipped goods. These advances are discounted at a rate of 2.125%. As of March 31, 2005, we had no advances outstanding under this line of credit facility. Interest chargeable on the general line of credit was 4.61% at March 31, 2005. As of May 3, 2005, the bank agreed to increase the general line of credit to (Euro) 500,000 ($648,250) and decrease the credit line based on the eligible accounts receivable to (Euro) 550,000 ($713,075). All other terms and conditions remained unchanged.
On March 23, 2004, we borrowed $100,000 from the Christopher T. Marlett Living Trust pursuant to the terms of a Convertible Promissory Note and Security Agreement with the Christopher T. Marlett Living Trust. Interest accrues on the loan balance at the rate of 10% per annum, compounding annually. The Note was scheduled to mature on September 30, 2004 and was secured by a Financing Statement on Form UCC-1 on all of our assets. Upon completion of a successful restructuring, the debt was to convert into two percent of our outstanding shares immediately following such restructuring. Upon successful completion of our restructuring on June 3, 2005, this $100,000 convertible note payable automatically converted to 197,839 shares of common stock. As of June 3, 2005, accrued interest on the note was $11,173, resulting in an effective conversion price of $0.57 per share. In accordance with Emerging Issues Task Force ("EITF") consensus on Issue No. 98-5, "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios", we will recognize the value of the beneficial conversion feature equal to the difference between the effective conversion price, $0.56 per share, and the fair market value of our common stock as of the date of the note was issued ($1.60 per share as of March 23, 2004) as additional interest expense as of the date of the conversion, not to exceed the amount of the proceeds received from the note. Accordingly, we will record $100,000 in additional non cash interest expense as of June 3, 2005.
Also upon completion of the restructuring, MDB, for financial advisory services rendered to us, was entitled to receive shares of our common stock equal to 2.5% of our issued and outstanding shares as of June 3, 2005 and five year common stock purchase warrants equal to another 2.5% of our outstanding shares as of June 3, 2005 that will be exercisable beginning ninety (90) days after June 3, 2005 with an exercise price of $1.20 per share. Accordingly, as of June 3, 2005, we were obligated to issue to MDB or its designee, 247,298 shares of the Company's common stock and 247,298 five year common stock purchase warrants. The market value of our common stock on June 3, 2005 was $1.60 per share, resulting in a value attributable to the stock issued to MDB Capital of $395,677. The value of the warrants, determined in accordance with the Black-Scholes pricing model utilizing an historic volatility factor of 1.52, a risk free interest rate of 6.0% and an expected life for the warrants of five years, is $1.49 per warrant, for a total of $368,474 for the warrants. Accordingly, we will recognize a non-cash restructuring expense as of June 3, 2005 of $764,151.
DESCRIPTION OF BUSINESS
Background
We were originally incorporated under the laws of Arizona in September 1996 under the name Remedent USA, Inc. In October 1998, we were then acquired by Resort World Enterprises, Inc., a Nevada corporation ("RWE") in a share exchange and RWE immediately changed its name to Remedent USA, Inc. The share exchange was a "reverse acquisition" and accounted for as if we acquired RWE and then recapitalized our capital structure. On July 1, 2001, we formed three wholly-owned subsidiaries, Remedent Professional Holdings, Inc., Remedent Professional, Inc. and Remedent N.V., and began developing high-technology dental equipment. Remedent Professional, Inc. and Remedent Professional Holdings, Inc. are both wholly-owned subsidiaries and have been inactive since inception. In June 2005, we formed Remedent Asia Pte Ltd, a wholly-owned subsidiary formed under the laws of Singapore.
In December 2002, as a result of losses incurred during its start-up period, Remedent N.V.'s shareholder equity fell below that which is required under Belgium law. In accordance with Belgium law, Remedent N.V. retained the services of an independent Belgium certified accountant to determine the amount of additional capital contribution necessary to bring Remedent N.V.'s balance sheet into compliance. As a result of this analysis, it was determined that additional capital of 310,000 Euros ($321,687 as of December 2002) would be required and, further, that Remedent N.V.'s valuation prior to such capital contribution was 88,500 Euros. In as much as we lacked the financial resources to provide the additional capital required, Remedent N.V. elected to issue 7,171 shares of its common stock to Lausha N.V., a company controlled by Guy De Vreese, in exchange for conversion of 50,000 Euros in notes payable and contribution of the 235,000 Euros in fixed income marketable securities owned by Mr. De Vreese that had been used as collateral for a credit line, both as an irrevocable capital contribution to Remedent N.V. In addition, Remedent N.V. issued 629 shares to Robin List in exchange for conversion of 25,000 Euros in notes payable as an irrevocable capital contribution to Remedent N.V. Until June 30, 2003, we had a unilateral right to repurchase the shares issued to Lausha N.V. and Robin List at the same price that the shares were sold to these parties however we were unable to obtain the required resources to accomplish this. As a result of this transaction, our ownership in our subsidiary was diluted from 100% to 22%.
For the last three fiscal years, substantially all of our revenue has been generated by our subsidiary, Remedent N.V., which has experienced substantial growth in its revenues and has achieved positive operating income for the fiscal year ending on March 31, 2005.
In February and December 2004, in an action taken by written consent of the holders of a majority of the issued and outstanding shares of our common stock, we; (i) increased the number of our authorized shares to 60,000,000 shares, consisting of 50,000,000 shares of common stock and 10,000,000 shares of preferred stock, (ii) approved implementation of a one-for-twenty reverse stock split with consideration for fractional shares to be issued in the form of scrip, and (iii) changed our name from "Remedent USA, Inc." to "Remedent, Inc." The written consent also authorized acquisition of the remaining 78% of our subsidiary, Remedent N.V., that we did not own in exchange for 7,715,703 post-split shares of our common stock in a transaction involving from Messrs. Guy De Vreese and Robin List, our Chairman and Chief Executive Officer respectively. Lastly, the written consent authorized the implementation of a 2004 Incentive and Nonstatutory Stock Option Plan, following the implementation of the reverse stock split (so as not to be affected by the reverse stock split), reserving 800,000 shares of common stock for issuance to employees, directors and consultants of the Company or any subsidiaries.
On June 3, 2005, we consummated the acquisition of Remedent N.V. and issued 7,715,703 post- split shares of its restricted common stock to the Lausha N.V., a company controlled by Guy De Vreese, and to Robin List in exchange for all of the issued and outstanding shares of Remedent N.V. owned by Lausha N.V. and Robin List. As a result of this acquisition, Remedent N.V. is our wholly owned subsidiary.
Also, on June 3, 2005, we amended our Articles of Incorporation pursuant to the filing of the Amended and Restated Articles of Incorporation with the Nevada Secretary of State. The Amended and Restated Articles of Incorporation (i) changed our name from "Remedent USA, Inc." to "Remedent, Inc." (ii) increased the number of authorized shares to 60,000,000 shares consisting of 50,000,000 shares of common stock and 10,000,000 shares of Preferred Stock, and (iii) effected a one-for-twenty reverse stock split.
Beginning in 2002, our initial focus was on the needs of the professional dentist market in Western Europe. Leveraging our knowledge of regulatory requirements regarding dental products in each market and our management's experience in understanding the needs of the professional dental community, development was completed on the RemeCure plasma curing light. The key differentiating advantages built into the RemeCure light were the ability to have a single device utilized for two applications: 1) curing dental composite materials in only seconds and; 2) for single appointment, in-office whitening in less than forty minutes.
Starting in Belgium and the Netherlands, the RemeCure light was launched utilizing our proprietary Distributor Assisted Marketing programs. First, we identified an established dealer in each market with a well developed sales force familiar with sales of capital equipment to the professional dentist community. Second, we developed aggressive lead generation programs and other marketing techniques which served as a blue print for the dealers to implement. The combination of a well-trained dealer force and a dealer assisted marketing and lead generation programs has proven to be far more effective than utilizing a direct sales approach, which is much slower and more costly to establish. As a result of this approach, in just three years we have established dealers in 35 countries encompassing, Europe, Asia, Latin America, the Pacific Rim and the Middle East.
Leveraging on our early success with the RemeCure light, in 2003, we introduced the RemeWhite In Office Whitening System. Based upon the initial RemeCure light, a new light, called the RemeCure CL-15, was developed featuring new enhancements to the hardware and software enabling this light to be fully automated thereby eliminating the need for the dentist to hold the light during whitening treatments. In addition, a proprietary gel was formulated to be used with the system as well as a time saving method to apply the gel. An additional benefit of the RemeWhite system is the repeat sales of the gel to users of the system providing ongoing revenue streams that we anticipate will continue to grow annually. In 2004, the RemeWhite Home Maintenance Kit was introduced to be sold by dentists to their patients, featuring 16 pre-filled trays with a level of whitening agent safe for home use yet stronger than most Over-The-Counter products.
Also introduced in September 2004 was Formulation+, a new whitening gel for use primarily for patients with serious discolorations. Additional benefits of this new gel are prolonged shelf life, up to 14 months, as well as increased resistance to temperature fluctuations in storage and transport.
Initially, all of the manufacturing related to the above products was conducted through third party manufacturers under our supervision thereby minimizing demands on capital resources. Beginning in 2003, parts of the manufacturing and the majority of the final assembly of our products were brought in house, thereby improving control over product quality while significantly reducing product costs.
In July 2003 we launched our first product developed for distribution through Over-The-Counter retail outlets, specifically pharmacies. CleverWhiteTM features a unique non-peroxide formula, thereby overcoming the European Union regulatory ban on Over-The-Counter sales of peroxide compounds, the active ingredient typically found in all United States tooth whitening products. Combining a mouth tray with a unique gel delivery system that requires no mixing, no syringes or even filling the tray, CleverWhite utilizes pre-filled pouches that are placed in the mouth tray and activate once in the mouth with no dripping or other discomfort often associated with tray based whitening systems.
CleverWhite's initial entrance into the Over-The-Counter market was in Holland and Belgium, in both cases through local distributors. Our initial success soon drew the attention of Omega Pharma, one of Europe's largest distributors of branded products for pharmacies. In October 2002, we entered
into a distribution agreement with Omega Pharma granting Omega Pharma exclusive distribution rights to CleverWhite in Spain, Portugal, Belgium, Germany, and the Netherlands. In January 2005, the original agreement expired and we began conducting business with each of the Omega Pharma companies in the local countries individually, as opposed to centralized purchasing through Omega Pharma headquarters. In doing so, we were able to strengthen our business relationship at the local level, lessen our dependency on a single office as the decision maker for the Omega Group and, in some cases, broaden our product lines distributed by the companies within the Omega Group to include professional dentist products as well as our Over-The-Counter products.
Duplicating the model we learned in the professional dental segment, our retail strategy has been to focus on product development and marketing and to rely on our distributor network assisted by our internally developed marketing programs for servicing our customers in each market. This same model has been expanded beyond Western Europe to include Asia, the Middle East and Latin America.
CleverWhite was initially manufactured by third party manufacturers under the supervision of our own personnel. In the last eighteen months, we have been expanding our internal manufacturing capabilities at our headquarters in Belgium. Today, CleverWhite is completely manufactured in-house except for foam trays, thereby reducing cost and lead time, improving margins and enabling us to improve product quality.
CleverWhite's introduction in Europe represented one of the first Over-The-Counter whitening products in many European markets. To date, many of the countries in Europe prohibit the use of peroxide based compounds in Over-The-Counter retail whitening products and, where permitted, it is often in concentrations too low to maintain satisfactory levels of efficacy. Furthermore, we have not targeted our Over-The-Counter products at the supermarket channels, where we would face price competition from United States whitening products such as Crest Whitestrips, but rather at the specialty pharmacy market that still thrives throughout Europe. As a result, CleverWhite is able to maintain higher perceived value and visibility within its target market.
Capitalizing on the CleverWhite's initial success, we launched our second Over-The-Counter product in the fourth quarter of calendar year 2004. CleverWhite Day & Night sticks offer a portable, easy to use, whitening solution at what we believe to be a very affordable price. Initial sales for this new product exceeded our expectations and has helped to solidify retail shelf space and market share.
Research and Development
During the year ended March 31, 2005 we expanded our research and development resources by the hiring of a PhD in Chemistry and additional pharmacists with expertise in the European regulatory authorities and additional collaborating with additional outside consultants who specialize in the technologies of teeth whitening. Research and development expenses were $263,137 for the year ended March 31, 2005 as compared to $90,700 for the year ended March 31, 2004, an increase of $172,437, or 190%, over the prior fiscal year. As a result of this investment, we believe that our subsidiary, Remedent N.V., fully complies with all applicable regulations regarding Over-The-Counter teeth whitening products. We expect to continue to increase our investment in research and development in future periods as we develop other products for both the dental equipment and Over-The-Counter market.
New Product Development
We have been active in the development of new products for both the professional dental and retail segment which, for the first time, include
proprietary technology that will enable Remedent to pursue new markets with products that we believe feature unique advantages in efficacy, convenience and affordability.
For the last several years, professional teeth whitening administered by professional dentists has been a rapidly expanding component of the total revenue of dental practices worldwide and particularly in the United States. Regardless of the specific products used by the dentist, the procedure always required three key components:
o Application of a peroxide based compound in concentrations five to ten times that found in Over-The-Counter products. Frequently these compounds drip and run out of the patient's mouth and can cause irritation to the gums if not properly administered.
o Stimulation of the whitening abilities of that compound by applying a combination of light and heat to the surface of the teeth. This process usually takes between 15 and 30 minutes of time.
o Utilization of the dentist's chair during the procedure. As a result, the dentist is precluded from working on other patients which in turn increases the cost the dentist needs to charge for the procedure.
To address these issues, we developed Meta TrayTM, a completely self contained whitening system that can be administered by dentists that:
o Does not require chair time.
o Incorporates all the benefits of heat and light for activating gel.
o Introduces a proprietary gel delivery system that eliminates dripping and running while enhancing protection for surrounding gums and tissue.
The MetaTrayTM kit consists of a proprietary, reusable mouthpiece that has embedded in the mouthpiece both a heating element and an electroluminescent mesh that are powered by a rechargeable 9 volt power source providing heat and light similar to that which is delivered to the teeth by conventional dental lights.
The system also will introduce a proprietary foam strip that is unique in the manner in which it releases peroxide to the tooth surface without dripping or running. The MetaTrayTM kit is easy to handle, to store, and to discard. It works by a gradual release. As the mouth is producing more saliva - the saliva is absorbed by the foam and is pushing the peroxide out of the foam in a chemical reaction. This also prolongs the release of peroxide allowing for a more gradual treatment thus minimizing irritation to the gums and surrounding tissue. Most importantly, since the MetaTrayTM kit can be used at home by the patient, foam strips with the appropriate concentration of peroxide can be provided by the dentist thereby generating a continuing revenue stream for the dentist while achieving high levels of patient satisfaction.
In addition to MetaTrayTM, we have also completed development for a retail version of this product called iWhiteTM, which, when combined with lower concentrations of the whitening agent, we anticipate marketing as an Over-The-Counter product in conjunction with CleverWhite.
We further anticipate that both iWhiteTM and MetaTrayTM will be manufactured using third party manufacturing facilities due to the tooling, assembly and
volume requirements expected for these new products and technologies. We have identified these manufacturers, who are located in China, and have begun tooling and preproduction prototypes.
Another rapidly growing segment in dental practices within the United States is what is known as veneers or bondings to achieve a complete "smile makeover". With bonding, a dentist adheres a composite material directly on the tooth which lasts about 3 to 6 years and tends to discolor. Porcelain veneers, though a more lasting solution (ten years or more), require a significantly more invasive procedure to install which is irreversible, requires a very high level of training and skill from the dentist and can cost from $700 to $2,000 per tooth.
Irrespective of the cost of bondings and veneers, we believe that demand for these procedures continues to grow fueled by television programs such as "Extreme Makeover" which emphasize the transformation that can be achieved by a new smile. For two years, we have been in development of a new methodology for the manufacture and application of veneers utilizing new synthetic materials that exhibit attributes we believe are superior to porcelain.
Branded as RemeSmileTM, this new procedure is based upon patent pending technology that enables the veneers to actually be manufactured as a single unit and placed in a customized tray that enables dentists with only minimal training to quickly and easily apply up to six teeth in one 30 - 45 minute application.
Because of the high level of automation engineered into the process combined with the relative speed of application, we anticipate that the cost for these veneers will be a fraction of traditional veneers and bondings while offering the patient reversibility, durability, comfort and outstanding appearance. Patents have been applied for in Europe covering the RemeSmileTM veneers which we then expect to follow with United States patent applications.
With the development of our new products, we believe we are now poised to launch in the United States, the largest teeth whitening market in the world. We anticipate that the initial launch will focus on MetaTrayTM in the professional dental segment. We have initiated discussions with several major dental products distributors for this market segment. As was the case in Europe and Asia, we expect the launch will be supported by our marketing efforts focused on targeted print trade advertising, trade show attendance, direct mailing of DVD demonstration video's and a significant public relations effort.
Intellectual Property
In October 2004, we acquired from the inventor the exclusive, perpetual license to two issued United States patents which are applicable to the MetaTrayTM kit. Pursuant to the terms of the license agreement, we were granted an exclusive, worldwide, perpetual license to manufacture, market, distribute and sell the products contemplated by the patents subject to; 1) the payment of $65,000 as reimbursement to the patent holder for legal and other costs associated with obtaining the patents, which was paid in October 2004, and royalties for each unit sold subject to an annual minimum royalty of $100,000 per year. We anticipate that these patents will provide protection against potential competition for the MetaTrayTM product within the United States and we intend to pursue worldwide applications for these patents.
We have filed two European patent applications related to the RemeSmileTM product and four international patents applications related to the MetaTrayTM and iWhiteTM products which are pending, including patent applications related to the foam strip technology utilized in these products.
We also have ongoing research and development efforts to improve and expand our current technology and to develop new teeth whitening products. We intend to continue to apply for patents when we believe it is in our interest to do so and as advised by patent counsel. We rely and will continue to rely on trade secrets, know-how and other unpatented proprietary information in our business. Certain of our key employees and consultants are required to enter into confidentiality and/or non-competition agreements to protect our confidential information.
We also own the rights to registered trademarks and service marks in the United States and in several foreign countries including, but not limited to, "CleverWhite." We have filed applications to register trademarks and service marks in the United States and in several foreign countries including but not limited to "iWhiteTM", "MetaTrayTM" and "Remedent."
Major Customers
We currently have one major group of customers, Omega Pharma, which includes Omega Pharma NV (Belgium), Chefaro UK, Ltd, Chefaro Espanola SA, Chefaro Nederland BV, Chefaro Portuguesa and Deutsche Chefaro Pharma GmbH, whose continued sales were 37% and 45% of total revenues for the fiscal years ended March 31, 2005 and March 31, 2004, respectively.
Competition
International markets including Europe, Asia and Latin America have followed the United States' lead in expanding offerings in the areas of tooth whitening. Leading the way in both the professional dentist and retail segments have been United States based companies seeking to expand their distribution. Impeding these efforts has been the inability of many of these companies to fully understand the differences from both a distribution and a regulatory standpoint that apply in each of the European and Asian markets. Notwithstanding the formation of the European Union and its efforts to standardize regulatory and business practices throughout Europe, these practices in reality vary widely from country to country. In addition, unlike the United States market where pharmacies and supermarkets have become homogenized as to retail product offerings and pricings, most companies in Europe need to distinguish between the locally owned pharmacy and the supermarket chains with regard to product brands and pricing offered. We have not targeted our Over-The-Counter products at the supermarket channels, where our products would face price competition from United States whitening products such as Crest Whitestrips, but rather at the specialty pharmacy market that's still thrives throughout Europe. As a result, we believe that CleverWhite is able to maintain higher perceived value within its target market.
Competition in the professional dentist products comes primarily from the larger United States based competitors including Brite-Smile, Rembrandt (now a subsidiary of Gillette Company, Inc.), Discuss Dental, Inc. and Zoom. All of these companies offer light and whitening solutions to the professional dentist community. Despite our competition's advantage with respect to size, resources and name recognition, we have continued to build market share for the following reasons:
o Better combined pricing strategy than the competition when considering net cost for whitening materials and initial cost of light.
o Dual purpose light to maximize value of initial investment.
o Ease of use from automated functionality of light, speed and gel application method.
o Superior gel formulation which maximizes performance while minimizing sensitivity.
o Home maintenance kit for improved patient satisfaction.
Regulatory Issues
As we market dental products which are legally defined to be medical devices, we are considered to be a medical device manufacturer and as such we are subject to the regulations of, among other governmental entities, the United States Food and Drug Administration (the "FDA") and the corresponding agencies of the states and foreign countries in which we sell our products. These regulations govern the introduction of new medical devices, the observance of certain standards with respect to the manufacture and labeling of medical devices, the maintenance of certain records and the reporting of potential product problems and other matters. A failure to comply with such regulations could have material adverse effects on our business.
The Federal Food, Drug and Cosmetic Act ("FDC Act") regulates medical devices in the United States by classifying them into one of three classes based on the extent of regulation believed necessary to ensure safety and effectiveness. Class I devices are those devices for which safety and effectiveness can reasonably be ensured through general controls, such as device listing, adequate labeling, pre-market notification and adherence to the Quality System Regulation ("QSR") as well as medical device reporting, labeling and other regulatory requirements. Some Class I medical devices are exempt from the requirement of pre-market approval or clearance. Class II devices are those devices for which safety and effectiveness can reasonably be ensured through the use of special controls, such as performance standards, post-market surveillance and patient registries, as well as adherence to the general controls provisions applicable to Class I devices. Class III devices are devices that generally must receive pre-market approval by the FDA pursuant to a pre-market approval application ("PMA") to ensure their safety and effectiveness. Generally, Class III devices are limited to life sustaining, life supporting or implantable devices; however, this classification can also apply to novel technology or new intended uses or applications for existing devices.
Before most medical devices can be marketed in the United States, they are required by the FDA to secure either clearance of a pre-market notification pursuant to Section 510(k) of the FDC Act (a "510(k) Clearance") or approval of a PMA. Obtaining approval of a PMA can take several years. In contrast, the process of obtaining 510(k) Clearance generally requires a submission of substantially less data and generally involves a shorter review period. Most Class I and Class II devices enter the market via the 510(k) Clearance procedure, while new Class III devices ordinarily enter the market via the more rigorous PMA procedure. In general, approval of a 510(k) Clearance may be obtained if a manufacturer or seller of medical devices can establish that a new device is "substantially equivalent" to a predicate device other than one that has an approved PMA. The claim for substantial equivalence may have to be supported by various types of information, including clinical data, indicating that the device is as safe and effective for its intended use as its legally marketed equivalent device. The 510(k) Clearance is required to be filed and cleared by the FDA prior to introducing a device into commercial distribution. Market clearance for a 510(k) Notification submission may take 3 to 12 months or longer. If the FDA finds that the device is not substantially equivalent to a predicate device, the device is deemed a Class III device, and a manufacturer or seller is required to file a PMA. Approval of a PMA for a new medical device usually requires, among other things, extensive clinical data on the safety and effectiveness of the device. PMA applications may take years to be approved after they are filed. In addition to requiring clearance or approval for new medical devices, FDA rules also require a new 510(k) filing and review period prior to marketing a changed or modified version of an existing legally marketed device if such changes or modifications could significantly affect the safety or effectiveness of that device. FDA prohibits the advertisement or promotion of any approved or cleared device for uses other than those that are stated in the device's approved or cleared application.
We have received approval from the FDA to market our RemeCure CL15 dental curing lamp in the United States. We submitted our application for approval on FDA Form 510(k) on October 30, 2002 and received FDA approval for this product on January 9, 2003. None of our other products have FDA approval for marketing in the United States. We intend to file applications for approval on FDA Form 510(k) for MetaTrayTM, iWhiteTM and RemeSmileTM during our fiscal year ending March 31, 2006, if such approval is required under the FDA. We believe that our products: MetaTrayTM, iWhiteTM and RemeSmileTM will not require a 510(k) submission because the products fall within an exemption under the 510(k) regulation.
International sales of medical devices are also subject to the regulatory requirements of each country. In Europe, the regulations of the European Union require that a device have a CE Mark, a mark that indicates conformance with European Union laws and regulations before it can be sold in that market. The regulatory international review process varies from country to country. We rely upon our distributors and sales representatives in the foreign countries in which we market our products to ensure we comply with the regulatory laws of such countries.
Costs and Effects of Compliance with Environmental Laws and Regulations
We are not involved in a business which involves the use of materials in a manufacturing stage where such materials are likely to result in the violation of any existing environmental rules and/or regulations. Further, we do not own any real property which could lead to liability as a landowner. Therefore, we do not anticipate that there will be any substantial costs associated with the compliance of environmental laws and regulations.
Employees
We currently retain 21 full-time employees in Belgium. We currently have one employee in the United States. We currently have employment agreements with Philippe Van Acker, our Chief Financial Officer, and Judd Hoffman, our Vice- President of Worldwide Sales and Operations. We believe that our employee relationships are satisfactory. Long term, we will attempt to hire additional employees as needed based on our growth rate.
DESCRIPTION OF PROPERTY
We lease a 26,915 square foot 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 (Euro) 6,560 per month ($8,505 per month at March 31, 2005). In addition, we are responsible for the payment of annual real estate taxes on the property that totaled (Euro) 3,245 ($4,207) for calendar year 2004.
LEGAL PROCEEDINGS
We are not a party to any material legal proceeding.
DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS
Directors and Executive Officers
The following table sets forth the names and ages of our current directors and executive officers, the principal offices and positions held by each person and the date such person became one of our directors or executive officers. Our
executive officers are elected annually by the Board of Directors. Each year our stockholders elect the board of directors. Our executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. There was no arrangement or understanding between any executive officer and any other person pursuant to which any person was elected as an executive officer.
------------------------------- ------- ----------------------------------------------------------- Person Age Position ------------------------------- ------- ----------------------------------------------------------- Guy De Vreese 50 Chairman ------------------------------- ------- ----------------------------------------------------------- Robin List 34 Director and Chief Executive Officer ------------------------------- ------- ----------------------------------------------------------- Philippe Van Acker 41 Chief Financial Officer and Assistant Secretary ------------------------------- ------- ----------------------------------------------------------- Stephen Ross 46 Director and Secretary ------------------------------- ------- ----------------------------------------------------------- Fred Kolsteeg 62 Director ------------------------------- ------- ----------------------------------------------------------- Judd Hoffman 31 Vice President of Worldwide Sales and Operations ------------------------------- ------- ----------------------------------------------------------- |
Guy De Vreese, Chairman. From April 1, 2002, Mr. De Vreese has served as our Chairman of the Board. From June 2001 Mr. De Vreese has also served as President of Remedent N.V. Mr. De Vreese served as President of DMDS, Ltd., a European subsidiary of Dental & Medical Systems, Inc. DMDS, Ltd. developed and marketed high-tech dental equipment. In August 1996, Mr. De Vreese founded DMD N.V., a Belgian company that was the independent European distributor for DMDS products and was its Chief Executive Officer until DMD purchased its distribution rights in April 1998. From 1998 to the present , Mr. De Vreese has worked as CEO of Lident, N.V., a Belgian company that merged with DMD. From October 2002 to the present, Mr. De Vreese has served as director of Lident, N.V. and Lausha, N.V. Mr. De Vreese also served as a consultant providing services to DMDS, Ltd. from February 1999 to June 2001.
Robin List, Director and Chief Executive Officer. From April 1, 2002, Mr. List has served as our CEO and as a director. From April 2001, Mr. List has served a director of Remedent N.V. From January 1998 through April 2001, Mr. List was a director of New BitSnap N.V., a Belgian company. In this position Mr. List consulted for DMDS Ltd., a European subsidiary of Dental & Medical Diagnostic Systems, Inc. DMDS, Ltd. developed and marketed high-tech dental equipment. From August 1995 to January 1998 Mr. List served as commercial director for WAVE Imaging B.V. a Dutch based company that provided digital services. Mr. List resides in Belgium.
Philippe Van Acker, Chief Financial Officer and Assistant Secretary. Mr. Van Acker was appointed as our Chief Financial Officer as of March 30, 2005. From July 2001 to March 30, 2005, Mr. Van Acker has served as a director of the Company's subsidiary, Remedent N.V. where he has also served as financial controller. From 1999 to 2001, Mr. Van Acker served as Director of Finance for DMDS, Ltd., a European subsidiary of Dental & Medical Diagnostic Systems, Inc., a company that developed and marketed high-tech dental equipment. From 1992 to 1999, Mr. Van Acker held various positions with Pfizer Medical Technology Group. The Company has an employment agreement with Mr. Van Acker dated as of June 8, 2001.
Stephen Ross, Director and Secretary. Mr. Ross has served as a director and Chief Financial Officer of the Company since August 2001 and as our Secretary since April 2002. From February 1998 through January 2001, Mr. Ross was CFO of Dental & Medical Diagnostic Systems, Inc., a company that developed and marketed high-tech dental equipment and declared bankruptcy in July 2001. Commencing in 1996 and terminating February 1998, Mr. Ross served as a senior management consultant with Kibel and Green, a corporate restructuring and management firm. Prior to working for Kibel and Green, Mr. Ross served as CFO and co-founder of a personal care company, and as tax manager with an accounting firm. Mr. Ross resides in Los Angeles, California. Since April 2003, Mr. Ross has worked as CEO of IMDS, LLC, which is a United States distributor for the Company.
Fred Kolsteeg, Director. Mr. Kolsteeg has served as a director of the Company since May 2002. Since 1996, Mr. Kolsteeg has served as the president of WAVE Communications, a Dutch based advertising agency. Prior to founding WAVE in 1996, he founded several other advertising agencies such as ARA, Team and Team Saatchi. Mr. Kolsteeg has also worked at Phillips and Intermarco Publicis. Mr. Kolsteeg is the Chief Executive Officer and director of Kolsteeg Beleggingsmaatschappij B.V. and PureWhite International BV. Mr. Kolsteeg resides in Holland.
Judd Hoffman, Vice President of Worldwide Sales and Operations. Mr. Hoffman was appointed our Vice President of Worldwide Sales and Operations in October 2005. Mr. Hoffman was the Executive Director of Global Operations of Discus Dental, Inc., a manufacturer and distributor of dental supplies from February 2003 to October 2005. From January 2002 to February 2003, he worked as an independent consultant for various multi-national companies supervising the growth and management of offices worldwide. From 1998 to 2002, he was the Chief Operating Officer, Senior Vice President of Global Business Development and Co-Founder of Junroo Netcommunications, Inc., an international privately-managed internet protocol network and services company. Mr. Hoffman earned his bachelor's degree in Biology and Psychology from the University of Georgia.
Audit Committee Financial Expert
Our Board of Directors has not established a separate audit committee within the meaning of Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Instead, our entire Board of Directors acts as the audit committee within the meaning of Section 3(a)(58)(B) of the Exchange Act. In addition, no director on our Board of Directors currently meets the definition of an "audit committee financial expert" within the meaning of Item 401(e) of Regulation SB. We are currently seeking candidates for outside directors and for a financial expert to serve on a separate audit committee when we establish one. Due to our small size and limited resources, it has been difficult to recruit outside directors and financial experts, especially due to the fact that we do not have directors and officer's liability insurance to offer suitable candidates.
EXECUTIVE COMPENSATION
Summary Compensation
The following table and attached notes sets forth the compensation of our executive officers and directors during each of the last three fiscal years. The remuneration described in the table does not include our costs of benefits furnished to the named executive officers, including premiums for health insurance, reimbursement of expense, and other benefits provided to such individual that are extended in connection with the ordinary conduct of our business. The value of such benefits cannot be precisely determined, but the executive officers named below did not receive other compensation in excess of the lesser of $25,000 or 10% of such officer's cash compensation:
Annual Compensation Long Term Compensation
Awards Payouts
Other Restricted Securities LTIP All other
Name and Annual stock Underlying ay-out compensation
Principal Salary Bonus compensation award(s) Options/ ($) ($)
Position Year ($) ($) ($) ($) SARs (#) p s
-----------------------------------------------------------------------------------------------------------------------------------
Guy De Vreese,(1) 2005 $-0- $-0- $-0- $-0- -0- $-0- $225,000(2)
Chairman, CEO 2004 $-0- $-0- $-0- $-0- -0- $-0- $214,000(2)
of Remedent N.V. 2003 $-0- $-0- $-0- $-0- -0- $-0- $132,000(2)
Robin List,(3) Director 2005 $188,000 $-0- $-0- $-0- -0- $-0- $-0-
CEO 2004 $169,000 $-0- $-0- $-0- -0- $-0- $-0-
2003 $110,000 $-0- $-0- $-0- -0- $-0- $-0-
Philippe Van Acker, 2005 $105,000 $-0- $-0- $-0- -0- $-0- $-0-
CFO(6) 2004 $ 94,000 $-0- $-0- $-0- -0- $-0- $-0-
2003 $ 83,000 $-0- $-0- $-0- -0- $-0- $-0-
Stephen F. Ross,(5) 2005 $-0- $-0- $-0- $-0- -0- $-0- $-0-
Director, 2004 $60,000 $-0- $-0- $-0- -0- $-0- $-0-
Secretary 2003 $28,951 $-0- $-0- $-0- 50,000(4) $-0- $-0-
|
(1) In March 2002, prior to Mr. De Vreese becoming an officer or director of the Company, he was issued options to purchase 50,000 shares of our common stock, which vested on March 29, 2002 and have an exercise price of $1.00 (fair market value at date of grant) per share.
(2) These amounts are consulting fees paid by Remedent N.V. to Lausha, N.V. and Lident N.V., both companies controlled by Mr. De Vreese, pursuant to an oral consulting agreement between these companies and Remedent N.V.
(3) In March 2002, prior to Mr. List becoming an officer or director of the Company, he was issued options to purchase 50,000 shares of our common stock which vested on March 29, 2002 and have an exercise price of $1.00 (fair market value at date of grant) per share, however Mr. List was not an officer of the Company during fiscal year 2002.
(4) In March 2002, Mr. Ross was issued options to purchase 50,000 shares of our common stock which vested on March 29, 2002 and have an exercise price of $1.00 (fair market value at date of grant) per share.
(5) In March 2005, Mr. Ross resigned his position as Chief Financial Officer.
(6) In March 2005, Mr. Van Acker was appointed as the Company's Chief Financial Officer. In March 2002, prior to Mr. Van Acker becoming an officer of the Company, he was issued options to purchase 10,000 shares of our common stock which vested on March 29, 2002 and have an exercise price of $1.00 (fair market value at date of grant) per share, however Mr. Van Acker was not an officer of the Company during fiscal year 2002.
Employment Agreements
We currently have employment agreements with Mr. Philippe Van Acker, our Chief Financial Officer, and Mr. Judd Hoffman, our Vice President of Worldwide Sales and Operations. We do not currently have any other employment agreements with our executive officers. However, we anticipate having employment contracts with executive officers and key personnel as necessary, in the future.
Compensation of Directors
Our directors do not receive any cash compensation, but are entitled to reimbursement of their reasonable expenses incurred in attending directors' meetings. However, at the discretion of our Board of Directors, we may periodically issue stock options under our stock option plan to directors.
Stock Option Plan
On May 29, 2001, our Board of Directors adopted an Incentive and Nonstatutory Stock Option Plan ("2001 Plan"), reserving 250,000 shares underlying options for issuance under this stock option plan. There is a restriction that no more than 50,000 options may be granted to any one individual or entity in any one calendar year under the stock option plan. As of October 13, 2005, 222,500 options were outstanding under the 2001 Plan.
In February and December 2004, in an action taken by written consent of the holders of a majority of the issued and outstanding shares of our common stock, we authorized the implementation of a 2004 Incentive and Nonstatutory Stock Option Plan, following the implementation of the reverse stock split (so as not to be affected by the reverse stock split), reserving 800,000 shares of common stock for issuance to employees, directors and consultants of the Company or any subsidiaries. This action became effective June 3, 2005. As of October 19, 2005, 400,000 options under the 2004 Incentive and Nonstatutory Stock Option Plan were outstanding.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of October 17, 2005 certain information relating to the ownership of our common stock by (i) each person known by us to be the beneficial owner of more than 5% of the outstanding shares of the class of equity security, (ii) each of our Directors, (iii) each of the our executive officers, and (iv) all of our executive officers and directors as a group. Except as may be indicated in the footnotes to the table and subject to applicable community property laws, each of such persons has the sole voting and investment power with respect to the shares owned.
------------------------------------------------------ ----------------------- ----------------------
Shares Beneficially Percentage
Beneficial owner (1) Owned Beneficially Owned
------------------------------------------------------ ----------------------- ----------------------
Guy De Vreese, Chairman (2) 7,456,919 57.73%
Xavier de Cocklaan 42
9831 Deurle, Belgium
------------------------------------------------------ ----------------------- ----------------------
Robin List, CEO, Director (3) 782,827 6.06%
Xavier de Cocklaan 42
9831 Deurle, Belgium
------------------------------------------------------ ----------------------- ----------------------
Philippe Van Acker, CFO (4) 10,000 *%
Xavier de Cocklaan 42
9831 Deurle, Belgium
------------------------------------------------------ ----------------------- ----------------------
Stephen Ross, Secretary, Director (5)
1921 Malcolm #101
Los Angeles, CA 90025 64,495 *%
------------------------------------------------------ ----------------------- ----------------------
|
------------------------------------------------------ ----------------------- ----------------------
Shares Beneficially Percentage
Beneficial owner (1) Owned Beneficially Owned
------------------------------------------------------ ----------------------- ----------------------
Fred Kolsteeg (6) 110,000 *%
Managelaantje 10
3062 CV Rotterdan
The Netherlands
------------------------------------------------------ ----------------------- ----------------------
Judd Hoffman - -
Judd Hoffman
702A N. Juanita Avenue
Redondo Beach, CA 90277
------------------------------------------------------ ----------------------- ----------------------
All Officers and Directors as a Group (5 persons) 8,424,241 64.53%
------------------------------------------------------ ----------------------- ----------------------
Austin W. Marxe and David M. Greenhouse (7) 3,333,334 22.95%
153 East 53rd Street, 55th FL
New York, NY 10022
------------------------------------------------------ ----------------------- ----------------------
MDB Capital Group LLC (8) 507,972 3.83%
401 Wilshire Blvd. Suite 1020
Santa Monica, CA 90401
------------------------------------------------------ ----------------------- ----------------------
Christopher A. Marlett (9) 7.84%
401 Wilshire Blvd. Suite 1020
Santa Monica, CA 90401 1,059,409
------------------------------------------------------ ----------------------- ----------------------
|
* Less than one percent
(1) Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Pursuant to the rules of the Securities and Exchange Commission, shares of common stock which an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be beneficially owned and outstanding for the purpose of computing the percentage ownership of any other person shown in the table.
(2) Guy De Vreese holds 53,000 shares in his own name, including 50,000 shares of common stock underlying options which vested on March 29, 2002 and have an exercise price of $1.00 per share; 239,248 shares of common stock held in the name of Lident N.V., a Belgian company controlled by Guy De Vreese, including warrants to purchase 1,320 shares of common stock with the exercise price of $10.00; 7,164,671 shares of common stock held in the name of Lausha N.V., a Belgian company controlled by Guy De Vreese, including 8,670 shares of common stock underlying warrants which became exercisable on August 21, 2002 and have the exercise price of $10.00 per share.
(3) Includes 50,000 shares of common stock underlying options which vested on March 29, 2002 and have an exercise price of $1.00 per share.
(4) Includes 10,000 shares of common stock underlying options which vested on March 29, 2002 and have an exercise price of $1.00 per share.
(5) Includes 50,000 shares of common stock underlying options which vested on March 29, 2002 and have an exercise price of $1.00 per share and 12,500 shares of common stock underlying options which vested on April 8, 2004 and have an exercise price of $2.00 per share.
(6) Consists of 50,000 shares of common stock held in his own name, including 5,000 shares of common stock underlying options which vested on March 29, 2002 and have an exercise price of $1.00 per share, 60,000 shares of common stock held by Kolsteeg Beleggingsmaatschappij B.V., a Dutch company of which Fred Kolsteeg is the principal, including 10,000 shares of common stock underlying warrants held by Kolsteeg Beleggingsmaatschappij B.V. with an exercise price of $10.00 per share.
(7) Consists of 1,666,667 shares of common stock of the Company held by Special Situations Private Equity Fund, L.P. ("SSF Private Equity") and warrants to purchase 1,666,667 shares of common stock held by SSF Private Equity. MG Advisers, L.L.C. ("MG) is the general partner and investment adviser to SSF Private Equity. Austin W. Marxe and David M. Greenhouse are the principal owners of MG. Through their control of MG, Messrs. Marxe and Greenhouse share voting and investment control over the portfolio securities of SSF Private Equity.
(8) Consists of 111,286 shares of common stock and 111,286 shares of common stock underlying warrants to purchase the Company's common stock exercisable for five years at an exercise price of $1.20 per share issued for financial advisory services in connection with the restructuring of the Company completed on June 3, 2005 and; 285,400 shares of common stock underlying warrants (representing 10% of the units subscribed to date of July 20, 2005) authorized to be issued in conjunction with a private placement each unit exercisable at $1.50 per Unit consisting of one share of the Company's common stock and a warrant exercisable for five years to purchase an additional share of the Company's common stock at an exercise price of $1.75.
(9) Consists of 197,839 shares of common stock held in the name of the Christopher Marlett Living Trust acquired by conversion of a $100,000 note payable on June 3, 2005 which required automatic conversion contingent upon successful completion of any corporate restructuring, 100,155 shares of common stock and 100,155 shares of common stock underlying warrants to purchase the Company's common stock exercisable for five years at an exercise price of $1.20 per share issued for financial advisory services in connection with the restructuring of the Company completed on June 3, 2005, 153,288 shares of common stock underlying warrants (representing 10% of the units subscribed to date of July 20, 2005) authorized to be issued in conjunction with a private placement each unit exercisable at $1.50 per Unit consisting of one share of the Company's common stock and a warrant exercisable for five years to purchase an additional share of the Company's common stock at an exercise price of $1.75 and the amounts shown in (8) above in as much as Mr. Marlett is the Managing Principal of MDB Capital LLC.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 14, 2002, we entered into an Asset Purchase Agreement with Famcare 2000, LLC, a Nevada limited liability company, owned and operated by Rob Hegemann, the son of Ken Hegemann, who was one of our directors, selling our Remedent Toothbrush division to Famcare 2000, LLC. The agreement provided for the sale of our old Remedent Toothbrush business, which accounted for approximately $50,000 in revenues for the fiscal year ended March 31, 2002. The business, which engages in the worldwide distribution of the Remedent Toothbrush, had been our sole activity since 1996. As a condition of the sale, Famcare 2000 agreed to assume responsibility for the liabilities relating to the toothbrush business, which liabilities exceeded the value of the toothbrush business by approximately $310,000. Therefore the terms of the agreement called for us to issue 37,500 shares of our common stock to Famcare 2000 in consideration of Famcare 2000 taking over the toothbrush business and assuming responsibility for the related liabilities. Famcare 2000 received an effective price of $8.20 per share, representing an approximate 400% premium over the Company's market value at the time. This transaction was not consummated until September 2002, 20 days following the mailing to our stockholders of a Definitive Information Statement on Schedule 14C for that transaction.
On February 11, 2002, we, through our subsidiary, Remedent N.V., established a line of credit with ING (formerly Bank Brussel Lambert) for Euro 250,000 ($218,100 at March 31, 2002). Due to insufficient assets maintained by
Remedent N.V. as of the date of the line of credit, ING imposed two requirements for the extension of credit; (1) Mr. De Vreese personally guarantee the line of credit, and (2) Remedent N.V. use the line of credit repay in full the Euro 125,000 outstanding balance on BBL's existing line of credit to Dental Marketing Development N.V. ("DMD"), a company owned and operated by Guy De Vreese. Accordingly, Guy De Vreese personally guaranteed the Euro 250,000 BBL line of credit, including pledging as collateral specific investments owned by Mr. De Vreese valued at approximately $250,000, and Remedent N.V. drew Euro 125,000 from this line of credit to advance to DMD and booked this amount as an interest-free loan to DMD. DMD must repay this loan (i) if the line of credit is cancelled by BBL due to insufficient security, (ii) if Remedent N.V. finds other facilities to secure payment of Guy De Vreese's funds and no longer needs the line of credit, or (iii) Remedent N.V. is still using the line of credit but has found other facilities to secure payment of Guy De Vreese's funds. Remedent N.V. did not take any procedural steps to insure fairness in the terms of this transaction to the Company or to Remedent N.V. DMD later merged with Lident N.V. Effective July 13, 2005, our Board of Directors approved the repayment of the advance to DMD in exchange for 93,533 shares of our common stock at $1.50 per share, based upon a principal amount of Euro 115,000 and a conversion rate of $1.22 to the Euro . The transaction was approved by the disinterested directors with Mr. De Vreese abstaining from the vote.
In May 2003 we advanced (Euro) 5,400 ($7,001) to Pure White International in exchange for a 30% interest in this company. Pure White International is a related party as a result of its principal being the spouse of Mr. Fred Kolsteeg, one of our directors. As anticipated, in July 2005, this investment was repurchased by Pure White International for (Euro) 5,400 ($7,001). Pure White International BV was our former distributor for the CleverWhite tooth whitening kits for the Dutch market prior to our licensing these distribution rights to Omega Pharma.
On March 23, 2004, we issued 100,000 shares of our common stock to Lident N.V., a Belgium corporation partly owned and controlled by Guy De Vreese, our Chairman of the Board, and 50,000 shares of common stock to Robin List, our Chief Executive Officer. These shares were issued pursuant to an agreement dated March 20, 2002 with New BitSnap, N.V., a predecessor company of Lident N.V., who was to receive 150,000 shares of our common stock in repayment of a debt of $240,000 owed to New BitSnap, N.V. consisting of $201,000 in consulting services and $39,000 in advanced expenses from March 1, 2001 through March 31, 2002. The consulting services consisted of the set-up and implementation of Remedent N.V. and were provided pursuant to an oral agreement, prior to Mr. De Vreese becoming an officer and director of Remedent USA, Inc. At the request of Lident N.V., 20,000 of the shares due to Lident N.V. were issued to Mr. List to satisfy debts between Lident N.V. and Mr. List.
On March 23, 2004, pursuant to an agreement dated March 20, 2002, we issued 35,625 shares of our common stock to Robin List, our Chief Executive Officer, in repayment of $57,000 in accrued fees for consulting services by Mr. List from March 1, 2001 to March 31, 2002. The consulting services consisted of the set-up and implementation of Remedent N.V. and were provided pursuant to an oral agreement, prior to Mr. List becoming an officer and director of Remedent USA, Inc.
On March 23, 2004, we also issued 25,000 shares of our common stock to Mr. List pursuant to an oral agreement for consulting services valued at $22,700 related to developing the IMDS business concept. The consulting services were for providing Dutch dentists to serve as customers of IMDS and Belgium dentists to work in the Netherlands.
Also pursuant to the March 20, 2002 agreement, on March 23, 2004, we issued 3,000 shares of our common stock to Mr. De Vreese, our Chairman of the Board, in repayment of $30,000 in accrued fees for consulting services by Mr. De Vreese from March 1, 2001 to March 31, 2002. The consulting services were provided prior to Mr. De Vreese becoming an officer and director of Remedent USA, Inc. and pursuant to an oral agreement and consisted of the set-up and implementation of Remedent N.V.
On March 23, 2004, we issued 62,500 shares of our common stock to Lausha N.V., a Belgian company controlled by Guy De Vreese, our Chairman of the Board. Lausha N.V. purchased these shares for $1.60 per share for a total price of $100,000 on January 11, 2002. We used this capital to fund the operations of Remedent N.V.
On March 23, 2004, we issued 1,996 shares of our common stock to Stephen Ross, our Chief Financial Officer at the time, in repayment of a debt consisting of $19,959 and unpaid salary as of March 31, 2003 for his services as Chief Financial Officer.
On March 23, 2004, we issued 47,250 shares of our common stock to Kenneth J. Hegemann, a former director, in repayment of $472,500 of debts owed to Mr. Hegemann and parties affiliated with him. These debts consisted of $195,975 owed to Mr. Hegemann in unpaid salary, $179,473 owed to his wife and our former Chief Executive Officer, Rebecca Inzunza, in unpaid salary, $8,914 owed to his son, Robert Hegemann in unpaid salary, $23,353 owed to Mr. Hegemann in interest on these debts, $26,010 owed to CRA Labs, a company controlled by Mr. Hegemann, for expenses advanced by CRA Labs on our behalf, and $26,245 owed to Famcare 2000, a company affiliated with Mr. Hegemann, in connection with the sale of the Remedent Toothbrush division.
Guy De Vreese, our Chairman of the Board, is the managing director of our subsidiary, Remedent N.V. Mr. De Vreese provides his services as Remedent N.V.'s Managing Director through two companies, Lausha, N.V. and Lident N.V. Lausha, N.V. and Lident N.V. have consulting arrangements with Remedent N.V. that provide Mr. De Vreese's services and are both companies controlled by Mr. De Vreese. Lausha N.V. and Lident N.V. received a combined total of $214,000 paid in cash and stock as compensation for these services. We expect to pay these companies an aggregate of approximately $ 214,000 in consulting fees for services in fiscal year 2005.
On March 23, 2004, we borrowed $100,000 from the Christopher T. Marlett Living Trust pursuant to the terms of a Convertible Promissory Note and Security Agreement with the Christopher T. Marlett Living Trust. Interest accrues on the unpaid principal at the rate of 10% per annum, compounding annually. The Note matured on September 30, 2004 and is secured by all of our assets. The Note is convertible into common stock as follows: (i) It will automatically convert into that number of shares that will equal two percent of our outstanding shares calculated on a fully diluted basis automatically on the completion of our planned restructuring; or (ii) if on the maturity date, if our planned restructuring is not completed, the note holder, in its discretion, may elect to have the debt converted into that number of shares that will equal two percent (2%) of our outstanding shares as calculated on a fully diluted basis immediately following our planned restructuring. Our planned restructuring consisted of an acquisition of the remaining seventy-eight percent (78%) of Remedent N.V. not owned by us, a one-for-twenty reverse stock split, the working-out of past due obligations for stock and/or cash and the implementation of a stock option plan. Mr. Marlett, the trustee of the Christopher T. Marlett Living Trust, is a partner of MDB Capital Group LLC, a NASD registered broker-dealer that has provided advice to us regarding our restructuring. We used the proceeds of this loan for development expenses associated with the tray-based teeth whitening system and for legal expenses. On June 3, 2005, following completion of our restructuring, we converted the $100,000 note payable to Christopher T. Marlett Living Trust into 197,839 shares of common stock.
In September 2004, we entered into an agreement with Lident N.V., a company controlled by Mr. De Vreese, our Chairman, to obtain an option, exercisable through December 31, 2005, to license a patent and worldwide manufacturing and distribution rights for a potential new product for which Lident had been assigned certain rights by the inventors of the products, who are unrelated parties, prior to Mr. De Vreese's association with us. The agreement required us to advance to the inventors through Lident a fully refundable deposit of (Euro) 100,000 ($129,650) subject to our due diligence regarding the enforceability of
the patent and marketability of the product, which, if viable, will be assigned to us for additional consideration to the inventors of (Euro) 100,000 ($129,650) and an ongoing royalty from sales of products related to the patent equal to 3% of net sales and, if not viable, the deposit will be repaid in full to us by Lident. The consideration we had agreed to pay Lident upon the exercise of the option is the same as the consideration Lident is obligated to pay the original inventors. Consequently, Lident will not profit from the exercise of the option. Furthermore, at a meeting of our Board of Directors on July 13, 2005, we accepted Lident's offer to facilitate an assignment of Lident's intellectual property rights to the technology to us in exchange for the reimbursement of Lident's actual costs incurred relating to the intellectual property. Consequently, if we exercise the option, it is anticipated that all future payments, other than the reimbursement of costs, would be paid directly to the original inventors and not to Lident.
As part of our corporate restructuring, holders of our debentures in the principal amount of $127,500 agreed to convert this principal plus accrued interest into 695,340 shares of our common stock. These agreements were effective December 31, 2004. The conversion price for this transaction was $.05 per share and the closing bid price for our shares on December 31, 2004 was $.08 and March 22, 2005 was $.04, respectively. The following debenture holders received shares in the conversion of their debt: Edward Quincy (2,030,980 shares); Leon Grothe (143,340 shares); Dr. Timothy Peiper (420,820 shares) and Lee Dahl (100,200 shares). Since the conversion took place prior to the reverse stock split, the numbers reflected in this paragraph are on a pre-reverse stock split basis.
In February and December 2004, in an action taken by written consent of the holders of a majority of the issued and outstanding shares of our common stock, we authorized the acquisition of the remaining 78% of our subsidiary, Remedent N.V., that we did not own from Messrs. Guy De Vreese and Robin List, our Chairman and Chief Executive Officer respectively (the "Exchanging Stockholders"), through the issuance of shares of our common stock equal to 78% of our issued and outstanding shares following the completion of the transaction. Mr. De Vreese held his shares in Remedent N.V. in Lausha, N.V., a company he controls. On June 3, 2005, we consummated the acquisition of Remedent N.V. and issued 7,715,703 post- split shares of its restricted common stock to the Exchanging Stockholders in exchange for all of the issued and outstanding shares of Remedent N.V. owned by the Exchanging Stockholders. As a result of this acquisition, Remedent N.V. is a wholly owned subsidiary of the Company as of June 3, 2005.
Since the inception of IMDS, Inc. ("IMDS") in April, 2003, IMDS, a distributor of our products, has purchased inventory valued at approximately $140,000 from us. All inventory was purchased at standard pricing and as of July 31, 2005, approximately $10,000 remains outstanding. Mr. Stephen Ross, one of our directors, is also the Chief Executive Officer of IMDS.
Upon completion of our corporate restructuring, MDB Capital Group LLC, for financial advisory services rendered to us, was entitled to receive shares of our common stock equal to 2.5% of our issued and outstanding shares as of June 3, 2005 and five year common stock purchase warrants equal to another 2.5% of our outstanding shares as of June 3, 2005 that will be exercisable beginning ninety (90) days after June 3, 2005 with an exercise price of $1.20 per share. Accordingly, as of June 3, 2005, we were obligated to issue to MDB Capital Group LLC, or its designee, 247,298 shares of our common stock and 247,298 five year common stock purchase warrants.
In connection with our private placement of 2,520,661 Units consisting of one share of our common stock and one common stock purchase warrant in July 2005 (the "Units"), we engaged MDB Capital Group LLC, as our exclusive agent to offer the Units ("MDB"). MDB is entitled to a placement agent's fee equal to ten percent (10%) of the gross proceeds derived from the sale of the Units together with a five year warrant to purchase up to ten percent (10%) of the number of Units sold in the Offering at an exercise price of $1.50 per Unit. Moreover, we agreed to reimburse MDB for its out-of-pocket expenses related to the sale of the Units and to register with the Commission our shares underlying MDB's warrants.
In connection with the employment of Mr. Hoffman, we issued Mr. Hoffman options to purchase 400,000 shares of our common stock at an exercise price of $4.00 in October 2005. The options were granted pursuant to our 2004 Incentive and Nonstatutory Stock Option Plan. One-third of the options are scheduled to vest on each annual anniversary of Mr. Hoffman's employment. As of the date of this Prospectus, none of the options have vested.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
On March 17, 2005, our Board of Directors received written notice of Farber & Hass, LLP's decision not to stand for reappointment as our independent accountants.
Farber & Hass, LLP's report on our consolidated financial statements for the fiscal year ended March 31, 2004 did not contain an adverse opinion or disclaimer of opinion, or was modified as to uncertainty, audit scope or accounting principles. Farber & Hass, LLP's report on our consolidated financial statements for the fiscal year ended March 31, 2003 and March 31, 2002 did not contain an adverse opinion or disclaimer of opinion, or was modified as to uncertainty, audit scope or accounting principles, however, they were modified to include an explanatory paragraph wherein they expressed substantial doubt about our ability to continue as a going concern.
During the years ended March 31, 2002, 2003 and 2004 and through March 17, 2005, there were no disagreements with Farber & Hass, LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to Farber & Hass, LLP's satisfaction, would have caused them to make reference to the subject matter of such disagreements in connection with their report on our consolidated financial statements for such years.
On March 30, 2005, we engaged PKF Bedrijfsrevisoren, Antwerp, Belgium ("PKF") as our new independent accountants to audit our financial statements for the fiscal year ending March 31, 2005. The decision to change our independent accountants to PKF was considered and approved by our Board of Directors. Neither us, nor anyone acting on our behalf, consulted PKF regarding any matters specified in Items 304(a)(2)(i) or 304(a)(2)(ii) of Regulation S-B.
SELLING STOCKHOLDERS
The following table identifies the Selling Stockholders, as of October 17, 2005, and indicates certain information known to us with respect to (i) the number of common shares beneficially owned by the Selling Stockholder, (ii) the number of common shares that may be offered for the Selling Stockholder's account, and (iii) the number of common shares and percentage of outstanding common shares to be beneficially owned by the Selling Stockholders assuming the sale of all of the common shares covered hereby by the Selling Stockholders. The term "beneficially owned" means common shares owned or that may be acquired within 60 days. Shares of common stock that are issuable upon the exercise of outstanding options, warrants, convertible securities or other purchase rights, to the extent exercisable within 60 days of the date of this Prospectus, are treated as outstanding for purposes of computing each Selling Stockholder's percentage ownership of outstanding shares. The Selling Stockholders may sell some, all, or none of their common shares. The number and percentages set forth below under "Shares Beneficially Owned After Offering" assumes that all offered shares are sold.
Shares Beneficially Owned Shares to be Shares Beneficially
Prior to Offering Offered Owned After Offering
------------------------------ ----------------- --------------------------
Name of Selling Stockholder Number Percentage Number Number Percentage
--------------------------- ------ ---------- ------ ------ ----------
Special Situations Private Equity Fund L.P.(1) 3,333,334 22.95% 3,333,334 -0- -0-
260,000 2.00% 260,000 -0- -0-
Lewin Investments LLC(2)
Stephen M. Walker(3) 133,334 1.03% 133,334 -0- -0-
Ponte Vedra Partners Ltd(4) 73,334 * 73,334 -0- -0-
Peter A. Massaniso(5) 73,332 * 73,332 -0- -0-
Pinnacle Asset Management Inc.(6) 73,334 * 73,334 -0- -0-
Massaniso & Co, Inc.(7) 73,334 * 73,334 -0- -0-
London Family Trust(8) 333,332 2.56% 333,332 -0- -0-
Russmir Capital Inc. (9) 40,000 * 40,000 -0- -0-
Gary Cohen(10) 33,334 * 33,334 -0- -0-
Edwin L. Bertolas Revocable Living Trust(11) 40,000 * 40,000 -0- -0-
John Micek(12) 93,336 * 93,336 -0- -0-
Peter Micek(1(3)) 13,334 * 13,334 -0- -0-
Silicon Prairie Partners, L.P(1(4)) 66,668 * 66,668 -0- -0-
Maurice J. Micek(1(5)) 26,668 * 26,668 -0- -0-
James P. Tierney(1(6)) 80,000 * 80,000 -0- -0-
Robert C. Hannah(1(7)) 36,000 * 36,000 -0- -0-
Soh Eng Yeong((18)) 33,980 * 33,980 -0- -0-
Richard Clarkson(19) 33,334 * 33,334 -0- -0-
Richard L. Clarkson TTEE, Joanne M. Clarkson 33,334 * 33,334 -0- -0-
TTEE U/A/O 6/13/91(20)
Lisa Gordon(21) 14,000 * 14,000 -0- -0-
Steven Mintz(22) 36,000 * 36,000 -0- -0-
|
Shares Beneficially Owned Shares to be Shares Beneficially
Prior to Offering Offered Owned After Offering
------------------------------ ----------------- --------------------------
Name of Selling Stockholder Number Percentage Number Number Percentage
--------------------------- ------ ---------- ------ ------ ----------
Michel Van Gerven(23) 40,000 * 40,000 -0- -0-
Joel T. Leonard Trust(24) 68,000 * 68,000 -0- -0-
MDB Capital Group LLC(25) 507,972 3.83% 507,972 -0- -0-
Christopher Marlett(26) 551,437 4.01% 353,598 197,839 1.54%
Dyana Marlett(27) 39,288 * 39,288 -0- -0-
Aaron Grunfeld(28) 49,458 * 49,458 -0- -0-
Karen Simi(29) 33,334 * 33,334 -0- -0-
Gary Cohen(30) 666 * 666 -0- -0-
Anthony Di Giandomenico(31) 1,334 * 1,334 -0- -0-
Greg Bailey(32) 13,080 * 13,080 -0- -0-
Michael Williams(3(3)) 50,000 * 50,000 -0- -0-
|
Footnotes to Table
* Less than 1%
(1) Includes warrants to purchase 1,666,667 shares of common stock. MG is the general partner of and investment adviser to SSF Private Equity. Austin W. Marxe and David M. Greenhouse are the principal owners of MG. Through their control of MG, Messrs. Marxe and Greenhouse share voting and investment control, over the portfolio securities of SSF Private Equity.
(2) Includes warrants to purchase 130,000 shares of common stock.
(3) Includes warrants to purchase 66,667 shares of common stock.
(4) Includes warrants to purchase 36,667 shares of common stock. Peter A. Massaniso is the manager of Ponte Vedra Partners Ltd.
(5) Includes warrants to purchase 36,666 shares of common stock. Peter A Massaniso is the manager of Ponte Vedra Partners Ltd., the President of Pinnacle Asset Management Ltd. and the President of Massaniso & Co., Inc.
(6) Includes warrants to purchase 36,667 shares of common stock. Peter A.
Massaniso is the President of Pinnacle Asset Management Ltd.
(7) Includes warrants to purchase 36,667 shares of common stock. Peter A.
Massaniso is the President of Massaniso & Co, Inc.
(8) Includes warrants to purchase 166,666 shares of common stock.
(9) Includes warrants to purchase 20,000 shares of common stock.
(10) Includes warrants to purchase 16,667 shares of common stock.
(11) Includes warrants to purchase 20,000 shares of common stock.
(12) Includes warrants to purchase 33,334 shares of common stock held in the name of John Micek; 6,667 shares of common stock and warrants to purchase 6,667 shares of common stock held in the name of John Micek as custodian for Gabriel Micek, under the California Uniform Transfer to Minor Act, and 6,667 shares of common stock and warrants to purchase 6,667 shares of common stock held in the name of John Micek as custodian for Jordan Micek under the California Uniform Transfer to Minor Act.
(13) Includes warrants to purchase 6,667 shares of common stock.
(14) Includes warrants to purchase 33,334 shares of common stock. John Micek is the Managing Partner of Silicon Prairie Partners, L.P.
(15) Includes warrants to purchase 13,334 shares of common stock.
(16) Includes warrants to purchase 40,000 shares of common stock.
(17) Includes warrants to purchase 18,000 shares of common stock.
(18) Includes warrants to purchase 16,990 shares of common stock.
(19) Includes warrants to purchase 16,667 shares of common stock.
(20) Includes warrants to purchase 16,667 shares of common stock.
(21) Includes warrants to purchase 7,000 shares of common stock.
(22) Includes warrants to purchase 18,000 shares of common stock.
(23) Includes warrants to purchase 20,000 shares of common stock.
(24) Includes warrants to purchase 34,000 shares of common stock.
(25) Includes warrants to purchase 396,686 shares of common stock.
(26) Includes warrants to purchase 253,443 shares of common stock. Mr. Christopher Marlett is a principal of MDB Capital Group LLC. Excludes ownership disclosed in (25).
(27) Includes warrants to purchase 28,160 shares of common stock.
(28) Includes warrants to purchase 24,729 shares of common stock.
(29) Includes warrants to purchase 33,334 shares of common stock.
(30) Includes warrants to purchase 666 shares of common stock.
(31) Includes warrants to purchase 1,334 shares of common stock.
(32) Includes warrants to purchase 13,080 shares of common stock.
(33) Includes warrants to purchase 50,000 shares of common stock.
PLAN OF DISTRIBUTION
The Selling Stockholders, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling shares of common stock or interests in shares of common stock received after the date of this Prospectus from a Selling Stockholder as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of common stock or interests in shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.
The Selling Stockholders may use any one or more of the following methods when disposing of shares or interests therein:
- ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
- an exchange distribution in accordance with the rules of the applicable exchange;
- privately negotiated transactions;
- short sales effected after the date the registration statement of which this Prospectus is a part is declared effective by the SEC;
- through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
- broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share; and
- a combination of any such methods of sale.
The Selling Stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock, from time to time, under this Prospectus, or under an amendment to this Prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of Selling Stockholders to include the pledgee, transferee or other successors in interest as Selling Stockholders under this Prospectus. The Selling Stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this Prospectus.
In connection with the sale of our common stock or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The Selling Stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this Prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this Prospectus (as supplemented or amended to reflect such transaction).
The aggregate proceeds to the Selling Stockholders from the sale of the common stock offered by them will be the purchase price of the common stock less discounts or commissions, if any. Each of the Selling Stockholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents. We will not receive any of the proceeds from this offering. Upon any exercise of the warrants by payment of cash, however, we will receive the exercise price of the warrants.
The Selling Stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act of 1933, provided that they meet the criteria and conform to the requirements of that rule.
The Selling Stockholders and any underwriters, broker-dealers or agents that participate in the sale of the common stock or interests therein may be "underwriters" within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act. Selling stockholders who are "underwriters" within the meaning of Section 2(11) of the Securities Act will be subject to the Prospectus delivery requirements of the Securities Act.
To the extent required, the shares of our common stock to be sold, the names of the Selling Stockholders, the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying Prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this Prospectus.
In order to comply with the securities laws of some states, if applicable, the common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the common stock may not be sold unless it has been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.
We have advised the Selling Stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the Selling Stockholders and their affiliates. In addition, we will make copies of this Prospectus (as it may be supplemented or amended from time to time) available to the Selling Stockholders for the purpose of satisfying the Prospectus delivery requirements of the Securities Act. The Selling Stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act.
We have agreed to indemnify the Selling Stockholders against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the shares offered by this Prospectus.
We have agreed with the Selling Stockholders to keep the registration statement of which this Prospectus constitutes a part effective until the earlier of (1) such time as all of the shares covered by this Prospectus have been disposed of pursuant to and in accordance with the registration statement or (2) the date on which the shares may be sold pursuant to Rule 144(k) of the Securities Act.
DESCRIPTION OF SECURITIES
We are authorized by our Amended and Restated Articles of Incorporation to issue 50,000,000 shares of common stock, $0.001 par value and 10,000,000 shares of preferred stock, $0.001 par value. As of October 13, 2005, there were 12,857,645, shares of common stock outstanding and no shares of preferred stock outstanding. Holders of shares of common stock have full voting rights, one vote for each share held of record. Stockholders are entitled to receive dividends as may be declared by the Board out of funds legally available therefore and share pro rata in any distributions to stockholders upon liquidation. Stockholders have no conversion, preemptive or subscription rights. All outstanding shares of common stock are fully paid and nonassessable, and all the shares of common stock issued by us upon the exercise of outstanding warrants will, when issued, be fully paid and nonassessable.
On June 3, 2005, we effected a one-for-twenty reverse stock split. In connection therewith, we did not issue any fractional shares of our common stock. Instead, all shares of our common stock held by a stockholder were aggregated into a single certificate and, on June 3, 2005, we issued scrip for any fractional shares resulting from the reverse stock split. Until June 3, 2006, all fractional shares represented by scrip consisting of a whole share may be combined and delivered to us in exchange for a whole share. Thereafter, all outstanding scrip will be void and all holders of scrip will have no rights thereunder. The Holders of scrip do not have the right to vote, the right to receive dividends or to participate in any of our assets upon liquidation or any other rights as one of our stockholders.
DISCLOSURE OF COMMISSION POSITION OF
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Under the Nevada General Corporation Law and our Amended and Restated Articles of Incorporation, our directors will have no personal liability to us or our stockholders for damages incurred as the result of the breach or alleged breach of fiduciary duty as a director involving any act or omission of any such director. This provision does not apply to the directors' (i) acts or omissions that involve intentional misconduct, fraud or knowing violation of law, or (ii) approval of an unlawful dividend, distribution, stock repurchase or redemption under Section 78.300 of the Nevada Revised Statutes. This provision would generally absolve directors of personal liability for negligence in the performance of duties, including gross negligence.
The effect of this provision in our Amended and Restated Articles of Incorporation, is to eliminate our rights and the rights of our stockholders (through stockholder's derivative suits on our behalf) to recover damages against a director for breach of his fiduciary duties as a director (including breaches resulting from negligent or grossly negligent behavior) except in the situations described in clauses (i) and (ii) above. This provision does not limit nor eliminate our rights or any stockholder's rights to seek equitable relief such as an injunction or rescission in the event of a breach of a director's fiduciary duties. The Nevada General Corporation Law grants corporations the right to indemnify their directors, officers, employees and agents in accordance with applicable law. In addition, our Amended and Restated Bylaws authorizes us to indemnify our directors and officers in cases where our officer or director acted in good faith and in a manner reasonably believed to be in our best interest, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
In connection with our engagement of MDB Capital Group LLC, as our exclusive agent for the offering of up to 2,666,667 units consisting of one share of our common stock and one common stock purchase warrant, we have agreed to indemnify MDB Capital Group LLC against various liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments it may be required to make in respect of any of those liabilities.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act" or "Securities Act") may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
LEGAL MATTERS
The validity of the shares of common stock offered by the Selling Stockholders will be passed on by the law firm of Bullivant Houser Bailey PC, Sacramento, California.
EXPERTS
PKF bedrijfsrevisoren, independent registered public accounting firm, audited our consolidated financial statements as of and for the year ended March 31, 2005. Farber & Hass LLP, independent registered public accounting firm, audited our consolidated financial statements as of and for the year ended March 31, 2004. We have included our financial statements in the Prospectus and elsewhere in the registration statement in reliance on Farber and Hass LLP's and PKF bedrijfsrevisoren reports given on their authority as experts in accounting and auditing.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Interwest Transfer Co., Inc., located at 1981 East 4800 South, Suite 100, Salt Lake City, UT 84117, with the same mailing address and telephone number (801) 272-9294.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form SB-2, together with all amendments and exhibits, with the Securities and Exchange Commission. This Prospectus, which forms a part of that registration statement, does not contain all information included in the registration statement. Certain information is omitted and you should refer to the registration statement and its exhibits. With respect to references made in this Prospectus to any of our contracts or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contracts or documents. You may read and copy any document that we file at the Commission's Public Reference Room at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our filings and the registration statement can also be reviewed by accessing the Securities and Exchange Commission's website at http://www.sec.gov.
REMEDENT, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page
For the Three Months Ended on June 30, 2005 and June 30, 2004
(Unaudited)
Condensed Consolidated Balance Sheet at June 30, 2005 and March 31, 2005.................................F-1
Condensed Consolidated Statements of Income (Loss) for the Three Months Ended
June 30, 2005 and June 30, 2004 (Restated)...............................................................F-2
Condensed Consolidated Statements of Shareholders Equity (Deficit) for
the Three Months Ended June 30, 2005.....................................................................F-3
Condensed Consolidated Statements of Comprehensive Income (Loss) for
the Three Months Ended June 30, 2005 and June 30, 2004 (Restated)........................................F-4
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended June 30, 2005 and June 30, 2004 (Restated)..................................................F-5
Supplemental Non-Cash Investing and Financing Activities.................................................F-6
Notes to Interim Condensed Consolidated Financial Statements for the Three
Months Ended June 30, 2005 and June 30, 2004.............................................................F-7
For the Years Ended March 31, 2005 and March 31, 2004 (Audited)
Reports of Independent Registered Public Accounting Firm.................................................F-23
Consolidated Balance Sheets at March 31, 2005 and March 31, 2004.........................................F-25
Consolidated Statements of Operations for the Year Ended March 31, 2005 and
March 31, 2004 ..........................................................................................F-26
Consolidated Statements of Shareholders Deficit for the Year Ended March 31, 2005
and March 31, 2004 ......................................................................................F-27
Consolidated Statements of Cash Flows for the Year Ended March 31, 2005
and March 31, 2004......................................................................................F-28
Supplemental Non-Cash Investing and Financing Activities.................................................F-29
Consolidated Statements of Comprehensive Income (Loss) for the Year Ended
March 31, 2005 and March 31, 2004........................................................................F-30
Notes to Consolidated Financial Statements...............................................................F-31
|
REMEDENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 2005 March 31, 2005
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 23,433 $ 40,442
Accounts receivable, net of allowance for doubtful accounts of
$70,571 at June 30, 2005 and $80,194 at March 31, 2005 892,599 1,488,296
Due from related party 144,986 156,099
Inventories, net 640,631 558,335
Prepaid expense 258,561 192,306
Other prepayments 120,420 129,650
--------- ---------
Total current assets 2,080,630 2,565,128
--------- ---------
PROPERTY AND EQUIPMENT, NET 291,367 85,737
OTHER ASSETS
Deferred offering costs 63,722 -
Patents, net 60,125 61,750
------- -------
123,847 61,750
-------------- --------------
TOTAL ASSETS $ 2,495,844 $ 2,712,615
============== ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current portion, long term debt $ 12,378 $ -
Line of Credit 150,525 -
Notes payable 121,636 294,322
Accounts payable 762,585 889,668
Accrued liabilities 399,358 367,854
Due to related parties 58,958 58,958
Deferred revenue 17,521 18,864
Income taxes payable 142,698 178,269
--------- ---------
Total current liabilities 1,665,659 1,807,935
--------- ---------
LONG TERM DEBT 72,211 -
MINORITY INTEREST IN REMEDENT N.V. - 1,178,590
STOCKHOLDERS' DEFICIT:
Preferred Stock $0.001 par value (10,000,000 shares
authorized, none issued and outstanding) - -
Common stock, $0.001 par value; (50,000,000 shares authorized,
10,337,065 shares issued and outstanding at
June 30, 2005 and 2,176,225 shares issued and outstanding
at March 31, 2005 ) 10,337 2,176
Additional paid-in capital 7,571,871 5,427,289
Accumulated deficit (6,776,637) (5,764,249)
Accumulated other comprehensive income (loss)
(foreign currency translation adjustment) (47,597) 60,874
---------- ---------
Total stockholders' equity (deficit) 757,974 (273,910)
TOTAL LIABILITIES AND STOCKHOLDERS' ---------- ---------
EQUITY (DEFICIT) $ 2,495,844 $ 2,712,615
============== ==============
See notes to the financial statements
|
REMEDENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS JUNE 30, 2005 AND 2004
(UNAUDITED)
June 30, 2005 June 30, 2004
------------- (Restated)
--------------
Net sales $ 1,378,308 $ 1,756,641
Cost of sales 630,685 810,849
------------- -------------
Gross profit 747,623 945,792
Operating Expenses
Research and development 51,814 29,502
Sales and marketing 108,886 77,205
General and administrative 782,096 519,986
Non cash restructuring expense 764,151 -
Depreciation and amortization 13,143 6,922
------------- ------------
TOTAL OPERATING EXPENSES 1,720,090 633,615
INCOME (LOSS) FROM OPERATIONS (972,467) 312,177
OTHER INCOME (EXPENSES)
Interest expense (102,792) (22,057)
Other income 38,712 -
------------- -----------
TOTAL OTHER INCOME (EXPENSES) (64,080) (22,057)
------------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (1,036,547) 290,120
Income tax benefit 24,159 -
MINORITY INTEREST IN REMEDENT N.V. - (238,738)
------------- -----------
NET INCOME (LOSS) $ (1,012,388) $ 51,382
------------- -----------
INCOME (LOSS) PER SHARE
Basic $ (0.32) $ 0.03
------------- -----------
Fully diluted $ (0.32) $ 0.02
------------- -----------
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 3,164,856 1,978,958
------------- -----------
Fully diluted 3,164,856 2,067,708
------------- -----------
See notes to the financial statements
|
REMEDENT , INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY (DEFICIT)
FOR THE THREE MONTHS JUNE 30, 2005
(UNAUDITED)
Additional
Paid in Accumulated
Shares Amount Capital Deficit Other Total
------ ----- ---------- ----------- ----- -----
Balance, March 31, 2005 2,176,225 $ 2,176 $ 5,427,289 $(5,764,249) $60,874 $ (273,910)
Common stock issued for 78% equity interest in
Remedent NV 7,715,703 7,716 1,170,876 - - 1,178,592
Common Stock issued for conversion of $100,000
note payable including $10,000 accrued interest
and $100,000 non cash interest as a result of the
beneficial conversion feature 197,839 198 209,802 - - 210,000
Common Stock issued to MDB Capital Group, LLC for
consulting fees 247,298 247 395,430 - - 395,677
Warrants issued to MDB Capital Group, LLC for
consulting fees 368,474 368,474
Cumulative translation
adjustment - - - - (108,471) (108,471)
Net loss - - - (1,012,388) - (1,012,388)
---------- ------- ----------- ----------- -------- ------------
Balance, June 30, 2005 10,337,065 $10,337 $ 7,571,871 $(6,776,637) $(47,597) $ 757,974
---------- ------- ----------- ----------- -------- ------------
|
See notes to the financial statements
REMEDENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED JUNE 30, 2005 AND 2004
(UNAUDITED)
June 30, 2005 June 30, 2004
------------- (Restated)
-------------
Net Income (Loss) $ (1,012,388) $ 51,382
OTHER COMPREHENSIVE
INCOME (LOSS):
Foreign currency translation adjustment (108,471) (9,758)
------------- ------------
Comprehensive income (loss) $ (1,120,859) $ 41,624
============= ===========
|
See notes to the financial statements
REMEDENT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2005 AND 2004
(UNAUDITED)
June 30, 2005 June 30, 2004
(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,012,388) $ 51,382
Adjustments to reconcile net loss
to net cash provided by operating activities
Depreciation and amortization 14,368 6,769
Inventory reserve - (378)
Allowance for doubtful accounts (4,133) (281)
Non cash interest on beneficial conversion
of $100,000 note payable 100,000 -
Common Stock issued to MDB Capital Group, LLC for consulting fees 395,677 -
Warrants issued to MDB Capital Group, LLC for consulting fees 368,474 -
Minority Interest - 238,738
Changes in operating assets and liabilities: -
Accounts receivable 521,266 591,996
Due from related party (11,113) 1,517
Inventories (128,871) 99,344
Prepaid expenses (79,262) (14,631)
Other current assets - -
Accounts payable (77,532) (222,740)
Accrued liabilities 67,629 (99,962)
Deferred revenue - -
Income taxes payable (24,159) -
------------- --------------
Net cash provided by operating activities 129,957 651,754
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments - 2,961
Purchases of equipment (237,943) (6,243)
Notes receivable-related party - -
------------- --------------
Net cash used by investing activities (237,943) (3,282)
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deferred offering costs (63,722) -
Proceeds from notes and debentures - 55,619
Note payments-unrelated parties (64,495) (197,689)
Proceeds from (repayments of) line of credit 158,944 (457,201)
Proceeds from installment note payable 89,320 -
------------- --------------
Net cash provided (used) by financing activities 120,047 (599,271)
------------- --------------
NET (DECREASE) INCREASE IN CASH 12,060 49,201
Effect of exchange rate changes
on cash and cash equivalents (29,069) (9,758)
CASH AND CASH EQUIVALENTS, BEGINNING 40,442 172,382
------------- --------------
CASH AND CASH EQUIVALENTS, ENDING $ 23,433 $ 211,825
------------- --------------
Supplemental Information:
Interest paid $ 2,290 $ 22,057
------------- --------------
Income taxes paid $ - $ -
------------- --------------
|
See notes to the financial statements and supplemental disclosures on following page.
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
During September 2004, the Company issued 12,500 shares of stock to an unrelated third party for the settlement of consulting fees for a total of $2,500.
During the quarter ended December 31, 2004, the Company executed agreements effective as of December 31, 2004 which converted convertible debentures totaling $127,580 in principal plus $62,187 in interest into 184,767 shares of common stock.
On June 3, 2005, the Company issued 7,715,703 shares of its common stock in exchange for 78% of the stock of Remedent NV, a commonly controlled subsidiary and the $1,178,590 minority interest associated with this 78% interest as of the closing of the transaction was recorded by the Company as additional paid in capital.
On June 3, 2005 a $100,000 note payable issued by the Company on March 23, 2004 the Christopher T. Marlett Living Trust ("Marlett Note") converted to 197,839 shares of common stock pursuant to its terms which required automatic conversion contingent upon successful completion of the Company's corporate restructuring. The Company recognized the value of the beneficial conversion feature of the Marlett Note equal to the difference between the effective conversion price, $0.57 per share, and the fair market value of the Company's common stock as of the date of the Marlett Note was issued ($1.60 per share as of March 23, 2004) as additional interest expense as of the date of the conversion, not to exceed the amount of the proceeds received from the Marlett Note. Accordingly, the Company recorded $100,000 in additional non-cash interest expense as of June 3, 2005.
On June 3, 2005, the Company issued to MDB Capital Group, LLC ("MDB") for consulting fees related to the Company's corporate restructuring 247,298 shares of the Company's common stock and 247,298 five year common stock purchase warrants that will be exercisable beginning ninety (90) days after June 3, 2005 with an exercise price of $1.20 per share. The market value of the Company's common stock on June 3, 2005 was $1.60 per share, resulting in a value attributable to the stock issued to MDB of $395,677. The value of the warrants, determined in accordance with the Black-Scholes pricing model is$1.49 per warrant, for a total for the warrants of $368,474. Accordingly the Company recognized a non-cash restructuring expense as of June 3, 2005 of $764,151.
REMEDENT, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005
(UNAUDITED)
1. BACKGROUND AND BUSINESS ACTIVITIES
The Company was originally incorporated under the laws of Arizona in September 1996 under the name Remedent USA, Inc. In October 1998, the Company was acquired by Resort World Enterprises, Inc., a Nevada corporation ("RWE") in a share exchange and RWE immediately changed its name to Remedent USA, Inc. The share exchange was a "reverse acquisition" and accounted for as if the Company acquired RWE and then recapitalized its capital structure. On July 1, 2001, the Company formed three wholly-owned subsidiaries, Remedent Professional Holdings, Inc., Remedent Professional, Inc. and Remedent N.V.(a Belgium corporation). Remedent Professional, Inc. and Remedent Professional Holdings, Inc. are both wholly-owned subsidiaries and have been inactive since inception.
During the quarter ended March 31, 2002, through the Company's Belgium based subsidiary, Remedent N.V., the Company initiated its entrance into the high technology dental equipment market. Since that time, the majority of the Company's operations have been conducted through its subsidiary, Remedent N.V. For the last three fiscal years, substantially all of the Company's revenue has been generated by Remedent N.V., which has become a leading provider of cosmetic dentistry products, including a full line of professional dental and retail "Over-The-Counter" tooth whitening products in Europe. Because the controlling stockholders of Remedent N.V. consisted of the Company's executive officers or companies owned by these executive officers, the Company has always had effective "control" over Remedent N.V., as defined by APB 51"Consolidated Financial Statements," even though it owned only twenty two percent (22%) of this subsidiary.
On June 3, 2005, the Company consummated the acquisition of the remaining 78% of Remedent N.V., and issued 7,715,703 shares of the Company's common stock in exchange for the 78% of the common stock of Remedent N.V. not owned by the Company. As a result of this acquisition, Remedent N.V. is now our wholly-owned subsidiary.
In addition, on June 3, 2005, the Company amended its Articles of Incorporation pursuant to the filing of the Amended and Restated Articles of Incorporation with the Nevada Secretary of State. The Amended and Restated Articles of Incorporation (i) changed the name of the Company from "Remedent USA, Inc." to "Remedent, Inc." (ii) increased the number of authorized shares to 60,000,000 shares consisting of 50,000,000 shares of common stock and 10,000,000 shares of Preferred Stock, and (iii) effected a one-for-twenty reverse stock split (collectively, the "Amendments"). The consolidated financial statements and accompanying notes have been retroactively adjusted to reflect the effects of the reverse split and authorization of 10,000,000 shares of Preferred Stock.
2. RESTATEMENT
In November, 2004, the Company detected errors in certain previously issued financial statements including the financial statements for the period ended June 30, 2004 included herein. The errors relate to the classification of certain assets, minority interest and paid in capital.
In March 2003 the Company did not properly record a capital contribution to its subsidiary, Remedent N.V. by two of the Company's officers. The capital contribution was the value of certain fixed income securities which were assigned and irrevocably transferred to Remedent N.V on March 5, 2003 (the "Transfer Date") as well as forgiveness of 75,000 Euros ($77,827) in notes payable from the same officers. The initial value of the securities on the
Transfer Date was 235,000 Euros ($243,860). These securities were collateral for a bank line of credit and had previously been shown as restricted investments on the Company's balance sheet. The $321,687 historical value of the fixed income securities and notes payable has been recorded and credited to additional paid in capital.
This foregoing capital contribution occurred as a result of the sale by Remedent N.V of 7,200 shares of Remedent N.V stock, representing 78% of the outstanding shares of Remedent N.V. after conclusion of the sale. In December 2002, as a result of losses incurred during its start-up period, Remedent N.V.'s shareholder equity fell below that which is required under Belgium law. In accordance with Belgium law, Remedent N.V. retained the services of an independent Belgium certified accountant to determine the amount of additional capital contribution necessary to bring Remedent N.V.'s balance sheet into compliance. As a result of this analysis, it was determined that additional capital of 310,000 Euros ($321,687 as of December 2002) would be required and, further, that Remedent N.V.'s valuation prior to such capital contribution was 88,500 Euros. In as much as Remedent lacked the financial resources to provide the additional capital required, Remedent N.V. elected to issue 7,171 shares of its common stock to Lausha N.V., a company controlled by Guy De Vreese in exchange for conversion of 50,000 Euros in notes payable and contribution of the 235,000 Euros in fixed income marketable securities discussed above, both as an irrevocable capital contribution to Remedent N.V.. In addition, Remedent NV issued 629 shares to Robin List in exchange for conversion of 25,000 Euros in notes payable as an irrevocable capital contribution to Remedent N.V. Mr. De Vreese and Mr. List are both officers and directors of Remedent N.V. and Remedent, Inc. As a result of this transaction, as previously reported in earlier filings, we then owned 22% of our subsidiary, Remedent N.V.
In connection with the same transaction, the Company did not correctly record the Minority Interest related to the previously mentioned 78% ownership of the Company's subsidiary, Remedent N.V. The foregoing was the result of an error in the recording of Minority Interest that originally occurred as of March 31, 2003. The effect of these errors had been to overstate the value of the Minority Interest by $112,756 as of June 30, 2004.
The effect on other accounts related to the foregoing error as of June 30, 2004 were to understate investments by $285,690; understate additional paid in capital by $321,687; overstate accumulated deficit by $47,940 and overstate the accumulated other comprehensive loss from foreign currency translation by $28,819.
In addition to the foregoing, other errors related to the classification of certain liabilities as of June 30, 2004, were discovered resulting in decreases to notes payable, unrelated parties of $183,179 with offsetting increases to the line of credit.
In the process of preparing the foregoing restatement as of June 30, 2004, the Company determined that, in addition to the changes required in the Statement of Cash Flows resulting from the foregoing, there were other classification errors in the Statement of Cash Flows which have been corrected. There were no changes required to the Consolidated Statements of Income for the three months ended June 30, 2004. The following tables set forth the amounts as previously filed and the restated amounts for the Condensed Balance Sheet and the Condensed Statement of Cash Flows for the three months ended June 30, 2004.
CONDENSED BALANCE SHEETS
(UNAUDITED)
June 30, 2004 June 30, 2004
ASSETS As Filed Restated
CURRENT ASSETS: ------------- -------------
Cash and cash equivalents $ 211,825 $ 211,825
Investments, restricted - 285,690
Accounts receivable, net 755,898 755,898
Due from related party 146,370 146,370
Inventories, net 332,348 332,348
Prepaid expense 36,373 36,373
Other current assets - -
-------------- --------------
Total current assets 1,482,814 1,768,504
-------------- --------------
PROPERTY AND EQUIPMENT, NET 43,790 43,790
-------------- --------------
TOTAL ASSETS $ 1,526,604 $ 1,812,294
-------------- --------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Line of Credit $ 151,963 $ 335,142
Notes payable 184,857 184,857
Accounts payable 445,221 445,221
Accrued liabilities 248,529 248,529
Due to related parties 127,960 127,960
Due to non-related parties 238,798 55,619
-------------- --------------
Total current liabilities 1,397,328 1,397,328
-------------- --------------
MINORITY INTEREST IN REMEDENT N.V. 942,812 830,056
STOCKHOLDERS' DEFICIT:
Preferred Stock $0.001 par value (10,000,000 shares
authorized, none issued and outstanding) - -
Common stock, $0.001 par value; (50,000,000 shares authorized,
1,958,958 shares issued and outstanding at June 30, 2004 ) 1,958 1,958
Additional paid-in capital 4,918,907 5,240,594
Accumulated deficit (5,657,379) (5,609,439)
Common stock subscribed (18,641 shares as of June 30, 2004) 19 19
Accumulated other comprehensive income (loss)
(foreign currency translation adjustment) (77,041) (48,222)
-------------- --------------
Total stockholders' deficit (813,536) (415,090)
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,526,604 $ 1,812,294
-------------- --------------
|
CONDENSED STATEMENT OF CASH FLOW
(UNAUDITED)
June 30, 2004 June 30, 2004
As Filed Restated
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$ $ 51,382 $ 51,382
Adjustments to reconcile net loss
to net cash used by operating activities
Depreciation and amortization
Inventory reserve 6,769 6,769
Allowance for doubtful accounts (378) (378)
(281) (281)
Minority Interest 238,738 238,738
Changes in operating assets and liabilities:
Accounts receivable 591,996 591,996
Due from related party 1,517 1,517
Inventories 99,344 99,344
Prepaid expenses (14,631) (14,631)
Accounts payable (222,740) (222,740)
Accrued liabilities (605,536) (99,962)
----------- ----------
Net cash used by operating activities 357,655 651,754
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments (39,657) 2,961
Purchases of equipment (6,243) (6,243)
----------- ----------
Net cash used by investing activities (45,900) (3,282)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes and debentures - 55,619
Note payments-unrelated parties - (197,689)
Proceeds from (repayments of) line of credit (93,697) (457,201)
----------- ----------
Net cash provided by financing activities (93,697) (599,271)
----------- ----------
NET (DECREASE) INCREASE IN CASH 218,058 49,201
Effect of exchange rate changes
on cash and cash equivalents (6,797) (9,758)
CASH AND CASH EQUIVALENTS, BEGINNING 564 172,382
----------- ----------
CASH AND CASH EQUIVALENTS, ENDING $ 211,825 $ 211,825
----------- ----------
|
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The accompanying consolidated financial statements include the accounts of Remedent, Inc. (formerly Remedent USA, Inc.), a Nevada corporation, and its three subsidiaries, Remedent N.V. (Belgian corporation) located in Deurle, Belgium, Remedent Professional, Inc. (incorporated in California) and a subsidiary of Remedent Professional Holdings, Inc. (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. All significant inter-company accounts and transactions have been eliminated in the consolidated financial statements.
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, 2005, are not necessarily indicative of the results that may be expected for the year ended March 31, 2006. Accordingly, your attention is directed to footnote disclosures found in the March 31, 2005 Annual Report on Form 10KSB, and particularly to Note 1, which includes a summary of significant accounting policies.
Basis for Presentation
The Company's financial statements have been prepared on an accrual basis of accounting, in conformity with accounting principles generally accepted in the United States of America. These principles contemplate the realization of assets and liquidation of liabilities in the normal course of business. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Principles of Consolidation
All inter-company balances and transactions have been eliminated in consolidation. Corporate administrative costs are not allocated to subsidiaries.
Revenue Recognition
Sales are recorded when products are shipped to customers. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period that related sales are recorded. The Company recognizes revenue in accordance with Staff Accounting Bulletin 104.
Impairment of Long-Lived Assets
Long-lived assets consist primarily of property and equipment. The recoverability of long-lived assets is evaluated by an analysis of operating results and consideration of other significant events or changes in the business environment. If impairment exists, the carrying amount of the long-lived assets is reduced to its estimated fair value, less any costs associated with the final settlement. As of June 30, 2005, management believes there was no impairment of the Company's long-lived assets. Accounts Receivable and Allowance for Doubtful Accounts
The Company sells professional dental equipment and consumer dental products to various companies, primarily to distributors located in Western Europe. The terms of sales vary by customer, however, generally are 2% 10 days, net 30 days. Accounts receivable is reported at net realizable value and net of allowance for doubtful accounts. The Company uses the allowance method to account for uncollectible accounts receivable. The Company's estimate is based on historical collection experience and a review of the current status of trade accounts receivable.
Prepaid Expense
Included in the Company's prepaid expenses are prepayments to suppliers for inventory purchases and to the Belgium customs department, to obtain an exemption of direct VAT payments for imported goods out of the European Union ("EU"). This prepayment serves as a guarantee to obtain the facility to pay VAT at the moment of sale and not at the moment of importing goods at the border.
Property and Equipment
Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income.
The Company depreciates its property and equipment for financial reporting purposes using the straight-line method based upon the following useful lives of the assets:
Tooling 3 Years Manufacturing Equipment 4 Years Furniture and fixtures 4 Years |
Research and Development Costs
The Company expenses research and development costs as incurred.
Warranties
The Company records warranty liabilities at the time of sale for the estimated costs that may be incurred under its basic warranty programs. The specific warranty terms and conditions vary depending upon the product sold but generally include technical support, repair parts, labor for periods up to 18 months. Factors that affect the Company's warranty liability include the number of installed units currently under warranty, historical and anticipated rates of warranty claims on those units, and cost per claim to satisfy the Company's warranty obligation. Based upon the foregoing, we have recorded as of June 30, 2005 a provision for potential future warranty costs of $18,063.
Impact of New Accounting Standards
In July 2004, the Emerging Issues Task Force ("EITF") reached a consensus on Issue No. 04-8, "Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effect on Diluted Earnings per Share" ("EITF No. 04-8"). The Task Force reached a consensus that contingently convertible debt instruments should be included in the computation of diluted earnings per share under the if-converted method regardless of whether the market price trigger (or other contingent feature) has been met. The EITF 04-8 consensus must be applied by retroactive restatement based on the term in effect on the last day of the fiscal period in which the consensus becomes effective. This consensus became effective for all financial statements issued after December 15, 2004. Accordingly, the Company retroactively restated all earnings per share measures for all periods to reflect the consensus as it relates to a $100,000 note payable contingently convertible into two percent (2%) of the Company's outstanding common stock upon successful completion of a restructuring (see Note 4) and $147,580 in principal plus interest in convertible debentures issued by the Company from April 2000 through February 2001 of which $127,580 converted (plus accrued interest of $57,187) as of December 31, 2004.
In November 2004, the FASB issued SFAS 151 "Inventory Costs, an amendment of ARB No. 43, Chapter 4.". This Statement amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). This Statement requires that those items be recognized as current-period charges. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The Company will adopt this statement for the fiscal year beginning April 1, 2006.
In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123 (revised 2004), "Share Based Payment" ("SFAS 123R"), a revision to SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS 123R supersedes Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and amends SFAS No. 95, "Statement of Cash Flows". SFAS 123R requires that the Company measure the cost of employee services received in exchange for equity awards based on the grant date fair value of the awards. The cost will be recognized as compensation expense over the vesting period of the awards. The Company is required to adopt SFAS 123R effective as of the beginning of the first interim or annual reporting period that begins after December 15, 2005 or January 1, 2006. Under this method, the Company will begin recognizing compensation cost for equity-based compensation for all new or modified grants after the date of adoption. In addition, the Company will recognize the unvested portion of the grant date fair value of awards issued prior to adoption based on the fair values previously calculated for disclosure purposes over the remaining vesting period of the outstanding options and warrants. The Company is currently evaluating the potential effect that the adoption of SFAS 123R will have on the Company's financial statement presentation and disclosures. Until such time, the Company has determined that it will continue to account for stock-based employee compensation in accordance with APB No. 25.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets, an amendment to APB Opinion No. 29" ("SFAS 153"). SFAS 153 amends Accounting Principles Board Opinion No. 29, "Accounting for Nonmonetary Transactions", to require that exchanges of nonmonetary assets be measured and accounted for at fair value, rather than at carryover basis, of the assets exchanged. Nonmonetary exchanges that lack commercial substance are exempt from this requirement. SFAS 153 is effective for nonmonetary exchanges entered into in fiscal periods beginning after June 15, 2005. Company is currently evaluating the potential effect that the adoption of SFAS No. 153 will have on the Company's financial statement presentation and disclosures.
Computation of Earnings per Share
Basic net income (loss) per common share is computed by dividing net income
(loss) attributable to common stockholders by the weighted average number
of shares of common stock outstanding during the period. Net income (loss)
per common share attributable to common stockholders assuming dilution is
computed by dividing net income by the weighted average number of shares of
common stock outstanding plus the number of additional common shares that
would have been outstanding if all dilutive potential common shares had
been issued. Potential common shares related to stock options and stock
warrants are excluded from the computation when their effect is
antidilutive.
Conversion of Foreign Currencies
The reporting currency for the consolidated financial statements of the Company is the U.S. dollar. The functional currency for the Company's European subsidiary, Remedent N.V. is the Euro . The functional currency for Remedent Professional, Inc. is the U.S. dollar. The Company translates foreign currency statements to the reporting currency in accordance with FASB 52. The assets and liabilities of companies whose functional currency is other that the U.S. dollar are included in the consolidation by translating the assets and liabilities at the exchange rates applicable at the end of the reporting period. The statements of income of such companies are translated at the average exchange rates during the applicable period.
Translation gains or losses are accumulated as a separate component of stockholders' deficit. The Company reports the reporting currency equivalent of foreign currency cash flows using an appropriately weighted average exchange rate for the period and reports the effect of exchange rate changes on cash balances held in foreign currencies as a separate part of the reconciliation of the change in cash and cash equivalents during the period.
4. CORPORATE RESTRUCTURING
Action by Unanimous Written Consent
In February and December 2004, in an action taken by written consent of the holders of a majority of the issued and outstanding shares of the Company's common stock, and without a meeting pursuant to Section 78.320 of the Nevada Revised Statute, the Company: (i) increased the number of authorized shares to 60,000,000 shares, consisting of 50,000,000 shares of common stock and 10,000,000 shares of preferred stock, (ii) implemented a one-for-twenty reverse stock split with consideration for fractional shares to be issued in the form of scrip, and (iii) changed the name of the Company from "Remedent USA, Inc." to "Remedent, Inc." The Written Consent also authorized acquisition of the remaining 78% of the Company's subsidiary, Remedent N.V., that the Company did not own from Messrs. Guy De Vreese and Robin List, the Chairman and Chief Executive Officer respectively, through the issuance of shares of the Company's common stock equal to 78% of the Company's issued and outstanding shares following the completion of the transaction. Lastly, the written consent authorized the implementation of a 2004 Incentive and Nonstatutory Stock Option Plan, following the implementation of the reverse stock split (so as not to be affected by the reverse stock split), reserving 800,000 shares of common stock for issuance to employees, directors and consultants of the Company or any subsidiaries. These actions were disclosed in an Information Statement on Schedule 14C mailed on May 9, 2005 to all stockholders of record as of the close of business on February 1, 2005 and became effective June 3, 2005.
On June 3, 2005, the Company amended its Articles of Incorporation pursuant to the filing of the Amended and Restated Articles of Incorporation with the Nevada Secretary of State. The Amended and Restated Articles of Incorporation (i) changed the name of the Company from "Remedent USA, Inc." to "Remedent, Inc." (ii) increased the number of authorized shares to 60,000,000 shares consisting of 50,000,000 shares of common stock and 10,000,000 shares of Preferred Stock, and (iii) effected a 1 for 20 reverse stock split (collectively, the "Amendments").
Acquisition of Minority Interest
Also on June 3, 2005 the Company entered into an agreement ("Exchange Agreement") with Remedent N.V. the Company's Belgium based consolidated subsidiary, Lausha NV, a Belgian company that is controlled by Guy De Vreese who is Chairman of the Company ("Lausha"); and Robin List, a director and the Chief Executive Officer of the Company ("Mr. List"). Mr. List and Lausha are collectively referred to as the "Exchanging Stockholders." Prior to the exchange contemplated by the Exchange Agreement, the Company owned 2,200 shares of Remedent N.V. representing a twenty-two percent (22%) ownership interest in Remedent N.V. and the Exchanging Stockholders collectively owned 7,800 shares of Remedent N.V. representing a seventy-eight percent (78%) ownership interest of Remedent N.V.. Under the terms of the Exchange Agreement, the Company agreed to issue 7,715,703 of its restricted common stock (representing a 78% ownership interest in the Company) giving effect to a one for twenty reverse stock split (the "Reverse Stock Split"), in exchange for all of the issued and outstanding shares of Remedent N.V. owned by the Exchanging Stockholders (the "Acquisition"). The number of shares to be issued, as a percentage of the Company's outstanding shares, in consideration for the Acquisition of the seventy eight percent (78%) of the shares of Remedent N.V. was based on an evaluation by MDB Capital Group, LLC ("MDB"), a NASD registered broker dealer retained by the Company to render advice with regard to the Company's restructuring. MDB concluded that the Company's twenty two percent (22%) interest in Remedent N.V. was the Company's only asset and therefore, as consideration for their seventy eighty percent
(78%) interest in Remedent N.V., the Exchanging Stockholders should receive an equal percentage ownership interest in the Company, therefore preserving the existing proportional indirect ownership interests in Remedent N.V. of both the Exchanging Stockholders and the existing Company stockholders.
The Company consummated the Acquisition of Remedent N.V. as contemplated by the Exchange Agreement on June 3, 2005. In connection with the Acquisition, the Company issued 7,715,703 shares of its restricted common stock to the Exchanging Stockholders in exchange for all of the issued and outstanding shares of Remedent N.V. owned by the Exchanging Stockholders. As a result of the Acquisition, Remedent N.V. is a wholly owned subsidiary of the Company. Since the Exchanging Stockholders of Remedent N.V. are officers, directors and shareholders of the Company, the Company has determined that it has "control" of Remedent N.V., as defined by APB 51 "Consolidated Financial Statements". Accordingly, the Acquisition was recorded at predecessor basis and all assets and liabilities have been presented at historical amounts.
Conversion of Note Payable
Upon successful completion of the foregoing transactions, on June 3, 2005 a $100,000 note payable issued by the Company on March 23, 2004 to Marlett ("Marlett Note") converted to 197,839 shares of common stock pursuant to its terms which required automatic conversion contingent upon successful completion of any corporate restructuring in an amount equal to two percent (2.0%) of the outstanding shares of the Company at the completion of such restructuring. As of June 3, 2005, accrued interest on the Marlett Note was $11,173, resulting in an effective conversion price of $0.57 per share. In accordance with Emerging Issues Task Force ("EITF") consensus on Issue No. 98-5, "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios", the Company recognized the value of the beneficial conversion feature equal to the difference between the effective conversion price, $0.57 per share, and the fair market value of the Company's common stock as of the date of the Marlett Note was issued ($1.60 per share as of March 23, 2004) as additional interest expense as of the date of the conversion, not to exceed the amount of the proceeds received from the Marlett Note. Accordingly, the Company recorded $100,000 in additional non-cash interest expense as of June 3, 2005.
Non-cash Fees for Financial Advisory Services
Also upon completion of the foregoing transactions, MDB, for financial advisory services rendered to the Company in connection with the Company's corporate restructuring, was entitled to receive shares of the Company's common stock equal to 2.5% the issued and outstanding shares as of June 3, 2005 restructuring and five year common stock purchase warrants equal to another 2.5% of the Company's outstanding shares as of June 3, 2005 that will be exercisable beginning ninety (90) days after June 3, 2005 with an exercise price of $1.20 per share. Accordingly, as of June 3, 2005, the Company is obligated to issue to MDB or its designee, 247,298 shares of the Company's common stock and 247,298 five year common stock purchase warrants. The market value of the Company's common stock on June 3, 2005 was $1.60 per share, resulting in a value attributable to the stock issued to MDB of $395,677. The value of the warrants, determined in accordance with the Black-Scholes pricing model utilizing an historic volatility factor of 1.52, a risk free interest rate of 6.0% and an expected life for the warrants of five years, is $1.49 per warrant, for a total for the warrants of $368,474. Accordingly the Company recognized a non-cash restructuring expense as of June 3, 2005 of $764,151.
5. CONCENTRATION OF RISK
Financial Instruments - Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade accounts receivable.
Concentrations of credit risk with respect to trade receivables are normally limited due to the number of customers comprising the Company's customer base and their dispersion across different geographic areas. At June 30, 2005, one customer, Chefaro UK, Ltd, accounted for 30% of the
Company's trade accounts receivable and 21% of revenues for the six months ended June 30, 2005. The Company performs ongoing credit evaluations of its customers and normally does not require collateral to support accounts receivable.
Purchases - The Company does not specifically rely upon any suppliers for key components for its products. Since the Company has begun to assemble and package its products in house, the reliance on any one supplier has diminished. The loss of any one supplier would not have a material impact on the Company's operations.
6. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
A summary of accounts receivable and allowance for doubtful accounts as of June 30, 2005 and March 31, 2005 is as follows:
June 30, 2005 March 31, 2005
------------- --------------
Accounts receivable, gross $ 963,170 $ 1,568,490
Less: allowance for doubtful accounts (70,571) (80,194)
Accounts receivable, net $ 892,599 $ 1,488,296
|
7. DUE FROM RELATED PARTY
On February 12, 2002, Remedent N.V. entered into a loan agreement for Euro
125,000 with Lident N.V., a company owned and operated by Guy De Vreese,
the Company's Chairman. The agreement was entered into in connection with a
line of credit established by Remedent N.V. with a Belgian bank. Due to the
insufficient assets maintained by Remedent N.V. as of inception date of the
line of credit, the bank imposed two requirements for the extension of
credit; (1) Mr. De Vreese personally guarantee the line of credit, and (2)
Remedent N.V. use the line of credit repay in full the Euro 125,000
outstanding balance on BBL's existing line of credit to Dental Marketing
Development N.V. ("DMD"), a company owned and operated by Guy De Vreese.
Accordingly, Mr. De Vreese personally guaranteed the Euro 250,000 BBL line
of credit, including pledging as collateral specific investments owned by
Mr. De Vreese valued at approximately $250,000, and Remedent N.V. drew Euro
125,000 from this line of credit to advance to DMD and booked this amount
as an interest-free loan to DMD. DMD would have to repay this loan (i) if
the line of credit had been cancelled by BBL due to insufficient security,
(ii) if Remedent N.V. found other facilities to secure payment of Mr. De
Vreese's funds and no longer needed the line of credit, or (iii) Remedent
N.V. was still using the line of credit but has found other facilities to
secure payment of Mr. De Vreese's funds. Remedent N.V. did not take any
procedural steps to insure fairness in the terms of this transaction to the
Company or to Remedent N.V. DMD later merged with Lident N.V. Effective
July 13, 2005, the Company's Board of Directors approved the repayment of
the advance to DMD in exchange for 93,533 shares of our common stock at
$1.50 per share, based upon a remaining principal amount of Euro 115,000 at
June 30, 2005 ($138,483) and a conversion rate of $1.22 to the Euro as of
July 13, 2005. The transaction was approved by the disinterested directors
with Mr. De Vreese abstaining from the vote.
Also included in due from related parties is a cash investment of Euro 5,400 ($6,503) in Pure White International made May, 2003 in exchange for a 30% interest in this company. The Company anticipates this investment will be repurchased by Pure White International for Euro 5,400 on or before August 31, 2005. Pure White International BV is the Company's former distributor for the CleverWhite tooth whitening kits for the Dutch market prior to the Company licensing these distribution rights to Omega Pharma
8. INVENTORIES
Inventories are stated at the lower of cost (weighted average) or market. Inventory costs include material, labor and manufacturing overhead. Individual components of inventory are listed below as follows:
June 30, 2005 March 31, 2005
------------- --------------
Raw materials $ 22,003 $ 14,486
Components 555,106 496,800
Finished goods 99,648 85,944
---------- -----------
676,757 597,230
Less: reserve for obsolescence (36,126) (38,895)
---------- -----------
Net inventory $ 640,631 $ 558,335
---------- -----------
|
9. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
June 30, 2005 March 31, 2005
------------- --------------
Furniture & Fixtures $ 47,976 $ 39,517
Machinery & Equipment 160,147 75,558
Tooling 124,100 -
Less: Accumulated Depreciation (40,856) (29,338)
---------- -----------
Property & equipment, net $ 291,367 $ 85,737
---------- -----------
|
10. OTHER PREPAYMENTS
In September 2004, the Company entered into an agreement with Lident N.V., a company controlled by Mr. De Vreese, the Company's Chairman, to obtain an option, exercisable through December 31, 2005, to license a patent and worldwide manufacturing and distribution rights for a potential new product for which Lident had been assigned certain rights by the inventors of the products, who are unrelated parties, prior to Mr. De Vreese association with the Company. The agreement required the Company to advance to the inventors through Lident a fully refundable deposit of Euro 100,000 ($120,420 as of June 30, 2005) subject to the Company's due diligence regarding the enforceability of the patent and marketability of the product, which, if viable, will be assigned to the Company for additional consideration to the inventors of Euro 100,000 ($120,420 as of June 30, 2005) and an ongoing royalty from sales of products related to the patent equal to 3% of net sales and, if not viable, the deposit will be repaid in full 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 will not profit 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 us in exchange for the reimbursement of Lident's actual costs incurred relating to the intellectual property. Consequently, if the Company exercises the option, it is anticipated that all future payments, other than the reimbursement of costs, would be paid directly to the original inventors and not to Lident.
11. LICENSED 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 under development 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; 1) 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.
12. DEFERRED OFFERING COSTS
As of July 20, 2005, the Company completed a private placement of equity securities (See Subsequent Events, Note 22). As of June 30, 2005, the Company had expended $63,722 in legal and professional fees and costs related to this private placement that were recorded as deferred offering costs. Upon closing of the private placement, these costs will be offset against the additional paid in capital received.
13. LINE OF CREDIT
On October 8, 2004, the Company obtained a new line of credit facility with a new Belgian bank for Euro 1,050,000 (US $1,264,420 at June 30, 2005) Line of Credit Facility (the "Facility") with a Belgian bank , consisting of a Euro 800,000 (US $963,360) credit line based on the eligible accounts receivable and a Euro 250,000 (US $301,050) general line of credit. Advances are approved by the bank based upon dated bills of exchange issued and signed by the customer for shipped goods. These advances are discounted at a rate of 2.125%. As of May 3, 2005, the Company and the bank agreed to increase the general line of credit to (Euro) 500,000 ($648,250) and decrease the credit line based on the eligible accounts receivable to (Euro) 550,000 ($713,075). All other terms and conditions remained unchanged. As of June 30, 2005, Remedent NV had $150,225 outstanding under this line of credit facility. Interest on the general line of credit was 4.61 % at June 30, 2005. There were no advances outstanding as of March 31, 2005.
14. DUE TO RELATED PARTIES
June 30, 2005 March 31, 2005
------------- --------------
Interest free borrowings from employees
in the form of working capital loans $ 58,958 $ 58,958
|
Borrowings from employees and entities controlled by officers of the Company are due upon demand and bear no interest.
15. ACCRUED LIABILITIES
Accrued liabilities are summarized as follows:
June 30, 2005 March 31, 2005
------------- --------------
Accrued interest $ 10,312 $ 20,470
Accrued audit and tax preparation fees 17,000 37,500
Accrued consulting fees - 1,700
Accrued employee benefit taxes 180,418 190,973
Reserve for warranty costs 18,062 19,448
Customer prepayments 111,466 -
Other accrued expenses 62,099 97,764
---------- -----------
$ 399,358 $ 367,854
========== ===========
|
16. NOTES PAYABLE
Notes payable are summarized as follows:
June 30, 2005 March 31, 2005
------------- --------------
Convertible Debentures:
Maturity Dates: September 1, 2001 thru February 8, 2002
Interest rate: 10% per annum
Optional conversion rate: 30% of the average
trading price (average of bid and ask) for the
30 days immediately prior to the maturity date.
Debentures are unsecured.
Unpaid principal balance $20,000 $20,000
Union Bank Debt:
Maturity Dates: April 26, 2005
Interest rate: 7.5% per annum
Security All of the assets of the company
Unpaid principal balance 11,282 11,282
Loan Payable -Fortis Bank
Maturity: October 9, 2005,
Interest Rate: 4.09%, Unsecured
Payable in twelve equal monthly installments of 12,783 Euro ($17,193)
Unpaid principal balance 90,354 163,040
Convertible Promissory Note:
Maturity Date: September 30, 2004
Interest rate: 10% per annum
Conversion rate: Balance of note converted into
the number of shares necessary to provide the note holder
with two percent of the Company's outstanding shares of
common stock, calculated on a fully diluted basis.(See Note 4)
Promissory note is secured by a first security interest in
assets of the Company pursuant to the terms of the Security
Agreement. This note converted to 197,839 shares of common stock on
June 3, 2005 (See Note 4) - 100,000
--------- ---------
Notes Payable $ 121,636 $ 294,322
========= =========
|
For the loans shown which are past their maturity dates, the company is presently in negotiation to amend the repayment terms and believes such renegotiation will be successful. No defaults have been declared by the note or debenture holders.
17. LONG TERM DEBT
On June 15, 2005, the Company entered into two five year capital lease agreements for manufacturing equipment totaling Euro 70, 245 ($84,589). The leases require monthly payments of principal and interest at 4.20% of Euro 1,258 ($1,515) and provide for buyouts at the conclusion of the five year term of Euro 2,820 ($3,396) or 4.0% of original value. Principal payable within 12 months of June 30, 2005 totals $12,378.
18. STOCK OPTIONS
In an Information Statement on Schedule 14C mailed on May 9, 2005 to all stockholders of record as of the close of business on February 1, 2005 and became effective June 3, 2005, the Company authorized the implementation of a 2004 Incentive and Nonstatutory Stock Option Plan reserving 800,000 shares of common stock for issuance to employees, directors and consultants of the Company or any subsidiaries. This plan became effective as of June 3, 2005 after the Company had completed a one for twenty reverse split however no options have been granted from this plan to date.
19. STOCK BASED COMPENSATION
The Company accounts for stock-based employee compensation in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25 and FASB Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions Involving Stock Compensation", and complies with the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based Compensation". Under APB No. 25, compensation expense is recorded based on the difference, if any, between the fair value of the Company's stock and the exercise price on the measurement date. The Company accounts for stock options and warrants issued to non-employees in accordance with SFAS No. 123, which requires entities to recognize as expense over the service period the fair value of all stock-based awards on the date of grant and EITF 96-18, "Accounting for Equity Investments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services", which addresses the measurement date and recognition approach for such transactions.
Pro forma information regarding net income (loss) per share is required by SFAS 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of such statement rather than disclosure only. The fair value for these options was estimated at the date of grant using the Black-Scholes option-pricing model.
For purpose of pro forma disclosures, the estimated fair value of the options is amortized to operations over the vesting period of the options or the expected period of benefit. The Company's unaudited pro forma information is as follows:
June 30, 2005 June 30, 2004
------------- -------------
Net income (loss):
As reported $ (1,012,388) $ 51,382
Pro forma $ (1,012,388) $ 49,865
Earnings per share:
Basic
As reported $ (0.32) $ 0.03
Pro forma $ (0.32) $ 0.03
Diluted
As reported $ (0.32) $ 0.02
Pro forma $ (0.32) $ 0.02
|
20. SEGMENT INFORMATION
The Company's only operating segment consists of dental products and oral hygiene products sold by Remedent NV. The other subsidiaries of the Company have been dormant since inception. Since the Company only has one segment, no further segment information is presented.
Customers Outside of the United States
Sales to customers outside of the United States were 99% of total sales for the three month periods ended June 30, 2005 and 2004, respectively. The sales were made mostly to customers in countries that are members of the European Union ("EU").
June 30, 2005 June 30, 2004
------------- -------------
U.S. sales $ 15,406 $ 14,632
Foreign sales 1,362,902 1,742,009
------------- -------------
$ 1,378,308 $ 1,756,641
============= =============
|
21. COMMITMENTS AND CONTINGENCIES
Real Estate Lease
The Company leases its 26,915 square feet office and warehouse facility in Deurle, Belgium from an unrelated party pursuant to a nine year lease commencing December 20, 2001 at a base rent of (Euro) 6,560 per month ($8,505 per month at March 31, 2005). In addition, the Company is responsible for the payment of annual real estate taxes for the property which totaled (Euro) 3,245 ($4,207) for calendar year 2004. The minimum aggregate rent to be paid over the lease term based upon the conversion rate for the (Euro) at March 31, 2005 is $918,540.
Rent expense for the foregoing lease for the three months ended June 30, 2005 and 2004 was $25,024 and $23,476 respectively.
Equipment Lease
In November 2004, the Company leased new computer equipment from a Belgium based Lessor pursuant to a three year operating lease with monthly payments of (Euro) 1,005 ($1,210). The aggregate rent to be paid over the lease term is $43,560.
Minimum monthly lease payments for real estate and equipment for the next five fiscal years are as follows based upon the conversion rate for the (Euro) at June 30, 2005.
March 31, 2006 $ 109,316 March 31, 2007 $ 109,316 March 31, 2008 $ 104,476 March 31, 2009 $94,794 March 31, 2010 $94,794 |
22. SUBSEQUENT EVENTS
On July 20, 2005 the Company completed a private placement of 2,520,661 Units for an aggregate offering price of $3,780,976 (the "Offering"). Each Unit consists of one share of restricted Common Stock (the "Shares") and one Common Stock Purchase Warrant (the "Warrants") at a price of $1.50 per Unit. The Warrants are exercisable for a period of five years and entitle the holder to purchase one share of restricted Common Stock (the "Warrant Shares") for $1.75 per Warrant Share. The Company also has the right to redeem the Warrants for $0.01 per Warrant Share covered by the Warrants if the Shares trade on the Over-The-Counter Bulletin Board or similar market above $3.50 per share for 30 consecutive trading days based upon the closing bid price for the Shares for each trading day (the "Redemption Right"), provided, however, that the Warrant Shares have been registered
with the Securities and Exchange Commission (the "Commission"). Once the Redemption Right vests, the Company has the right, but not the obligation, to redeem the Warrants for $0.01 per Warrant Share covered by the Warrants upon 30 days written notice to the holders of the Warrants.
Under the terms of the subscription agreement/purchase agreement and the registration rights agreement, the Company is required to prepare and file with the Commission a registration statement covering the resale of the Shares and the Warrant Shares. The Company has agreed to prepare and file a registration statement covering the resale no later than 30 days of the Closing (the "Filing Deadline") and such registration was filed on August 4, 2005. In the event the Company was unable to file a registration statement by the Filing Deadline or the registration statement is not declared effective on or before 120 days from the initial closing ("Effective Deadline"), then the Company will have to pay liquidated damages equal to 1.5% of the aggregate amount invested by each investor for each month beyond the Filing Deadline until the Company files the registration statement, or in the event it is beyond the Effective Deadline then the Company will have to pay such liquidated damages until the registration statement has been declared effective by the Commission. All payments must be made in cash.
The Company engaged MDB Capital Group, LLC, as its exclusive agent to offer the Units (the "Placement Agent"). The Placement Agent is entitled to a fee equal to ten percent (10%) of the gross proceeds derived from the sale of the Units together with a five year warrant to purchase up to ten percent (10%) of the number of Units sold in the Offering at an exercise price of $1.50 per Unit. In addition, the Company agreed to reimburse the Placement Agent for its out-of-pocket expenses related to the Offering and to register the Placement Agent's warrants together with the Shares and Warrant Shares to be registered in connection with the Offering.
The Units were offered and sold by the Company to accredited investors in reliance on Section 506 of Regulation D of the Securities Act of 1933, as amended.
INDEPENDENT AUDITORS' REPORT
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Remedent, Inc.:
We have audited the accompanying consolidated balance sheet of Remedent, Inc. (formerly Remedent USA, Inc.) as of March 31, 2005 and the related consolidated statements of operations, shareholders' deficit, comprehensive income loss and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the Standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2005 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Antwerp - Belgium,
July 13, 2005, except Note 3 as to which
the date is September 22, 2005
PKF bedrijfsrevisoren
Registered Auditors
Represented by
/s/ Ria Verheyen |
Ria Verheyen
Registered Auditor
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Remedent Inc. (formerly Remedent USA, Inc.):
We have audited the accompanying consolidated balance sheet of Remedent, Inc. (formerly Remedent USA, Inc.) (the "Company") as of March 31, 2004 and the related consolidated statements of operations, comprehensive income, shareholders' deficit and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2004 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States.
As described in Note 2, the Company restated its consolidated financial statements as of March 31, 2004, and for the year then ended.
/s/ Farber & Hass LLP May 28, 2004, except Note 2 as to which the date is January 20, 2005 Camarillo, California |
REMEDENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2005 March 31, 2004
ASSETS -------------- (Restated)
CURRENT ASSETS: --------------
Cash and cash equivalents $ 40,442 $ 172,382
Investments, restricted - 288,651
Accounts receivable, net of allowance for doubtful accounts
of $80,194 and $27,353 as of March 31, 2005 and 2004
respectively 1,488,296 1,347,613
Due from related party 156,099 147,887
Inventories, net 558,335 431,314
Prepaid expenses 192,306 21,742
Other prepayments 129,650 -
-------------- --------------
Total current assets 2,565,128 2,409,589
PROPERTY AND EQUIPMENT, NET 85,737 44,316
OTHER ASSETS
Patents, net 61,750 -
-------------- --------------
TOTAL ASSETS $ 2,712,615 $ 2,453,905
-------------- --------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Line of credit $ - $ 792,343
Notes payable 294,322 382,546
Accounts payable 889,668 667,961
Accrued liabilities 367,854 348,491
Due to related parties 58,958 127,960
Deferred revenue 18,864 -
Income taxes payable 178,269 -
-------------- --------------
Total current liabilities 1,807,935 2,319,301
-------------- --------------
MINORITY INTEREST IN REMEDENT N.V. 1,178,590 591,318
STOCKHOLDERS' DEFICIT:
Preferred stock $.001 par value (10,000 shares authorized,
none issued) - -
Common stock $0.001 par value (50,000,000 shares
authorized; 2,176,225 shares issued and outstanding
at March 31, 2005 and 1,978,958 shares issued and
outstanding at March 31, 2004) 2,176 1,979
Additional paid-in capital 5,427,289 5,240,573
Common stock subscribed (18,641 shares as of March 31, 2004) - 19
Accumulated deficit (5,764,249) (5,660,821)
Accumulated other comprehensive income (loss)
(foreign currency translation adjustment) 60,874 (38,464)
-------------- --------------
Total stockholders' deficit (273,910) (456,714)
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 2,712,615 $ 2,453,905
-------------- --------------
|
The accompanying notes are an integral part of these consolidated financial statements.
REMEDENT , INC. AND SUBSIDIARES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended
March 31, 2004
March 31, 2005 (Restated)
-------------- --------------
Net sales $ 7,072,300 $ 5,234,855
Cost of sales 2,982,315 2,413,920
------------- -------------
Gross profit 4,089,985 2,820,935
Operating expenses
Research and development 263,137 90,700
Sales and marketing 325,175 159,723
General and administrative 2,578,274 1,828,383
Depreciation and amortization 35,636 23,540
------------- -------------
Total operating expenses 3,202,222 2,102,346
------------- -------------
Income from operations 887,763 718,589
Other income (expenses)
Interest expense (66,390) (130,422)
Other income 25,544 19,300
------------- -------------
Total other income (expenses) (40,846) (111,122)
------------- -------------
Income before income tax expense 846,917 607,467
Income tax expense (363,072) -
Minority interest in Remedent N.V. (587,273) (591,318)
------------- -------------
Net income (loss) $ (103,428) $ 16,149
------------- -------------
Income (loss) per share
Basic $ (0.05) $ 0.01
------------- -------------
Fully diluted $ (0.05) $ 0.01
------------- -------------
Weighted average shares outstanding
Basic 2,047,470 1,963,927
------------- -------------
Fully diluted 2,047,470 2,448,856
------------- -------------
|
The accompanying notes are an integral part of these consolidated financial statements.
REMEDENT , INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS DEFICIT
FOR THE YEARS ENDED MARCH 31, 2005 AND 2004
Additional Paid Accumulated Common Stock
Shares Amount in Capital Deficit Subscribed Other Total
Balance, March 31, 2003
(Restated) 1,842,703 $ 1,843 $ 4,858,968 $ (5,676,970) $ 67 $ (48,194) $ (864,286)
Common stock issued under
private placements 18,750 19 - - (19) - -
Common stock issued in
repayment of notes payable 20,500 21 - - (21) - -
Common stock issued in
repayment of accrued expenses 9,255 9 - - (9) - 0
Common stock issued with sale of
toothbrush division 37,500 38 335,672 - - - 335,710
Settlement of consulting services
with related party 25,000 25 22,675 - - - 22,700
Settlement of consulting services
with unrelated parties 20,000 20 19,980 - - - 20,000
Purchase of 14.85% share in
PureWhite International BV 5,250 5 3,278 - - - 3,283
Cumulative translation adjustment - - - - - 9,730 9,730
Net income - - - 16,149 - - 16,149
--------- --------- ------------ ------------ --------- ---------- ----------
Balance, March 31, 2004
(Restated) 1,978,958 1,979 5,240,573 (5,660,821) 19 (38,464) (456,714)
--------- --------- ------------ ------------ --------- ---------- ----------
Common stock issued for services 12,500 13 2,488 - - - 2,500
Conversion of debentures 184,767 185 184,582 - - - 184,767
Subscribed stock forfeited - - (354) - (19) - (373)
Cumulative translation
adjustment - - - - - 99,338 99,338
Net
loss - - - (103,428) - - (103,428
--------- --------- ------------ ------------ --------- ---------- ----------
Balance, March 31, 2005 2,176,225 $ 2,176 $ 5,427,289 $ (5,764,249) $ - $ 60,874 $(273,910)
--------- --------- ------------ ------------ --------- ---------- ----------
|
The accompanying notes are an integral part of these consolidated financial statements.
REMEDENT , INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended
March 31, 2005 March 31, 2004
(Restated) (Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (103,428) $ 16,149
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating activities
Depreciation and amortization 34,628 24,637
Inventory reserve - 28,681
Allowance for doubtful accounts 50,448 (63,264)
Subscribed stock forfeited (373)
Minority Interest 587,273 591,318
Changes in operating assets and liabilities:
Accounts receivable (115,185) (1,106,336)
Inventories (101,318) (343,165)
Prepaid expenses (166,473) 17,301
Other assets 1,790
Accounts payable 184,725 215,205
Accrued liabilities 69,833 81,213
Deferred revenue 18,543 -
Income taxes payable 175,234 -
------------ -----------
Net cash provided (used) by operating activities 633,908 (536,471)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments 299,490 (32,712)
Other prepayments (127,443) -
Purchases of equipment (70,299) (24,907)
Notes receivable-related party - (10,939)
License of patent (65,000) -
------------ -----------
Net cash provided (used) by investing activities 36,749 (68,558)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes and debentures 262,036 280,999
Note payments-unrelated parties (306,884) -
Proceeds from (repayments of) line of credit (822,097) 530,771
Proceeds from sale of common stock - 45,980
Payments to related parties - (90,069)
------------ -----------
Net cash provided (used) by financing activities (866,945) 767,681
------------ -----------
NET (DECREASE) INCREASE IN CASH (196,288) 162,652
Effect of exchange rate changes
on cash and cash equivalents 64,347 9,730
CASH AND CASH EQUIVALENTS, BEGINNING 172,382 -
------------ -----------
CASH AND CASH EQUIVALENTS, ENDING $ 40,442 $ 172,382
Supplemental Information: ============ ===========
Interest paid $ 54,390 $ 111,118
Income taxes paid $ 252,330 $ -
|
The accompanying notes are an integral part of these consolidated financial statements.
SUPPLEMENTAL NON-CASH INVESTING
AND FINANCING ACTIVITIES:
During the quarter ended June 30, 2003, the Company issued 37,500 shares of common stock in conjunction with the sale of the Toothbrush Division pursuant to which Famcare 2000 assumed responsibility for $335,000 in liabilities.
During the quarter ended June 30, 2003, the Company issued 20,000 shares of common stock for the repayment of $20,000 in accounts payable indebtedness.
During March 2004, the Company issued 25,000 shares of common stock for the settlement of consulting fees for a total of $22,700.
On March 23, 2004, the Company issued 5,250 shares of its common stock to three individuals for the purchase of an aggregate of 14.85% of Pure White International BV valued at $3,282.
During September 2004, the Company issued 12,500 shares of stock to an unrelated third party for the settlement of consulting fees for a total of $2,500.
During the quarter ended December 31, 2004, the Company executed agreements effective as of December 31, 2004 which converted convertible debentures totaling $127,580 in principal plus $57,187 in interest into 184,767 shares of common stock which was issued in March, 2005.
REMEDENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the years ended
March 31, 2005 March 31, 2004
-------------- --------------
Net Income (Loss) $ (103,428) $ 16,149
OTHER COMPREHENSIVE
INCOME (LOSS):
Foreign currency translation adjustment 99,338 9,730
------------- -----------
Comprehensive income (loss) $ (4,090) $ 25,879
============= ===========
|
The accompanying notes are an integral part of these consolidated financial statements.
REMEDENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2005 AND 2004
1. GENERAL
The accompanying consolidated financial statements include the accounts of Remedent, Inc. (formerly Remedent USA, Inc.), a Nevada corporation, and its three subsidiaries, Remedent N.V. (Belgian corporation) located in Deurle, Belgium, Remedent Professional, Inc. (incorporated in California) and a subsidiary of Remedent Professional Holdings, Inc. (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. At March 31, 2005, Remedent Inc. owned 22% of Remedent N.V., a manufacturer of professional dental equipment for use by dentists. Since the other shareholders of Remedent N.V. are officers of Remedent or companies owned by officers of Remedent, the Company believes that it has "control" of Remedent N.V., as defined by APB 51 "Consolidated Financial Statements". The Company has consolidated the financial position and results of operations of Remedent N.V. All significant inter-company accounts and transactions have been eliminated in the consolidated financial statements.
The Company is a provider of cosmetic dentistry products, primarily teeth whitening products, mainly in Europe. The Company currently manufactures many of its products in its facility in Deurle, Belgium and distributes its products using both its own internal sales force and through the use of third party distributors.
2. RESTATEMENT - MARCH 31, 2004
In November, 2004, the Company detected errors in certain previously issued financial statements including the financial statements for the year ended March 31, 2004 included herein. The errors relate to the classification of certain assets, minority interest and paid in capital as well as mathematical errors in the Statement of Cash Flows.
In March 2003 the Company did not properly record a capital contribution to its subsidiary, Remedent N.V. by two of the Company's officers. The capital contribution was the value of certain fixed income securities which were assigned and irrevocably transferred to Remedent N.V on March 5, 2003 (the "Transfer Date") as well as forgiveness of 75,000 Euros ($77,827) in notes payable from the same officers. The initial value of the securities on the Transfer Date was 235,000 Euros ($243,860). These securities are collateral for a bank line of credit and are therefore shown as restricted investments on the Company's balance sheet. The $321,687 historical value of the fixed income securities and notes payable has been recorded and credited to additional paid in capital.
This foregoing capital contribution occurred as a result of the sale by Remedent N.V of 7,200 shares of Remedent N.V stock, representing 78% of the outstanding shares of Remedent N.V. after conclusion of the sale. In December 2002, as a result of losses incurred during its start-up period, Remedent N.V.'s shareholder equity fell below that which is required under Belgium law. In accordance with Belgium law, Remedent N.V. retained the services of an independent Belgium certified accountant to determine the amount of additional capital contribution necessary to bring Remedent N.V.'s balance sheet into compliance. As a result of this analysis, it was determined that additional capital of 310,000 Euros ($321,687 as of December 2002) would be required and, further, that Remedent N.V.'s valuation prior to such capital contribution was 88,500 Euros. In as much as Remedent USA lacked the financial resources to provide the additional capital required, Remedent N.V. elected to issue 7,171 shares of its common stock to Lausha N.V., a company controlled by Guy De Vreese in exchange for conversion of 50,000 Euros in notes payable and contribution of the 235,000 Euros in fixed income marketable securities discussed above, both as an irrevocable capital contribution to Remedent N.V.. In addition, Remedent N.V. issued 629 shares to Robin List in exchange for conversion of 25,000 Euros in notes payable as an irrevocable capital contribution to Remedent N.V. Mr. De Vreese and Mr. List are both officers and directors of Remedent N.V. and Remedent USA, Inc. As a result of this transaction, as previously reported in earlier filings, the Company currently own 22% of the Company's subsidiary, Remedent N.V.
In connection with the same transaction, the Company did not correctly record the Minority Interest related to the previously mentioned 78% ownership of the Company's subsidiary, Remedent N.V. The foregoing was the result of an error in the recording of Minority Interest that originally occurred as of March 31, 2003. The effect of these errors had been to overstate the value of the Minority Interest by $112,756 as of March 31, 2004.
In addition, as of March 31, 2004, the Company had recorded advances totaling $546,583 under its accounts receivable line of credit as due to non-related parties. These amounts have been reclassified to the current liability account entitled line of credit
The cumulative effect of these errors as of March 31, 2004 had been to understate cash by $171,818, understate investments, restricted by $116,833, understate the balance due under the line of credit by $546,583, overstate amounts due unrelated parties by $546,583, overstate minority interest by $112,756, understate the value of additional paid in capital by $321,687, understate accumulated deficit by $47,940 and overstate the accumulated loss from foreign currency translation by $31,780.
In the process of preparing the foregoing restatements, the Company determined that, in addition to the changes required in the Statement of Cash Flows resulting from the foregoing, there were mathematical errors in the Statement of Cash Flows which have been corrected. The following tables set forth the amounts as previously filed and the restated amounts for Statement of Income (Loss), the Balance Sheet and the Statement of Cash Flows:
For the years ended
March 31, 2004
-----------------------------------------
Previously
Restated Reported
-------- ----------
Net Sales $ 5,234,855 $ 5,234,855
Cost of Sales 2,413,920 2,413,920
------------ ------------
Gross Profit 2,820,935 2,820,935
Operating Expenses
Research and Development 90,700 90,700
Sales and Marketing 159,723 159,723
General and Administrative 1,828,383 1,828,383
Impairment loss on IMDS Goodwill - -
Depreciation and Amortization 23,540 23,540
------------ ------------
TOTAL OPERATING EXPENSES 2,102,346 2,102,346
------------ ------------
INCOME (LOSS) FROM OPERATIONS 718,589 718,589
OTHER INCOME (EXPENSES)
Interest/Other Income 19,300 19,300
Interest Expense (130,422) (130,422)
------------ ------------
TOTAL OTHER INCOME (EXPENSES) (111,122) (111,122)
------------ ------------
LOSS BEFORE INCOME TAXES 607,467 607,467
MINORITY INTEREST IN REMEDENT N.V. (591,318) (639,258)
------------ ------------
NET INCOME (LOSS) $ 16,149 $ (31,791)
=========== ============
LOSS PER SHARE
Basic $ 0.01 $ 0.00
=========== ============
Fully diluted $ 0.01 $ 0.00
=========== ============
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 1,963,927 1,587,114
=========== ============
Fully diluted 2,448,856 1,690,995
=========== ============
|
March 31, 2004
Previously
Restated Reported
-------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 172,382 $ 564
Investments, restricted 288,651 171,818
Accounts receivable, net 1,347,613 1,347,613
Due from related party 147,887 147,887
Inventories, net 431,314 431,314
Prepaid expense 21,742 21,742
----------- -----------
Total current assets 2,409,589 2,120,938
----------- -----------
PROPERTY AND EQUIPMENT, NET 44,316 44,316
OTHER ASSETS - -
----------- -----------
TOTAL ASSETS $ 2,453,905 $ 2,165,254
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Line of Credit $ 792,343 $ 245,660
Accounts payable 667,961 667,961
Due to related parties 127,960 127,960
Net liabilities of Toothbrush Business to be sold -
Due to non-related parties - 744,372
Accrued liabilities 348,491 348,491
Notes payable, unrelated parties 382,546 184,857
----------- -----------
Total current liabilities 2,319,301 2,319,301
----------- -----------
MINORITY INTEREST IN REMEDENT N.V. 591,318 704,074
STOCKHOLDERS' DEFICIT:
Common stock $0.001 par value (50,000,000 shares
authorized, ; 1,978,958 shares issued and
outstanding at March 31, 2004 1,979 1,979
Additional paid-in capital 5,240,573 4,918,532
Accumulated deficit (5,660,821) (5,708,761)
Common stock subscribed (18,641 shares as of March
31, 2004) 19 373
Accumulated other comprehensive (loss)
(foreign currency translation adjustment) (38,464) (70,244)
----------- -----------
Total stockholders' deficit (456,714) (858,121)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 2,453,905 $ 2,165,254
=========== ===========
|
March 31, 2004
Previously
Restated reported
-------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ 16,149 $ (31,791)
Adjustments to reconcile net loss
to net cash used by operating activities
Depreciation and amortization 24,637 24,637
Inventory reserve 28,681 28,681
Allowance for doubtful accounts (63,264) (63,264)
Impairment loss on IMDSGoodwill -
Minority Interest 591,318 639,258
Changes in operating assets and liabilities:
Accounts receivable (1,106,336) (1,106,336)
Notes receivable -
Inventories (343,165) (343,165)
Prepaid expenses 17,301 17,301
Other assets 1,790 1,790
Accounts payable 215,205 215,205
Accrued liabilities 81,213 81,213
---------- -----------
Net cash used by operating activities (536,471) (536,471)
CASH FLOWS FROM INVESTING ACTIVITIES
Investments (32,712) (171,818)
Purchases of equipment (24,907) (24,907)
Notes from related parties (10,939) (10,939)
---------- -----------
Net cash used by investing activities (68,558) (207,664)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes and debentures 280,999 85,414
Proceeds from line of credit 530,771 (15,912)
Proceeds from sale of common stock 45,980 100,000
Payments to related parties (90,069) -
Notes to unrelated parties - 588,555
---------- -----------
Net cash provided by financing activities 767,681 766,749
---------- -----------
NET (DECREASE) INCREASE IN CASH 162,652 22,051
Effect of exchange rate changes
on cash and cash equivalents 9,730 (21,870)
CASH AND CASH EQUIVALENTS, BEGINNING - -
---------- -----------
CASH AND CASH EQUIVALENTS, ENDING $ 172,382 $ 564
========== ===========
|
3. RESTATEMENT - MARCH 31, 2005
In August 2005, the Company received a letter from the Securities and Exchange Commission regarding questions and comments related to the Company's annual report on Form 10-KSB for the year ended March 31, 2005. The letter addressed an issue related to the Company's presentation of the effect of exchange rate changes on cash and cash equivalents and the Company's compliance with SFAS 95 which discusses presentation of foreign currency exchange rate changes on the Statement of Cash Flows. Upon investigation, it was determined that the Company had not properly presented the effect of exchange rate changes on cash and cash equivalents for the year ended March 31, 2005 resulting in an overstatement of the effect of exchange rate changes on cash and cash equivalents of $34,991. The following tables set forth the amounts as previously filed and the restated amounts for Statement of Cash Flows:
March 31, 2005 March 31, 2005
(Restated) (As Filed)
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (103,428) $ (103,428)
Adjustments to reconcile net loss
to net cash used by operating activities
Depreciation and amortization 34,628 35,636
Inventory reserve - 2,046
Allowance for doubtful accounts 50,448 52,841
Subscribed stock forfeited (373) (373)
Minority Interest 587,273 587,273
Changes in operating assets and liabilities:
Accounts receivable (115,185) (193,524)
Inventories (101,318) (129,068)
Prepaid expenses (166,473) (170,564)
Other assets -
Accounts payable 184,725 221,707
Accrued liabilities 69,833 84,050
Deferred revenue 18,543 18,864
Income taxes payable 175,234 178,269
----------- ------------
Net cash provided (used) by operating activities 633,908 583,730
CASH FLOWS FROM INVESTING ACTIVITIES
Investments 299,490 288,651
Other current assets (127,443) (129,650)
Purchases of equipment (70,299) (73,808)
Notes receivable-related party - (8,212)
License of patent (65,000) (65,000)
----------- ------------
Net cash provided (used) by investing activities 36,749 11,981
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes and debentures 262,036 266,575
Note payments-unrelated parties (306,884) (301,221)
Proceeds from (repayments of) line of credit (822,097) (792,343)
Proceeds from sale of common stock - -
Payments to related parties - -
----------- ------------
Net cash provided (used) by financing activities (866,945) (826,989)
----------- ------------
NET (DECREASE) INCREASE IN CASH (196,288) (231,278)
Effect of exchange rate changes
on cash and cash equivalents 64,347 99,338
CASH AND CASH EQUIVALENTS, BEGINNING 172,382 172,382
----------- ------------
CASH AND CASH EQUIVALENTS, ENDING $ 40,442 $ 40,442
=========== ============
|
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis for Presentation
The Company's financial statements have been prepared on an accrual basis of accounting, in conformity with accounting principles generally accepted in the United States of America. These principles contemplate the realization of assets and liquidation of liabilities in the normal course of business. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. These financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
On June 3, 2005, the Company amended its Articles of Incorporation pursuant to
the filing of the Amended and Restated Articles of Incorporation with the Nevada
Secretary of State. The Amended and Restated Articles of Incorporation (i)
changed the name of the Company from "Remedent USA, Inc." to "Remedent, Inc."
(ii) increased the number of authorized shares to 60,000,000 shares consisting
of 50,000,000 shares of common stock and 10,000,000 shares of Preferred Stock,
and (iii) effected a 1 for 20 reverse stock split (collectively, the
"Amendments"). The Amendments were disclosed in an Information Statement on
Schedule 14 (c) mailed on May 9, 2005 to all stockholders of record as of the
close of business on February 1, 2005. The consolidated financial statements and
accompanying notes have been retroactively adjusted to reflect the effects of
the reverse split and authorization of 10,000,000 shares of Preferred Stock.
Principles of Consolidation
All inter-company balances and transactions have been eliminated in consolidation. Corporate administrative costs are not allocated to subsidiaries.
Revenue Recognition
The Company recognizes revenue from product sales when persuasive evidence of a sale exists: that is, a product is shipped under an agreement with a customer; risk of loss and title has passed to the customer; the fee is fixed or determinable; and collection of the resulting receivable is reasonably assured. Sales allowances are estimated based upon historical experience of sales returns.
Impairment of Long-Lived Assets
Long-lived assets consist primarily of property and equipment. The recoverability of long-lived assets is evaluated by an analysis of operating results and consideration of other significant events or changes in the business environment. If impairment exists, the carrying amount of the long-lived assets is reduced to its estimated fair value, less any costs associated with the final settlement. As of March 31, 2005, management believes there was no impairment of the Company's long-lived assets.
Pervasiveness of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, the Company evaluates estimates and judgments, including those related to revenue, bad debts, inventories,
investments, fixed assets, intangible assets, income taxes, and contingencies. Estimates are based on historical experience and on various other assumptions that the Company believes reasonable under the circumstances. The results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less to be cash or cash equivalents.
Investments
The Company accounts for investments, available for sale, in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The Company determines the appropriate classification of all marketable securities as held-to-maturity, available for sale or trading at the time of purchase, and re-evaluates such classification as of each balance sheet date. At March 31, 2004, all of the Company's investments in marketable securities were classified as restricted as a result of their being held as collateral for a bank credit line and were reported at fair value. As of October 8, 2004, the Company entered into a new line of credit with a new bank and the restrictions on these investments were released by the prior bank in January 2005 (Note 13). Unrealized gains and losses are reported as a component of accumulated other comprehensive income (loss) in stockholders' deficit.
Accounts Receivable and Allowance for Doubtful Accounts
The Company sells professional dental equipment to various companies, primarily to distributors located in Western Europe. The terms of sales vary by customer, however, generally are 2% 10 days, net 30 days. Accounts receivable is reported at net realizable value and net of allowance for doubtful accounts. The Company uses the allowance method to account for uncollectible accounts receivable. The Company's estimate is based on historical collection experience and a review of the current status of trade accounts receivable.
Inventories
The Company purchases certain of its products in components that require assembly prior to shipment to customers. All other products are purchased as finished goods ready to ship to customers.
The Company writes down inventories for estimated obsolescence to estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected, then additional inventory write-downs may be required. Inventory reserves for obsolescence totaled $38,895 at March 31, 2005 and $36,849 at March 31, 2004.
Prepaid Expense
The Company's prepaid expense consists of prepayments to suppliers for inventory purchases and to the Belgium customs department, to obtain an exemption of direct VAT payments for imported goods out of the European Union ("EU"). This prepayment serves as a guarantee to obtain the facility to pay VAT at the moment of sale and not at the moment of importing goods at the border. Prepaid expenses also include VAT payments made for goods and services in excess of VAT payments received from the sale of products as well as amounts for other prepaid operating expenses.
Property and Equipment
Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income.
The Company depreciates its property and equipment for financial reporting purposes using the straight-line method based upon the following useful lives of the assets:
Tooling 3 Years Furniture and fixtures 4 Years Machinery and Equipment 4 Years |
Patents
Patents consist of the costs incurred to purchase patent rights and are reported net of accumulated amortization. Patents are amortized using the straight-line method over a period based on their contractual lives. . Amortization expense for the year ended March 31, 2005 was $3,250.
Research and Development Costs
The Company expenses research and development costs as incurred.
Advertising
Costs incurred for producing and communicating advertising are expensed when incurred and included in sales and marketing and general and administrative expenses. For the years ended March 31, 2005 and 2004, advertising expense was $325,175 and $160,636, respectively.
Income taxes
Income taxes are provided in accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." Deferred taxes are recognized for temporary differences in the bases of assets and liabilities for financial statement and income tax reporting as well as for operating losses and credit carry forwards. A provision has been made for income taxes due on taxable income and for the deferred taxes on the temporary differences. The components of the deferred tax asset and liability are individually classified as current and non-current based on their characteristics.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Warranties
The Company typically warrants its products against defects in material and workmanship for a period of 18 months from shipment. Based upon historical trends and warranties provided by the Company's suppliers and sub-contractors, the Company has made a provision for warranty costs of $19,448 as of March 31, 2005. The Company had not recorded a provision for warranty costs as of March 31, 2004 as the required amount was considered immaterial.
Segment Reporting
Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure About Segments of an Enterprise and Related Information" requires use of the "management approach" model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. The Company's management considers its business to comprise one segment for reporting purposes.
Impact of New Accounting Standards
In February 2003, the Financial Accounting Standards Board issued Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"), which addresses the consolidation by business enterprises of variable interest entities. FIN 46 defines when a company should evaluate "controlling financial interest," and thus consolidation, based on factors other than voting rights, and requires that a new "risks and rewards" model be applied in these situations. The adoption of FIN 46 did not have a significant effect on its financial statements.
In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus on Issue No. 03-01, "The Meaning of Other-Than-Temporary Impairments and Its Application to Certain Investments" ("EITF 03-1"). EITF 03-1 provides a three-step impairment model for determining whether an investment is other-than-temporarily impaired and requires that Company to recognize such impairments as an impairment loss equal to the difference between the investment's cost and fair value at the reporting date. The adoption of EITF 03-1 did not have a significant effect on its financial statements.
In July 2004, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue No. 04-8, "Accounting Issues Related to Certain Features of Contingently
Convertible Debt and the Effect on Diluted Earnings per Share" ("EITF No.
04-8"). The Task Force reached a consensus that contingently convertible debt
instruments should be included in the computation of diluted earnings per share
under the if-converted method regardless of whether the market price trigger (or
other contingent feature) has been met. The EITF 04-8 consensus must be applied
by retroactive restatement based on the term in effect on the last day of the
fiscal period in which the consensus becomes effective. This consensus became
effective for all financial statements issued after December 15, 2004.
Accordingly, the Company retroactively restated all earnings per share measures
for all periods to reflect the consensus as it relates to a $100,000 note
payable contingently convertible into two percent (2%) of the Company's
outstanding common stock upon successful completion of a restructuring (see Note
4) and $147,580 in principal plus interest in convertible debentures issued by
the Company from April 2000 through February 2001 of which $127,580 converted
(plus accrued interest of $57,187) as of December 31, 2004.
In November 2004, the FASB issued SFAS 151 "Inventory Costs, an amendment of ARB No. 43, Chapter 4.". This Statement amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). This Statement requires that those items be recognized as current-period charges. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The Company will adopt this statement for the fiscal year beginning April 1, 2006.
In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123 (revised 2004), "Share Based Payment" ("SFAS 123R"), a revision to SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS 123R supersedes Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and amends SFAS No. 95, "Statement of Cash Flows". SFAS 123R
requires that the Company measure the cost of employee services received in exchange for equity awards based on the grant date fair value of the awards. The cost will be recognized as compensation expense over the vesting period of the awards. The Company is required to adopt SFAS 123R effective as of the beginning of the first interim or annual reporting period that begins after December 15, 2005 or January 1, 2006. Under this method, the Company will begin recognizing compensation cost for equity-based compensation for all new or modified grants after the date of adoption. In addition, the Company will recognize the unvested portion of the grant date fair value of awards issued prior to adoption based on the fair values previously calculated for disclosure purposes over the remaining vesting period of the outstanding options and warrants. The Company is currently evaluating the potential effect that the adoption of SFAS 123R will have on the Company's financial statement presentation and disclosures. Until such time, the Company has determined that it will continue to account for stock-based employee compensation in accordance with APB No. 25.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets, an amendment to APB Opinion No. 29" ("SFAS 153"). SFAS 153 amends Accounting Principles Board Opinion No. 29, "Accounting for Nonmonetary Transactions", to require that exchanges of nonmonetary assets be measured and accounted for at fair value, rather than at carryover basis, of the assets exchanged. Nonmonetary exchanges that lack commercial substance are exempt from this requirement. SFAS 153 is effective for nonmonetary exchanges entered into in fiscal periods beginning after June 15, 2005. Company is currently evaluating the potential effect that the adoption of SFAS No. 153 will have on the Company's financial statement presentation and disclosures.
Computation of Earnings (Loss) per Share
Basic net income (loss) per common share is computed by dividing net income
(loss) attributable to common stockholders by the weighted average number of
shares of common stock outstanding during the period. Net income (loss) per
common share attributable to common stockholders assuming dilution is computed
by dividing net income by the weighted average number of shares of common stock
outstanding plus the number of additional common shares that would have been
outstanding if all dilutive potential common shares had been issued. Potential
common shares related to stock options and stock warrants are excluded from the
computation when their effect is antidilutive.
Conversion of Foreign Currencies
The reporting currency for the consolidated financial statements of the Company is the U.S. dollar. The functional currency for the Company's European subsidiary, Remedent N.V. is the Euro . The functional currency for Remedent Professional, Inc. is the U.S. dollar. The Company translates foreign currency statements to the reporting currency in accordance with FASB 52. The assets and liabilities of companies whose functional currency is other that the U.S. dollar are included in the consolidation by translating the assets and liabilities at the exchange rates applicable at the end of the reporting period. The statements of income of such companies are translated at the average exchange rates during the applicable period. Translation gains or losses are accumulated as a separate component of stockholders' deficit.
Comprehensive Income (Loss)
The Company has adopted the provisions of Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 establishes standards for the reporting and display of comprehensive income, its components and accumulated balances in a full set of general purpose financial statements. SFAS No. 130 defines comprehensive income (loss) to include all changes in equity except those resulting from investments by owners and distributions to owners, including adjustments to minimum pension liabilities, accumulated foreign currency translation, and unrealized gains or losses on marketable securities.
The Company's only component of other comprehensive income is the accumulated foreign currency translation consisting of gains of $99,338 and $9,730 for the years ended March 31, 2005 and 2004, respectively. These amounts have been recorded as a separate component of stockholders' deficit.
5. SUBSEQUENT EVENT-CORPORATE RESTRUCTURING
Action by Unanimous Written Consent
In February and December 2004, in an action taken by written consent of the holders of a majority of the issued and outstanding shares of the Company's common stock, and without a meeting pursuant to Section 78.320 of the Nevada Revised Statute, the Company: (i) increased the number of authorized shares to 60,000,000 shares, consisting of 50,000,000 shares of common stock and 10,000,000 shares of preferred stock, (ii) implemented a one-for-twenty reverse stock split with consideration for fractional shares to be issued in the form of scrip, and (iii) changed the name of the Company from "Remedent USA, Inc." to "Remedent, Inc." The Written Consent also authorized acquisition of the remaining 78% of the Company's subsidiary, Remedent N.V., that the Company did not own from Messrs. Guy De Vreese and Robin List, the Chairman and Chief Executive Officer respectively, through the issuance of shares of the Company's common stock equal to 78% of the Company's issued and outstanding shares following the completion of the transaction. Lastly, the written consent authorized the implementation of a 2004 Incentive and Nonstatutory Stock Option Plan, following the implementation of the reverse stock split (so as not to be affected by the reverse stock split), reserving 800,000 shares of common stock for issuance to employees, directors and consultants of the Company or any subsidiaries. These actions were disclosed in an Information Statement on Schedule 14 (c) mailed on May 9, 2005 to all stockholders of record as of the close of business on February 1, 2005 and became effective June 3, 2005.
On June 3, 2005, the Company amended its Articles of Incorporation pursuant to
the filing of the Amended and Restated Articles of Incorporation with the Nevada
Secretary of State. The Amended and Restated Articles of Incorporation (i)
changed the name of the Company from "Remedent USA, Inc." to "Remedent, Inc."
(ii) increased the number of authorized shares to 60,000,000 shares consisting
of 50,000,000 shares of common stock and 10,000,000 shares of Preferred Stock,
and (iii) effected a 1 for 20 reverse stock split (collectively, the
"Amendments").
Acquisition of Minority Interest
Also on June 3, 2005 the Company entered into an agreement ("Exchange Agreement") with Remedent N.V. the Company's Belgium based consolidated subsidiary, Lausha NV, a Belgian company that is controlled by Guy De Vreese who is Chairman of the Company ("Lausha"); and Robin List, a director and the Chief Executive Officer of the Company ("Mr. List"). Mr. List and Lausha are collectively referred to as the "Exchanging Stockholders." Prior to the exchange contemplated by the Exchange Agreement, the Company owned 2,200 shares of Remedent N.V. representing a twenty-two percent (22%) ownership interest in Remedent N.V. and the Exchanging Stockholders collectively owned 7,800 shares of Remedent N.V. representing a seventy-eight percent (78%) ownership interest of Remedent N.V.. Under the terms of the Exchange Agreement, the Company agreed to issue 7,715,703 of its restricted common stock (representing a 78% ownership interest in the Company) giving effect to a one for twenty reverse stock split (the "Reverse Stock Split"), in exchange for all of the issued and outstanding shares of Remedent N.V. owned by the Exchanging Stockholders (the "Acquisition"). The number of shares to be issued, as a percentage of the Company's outstanding shares, in consideration for the Acquisition of the seventy eight percent (78%) of the shares of Remedent N.V. was based on an evaluation by MDB Capital Group, LLC ("MDB"), a NASD registered broker dealer retained by the Company to render advice with regard to the Company's restructuring. MDB concluded that the Company's twenty two percent (22%) interest in Remedent N.V. was the Company's only asset and therefore, as consideration for their seventy eighty percent (78%) interest in Remedent N.V., the Exchanging Stockholders should receive an equal percentage ownership interest in the Company, therefore preserving the existing proportional indirect ownership interests in Remedent N.V. of both the Exchanging Stockholders and the existing Company stockholders.
The Company consummated the Acquisition of Remedent N.V. as contemplated by the Exchange Agreement on June 3, 2005. In connection with the Acquisition, the Company issued 7,715,703 post Reverse Stock Split shares of its restricted common stock to the Exchanging Stockholders in exchange for all of the issued and outstanding shares of Remedent N.V. owned by the Exchanging Stockholders. As a result of the Acquisition, Remedent N.V. is a wholly owned subsidiary of the Company.
Conversion of Note Payable
Upon successful completion of the foregoing transactions, on June 3, 2005 a $100,000 note payable issued by the Company on March 23, 2004 to MDB ("MDB Note") converted to 197,839 shares of common stock pursuant to its terms which required automatic conversion contingent upon successful completion of any corporate restructuring in an amount equal to two percent (2.0%) of the outstanding shares of the Company at the completion of such restructuring. As of June 3, 2005, accrued interest on the MDB Note was $11,173, resulting in an effective conversion price of $0.57 per share. In accordance with Emerging Issues Task Force ("EITF") consensus on Issue No. 98-5, "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios", the Company will recognize the value of the beneficial conversion feature equal to the difference between the effective conversion price, $0.57 per share, and the fair market value of the Company's common stock as of the date of the MDB Note was issued ($1.60 per share as of March 23, 2004) as additional interest expense as of the date of the conversion, not to exceed the amount of the proceeds received from the MDB Note. Accordingly, the Company will record $100,000 in additional non-cash interest expense as of June 3, 2005.
Non-cash Fees for Financial Advisory Services
Also upon completion of the foregoing transactions, MDB, for financial advisory services rendered to the Company in connection with the Company's corporate restructuring, was entitled to receive shares of the Company's common stock equal to 2.5% the issued and outstanding shares as of June 3, 2005 restructuring and five year common stock purchase warrants equal to another 2.5% of the Company's outstanding shares as of June 3, 2005 that will be exercisable beginning ninety (90) days after June 3, 2005 with an exercise price of $1.20 per share. Accordingly, as of June 3, 2005, the Company is obligated to issue to MDB or its designee, 247,298 shares of the Company's common stock and 247,298 five year common stock purchase warrants. The market value of the Company's common stock on June 3, 2005 was $1.60 per share, resulting in a value attributable to the stock issued to MDB of $395,677. The value of the warrants, determined in accordance with the Black-Scholes pricing model utilizing an historic volatility factor of 1.52, a risk free interest rate of 6.0% and an expected life for the warrants of five years, is $1.49 per warrant, for a total for the warrants of $368,474. Accordingly the Company will recognize a non-cash restructuring expense as of June 3, 2005 of $764,151.
A summary of the Company's balance sheet and outstanding shares assuming the acquisition of the 78% interest in Remedent N.V. had been completed as of March 31, 2005, inclusive of the conversion of the MDB Note, recognition of the non-cash interest expense of the MDB Note and the payment of fees due MDB, is as follows:
Assuming
acquisition of
As reported 78% interest
March 31, 2005 March 31, 2005
-------------- --------------
Assets
Current assets $ 2,565,128 $ 2,565,128
Property and equipment, net 85,737 85,737
Other assets 61,750 61,750
-------------- --------------
Total assets $ 2,712,615 $ 2,712,615
============== ==============
Liabilities and stockholder's equity (deficiency)
Current liabilities
Notes payable 294,322 194,322
Due to related parties 58,958 58,958
Other current liabilities 1,443,155 1,433,155
-------------- --------------
Total current liabilities 1,796,435 1,686,435
-------------- --------------
Minority interest 1,178,590 -
Stockholder's equity (deficiency)
Common stock 2,176 10,337
Additional paid in capital 5,427,289 7,571,869
Accumulated earnings (deficit) (5,752,749) (6,616,900)
Accumulated other
comprehensive income (loss) 60,874 60,874
-------------- --------------
Total stockholder's
equity (deficiency) (262,410) 1,026,180
-------------- --------------
$ 2,712,615 $ 2,712,615
============== ==============
Number of shares of
common stock outstanding 2,176,225 10,337,065
============== ==============
|
Complete proforma information was filed by the Company on a Form 8-K/A filed with the SEC on August 17, 2005 .
Private Placement
As of July 8, 2005, the Company was in the process of completing a private placement offering pursuant to Rule 506 of Regulation D of the Act of 2,666,667 Units consisting of one share of its Common Stock (the "Shares") and one Common Stock Purchase Warrant (the "Warrants") at a price of $1.50 per Unit for a total of $4,000,000 (the "Offering"). As of July 8, 2005 the Company had accepted subscriptions from accredited investors to purchase an aggregate of 2,110,000 Units representing total gross proceeds of $3,165,000 in cash. The Warrants shall be exercisable for a period of five years and shall entitle the holder to purchase one share of Common Stock (the "Warrant Shares") for $1.75 per Warrant Share. The Company shall have the right to redeem the Warrants for $0.01 per Warrant Share covered by the Warrants if the Shares trade on the Over-The-Counter Bulletin Board above $3.50 per share for thirty consecutive trading days based upon the closing bid price for the Shares for each trading day (the "Redemption Right"), provided, however, that the Warrant Shares have been registered with the Securities and Exchange Commission (the "Commission"). Once the Redemption Right vests, the Company shall have the right, but not the obligation, to redeem the Warrants for $0.01 per Warrant Share covered by the Warrants upon thirty days written notice to the holders of the Warrants.
The Company engaged MDB Capital Group, LLC, as its exclusive agent to offer the Units (the "Placement Agent"). The Placement Agent is entitled to a Placement Agent's Fee equal to ten percent (10%) of the gross proceeds derived from the sale of the Units together with a five year warrant to purchase up to ten percent (10%) of the number of Units sold in the Offering at an exercise price of $1.50 per Unit. Moreover, the Company agreed to reimburse the Placement Agent its out-of-pocket expenses related to the Offering and to register with the Commission the Placement Agent's warrants together with the Shares and Warrants issued to investors in the Offering.
The Company has also agreed to indemnify the Placement Agent against various liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments the Placement Agent may be required to make in respect of any of those liabilities.
The Company has further agreed to file a registration statement with the Commission on or before thirty (30) days from the Initial Closing, registering the Shares and Warrant Shares for resale. In the event that the Company fails to file the registration statement on or before thirty (30) days from the Initial Closing, (the "Filing Deadline") or in the event that the registration statement is not declared effective on or before 120 days from the Initial Closing, then the Company has agreed to pay liquidated damages in an amount equal to 1.5% of the amount invested for each month beyond the Filing Deadline until filing of the registration statement or beyond the 120th day after the Initial Closing until the registration statement has been declared effective by the Commission.
6. CONCENTRATION OF RISK
Financial Instruments - Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade accounts receivable.
Concentrations of credit risk with respect to trade receivables are normally limited due to the number of customers comprising the Company's customer base and their dispersion across different geographic areas. At March 31, 2005 and 2004, one customer accounted for 52% and 76%, respectively, of the Company's trade accounts receivable. This number represents the collective receivable on the group Omega Pharma, which includes Omega Pharma NV (Belgium), Chefaro UK, Ltd, Chefaro Espanola SA, Chefaro Nederland BV, Chefaro Portuguesa and Deutsche Chefaro Pharma GmbH, that are invoiced through the Belgium Headquarters. The Company performs ongoing credit evaluations of its customers and normally does not require collateral to support accounts receivable.
Purchases - The Company has diversified its sources for product components and finished goods and, as a result, the loss of a supplier would not have a material impact on the Company's operations. For the year ended March 31, 2005, the Company had three suppliers each of whom who accounted for 10% to 11% gross purchases.
Revenues - For the years ended March 31, 2005 and 2004, the Company had one group of customers (represented by Omega Pharma NV) whose sales were 37% and 45% of total revenues, respectively.
7. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company's accounts receivable at March 31, 2005 and 2004 were as follows:
March 31, 2005 March 31, 2004
-------------- ---------------
Accounts receivable, gross $ 1,568,490 $ 1,374,966
Less: allowance for doubtful accounts (80,194) (27,353)
-------------- ---------------
Accounts receivable, net $ 1,488,296 $ 1,347,613
============== ==============
|
8. DUE FROM RELATED PARTIES
On February 12, 2002, Remedent N.V. entered into a loan agreement for Euro 125,000 with Lident N.V., a company owned and operated by Guy De Vreese, the Company's Chairman. The agreement was entered into in connection with a line of credit established by Remedent N.V. with a Belgian bank. Due to the insufficient assets maintained by Remedent N.V. as of inception date of the line of credit, the bank imposed two requirements for the extension of credit; (1) Mr. De Vreese personally guarantee the line of credit, and (2) Lident N.V. was required to repay its existing line of credit in full. As such, Euro 125,000 of Remedent N.V. 's proceeds from the line of credit was utilized to repay Lident's existing line of credit. On October 8, 2004, Remedent N.V. obtained a new bank line of credit facility with a different Belgian bank which no longer required the guarantee of Mr. De Vreese. Lident commenced repayment to the Company of this loan in December 2003 reducing the obligation by Euro 10,000 resulting in a balance due as of March 31, 2005 of Euro 115,000 ($149,098). All outstanding obligations under the original line of credit were paid in full at March 31, 2005 and Mr. De Vreese's guarantee was released in January 2005. DMD later merged with Lident, N.V. Effective July 13, 2005, the Company's Board of Directors approved the repayment of the advance to DMD in exchange for 93,533 shares of the Company's common stock held by Lident valued at $1.50 per share, based upon a principal amount of the loan Euro 115,000 and a conversion rate of $1.22 to the Euro . The transaction was approved by the disinterested directors with Mr. DeVreese abstaining from the vote.
Also included in due from related parties is a cash investment of (Euro) 5,400 ($7,001) in Pure White International made May, 2003 in exchange for a 30% interest in this company. The Company anticipates this investment will be repurchased by Pure White International for (Euro) 5,400 ($7,001) on or before August 31, 2005. Pure White International BV is the Company's former distributor for the CleverWhite tooth whitening kits for the Dutch market prior to the Company licensing these distribution rights to Omega Pharma.
9. INVENTORIES
Inventories at March 31, 2005 and March 31, 2004 are stated at the lower of cost (first-in, first-out) or net realizable value and consisted of the following:
March 31, 2005 March 31, 2004
-------------- --------------
Raw materials $ 14,486 $ 5,839
Components 496,800 435,708
Finished goods 85,944 26,615
-------------- --------------
597,230 468,163
Less: reserve for obsolescence (38,895) (36,849)
-------------- --------------
Net inventory $ 558,335 $ 431,314
============== ==============
|
10. PREPAID EXPENSES
Prepaid expenses are summarized as follows:
March 31, 2005 March 31, 2004
--------------- --------------
Prepaid materials and components $ 28,654 $ 9,827
Prepaid Belgium income taxes 64,825 -
VAT payments in excess of VAT receipts 76,493 -
VAT import bond 8,016 4,218
Prepaid rent 8,505 7,697
Prepaid equipment rental 3,014 -
Other 2,799 -
--------------- --------------
$ 192,306 $ 21,742
=============== ==============
|
11. OTHER PREPAYMENTS
In September 2004, the Company entered into an agreement with Lident N.V., a company controlled by Mr. De Vreese, the Company's Chairman, to obtain an option, exercisable through December 31, 2005, to license a patent and worldwide manufacturing and distribution rights for a potential new product for which Lident had been assigned certain rights by the inventors of the products, who are unrelated parties, prior to Mr. De Vreese association with the Company. The agreement required the Company to advance to the inventors through Lident a fully refundable deposit of (Euro) 100,000 ($129,650) subject to the Company's due diligence regarding the enforceability of the patent and marketability of the product, which, if viable, will be assigned to the Company for additional consideration to the inventors of (Euro) 100,000 ($129,650) and an ongoing royalty from sales of products related to the patent equal to 3% of net sales and, if not viable, the deposit will be repaid in full 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 will not profit 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 us in exchange for the reimbursement of Lident's actual costs incurred relating to the intellectual property. Consequently, if the Company exercises the option, it is anticipated that all future payments, other than the reimbursement of costs, would be paid directly to the original inventors and not to Lident.
12. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
March 31, 2005 March 31, 2004
-------------- --------------
Furniture and Fixtures $ 39,517 $ 29,621
Machinery and Equipment 75,558 11,646
Tooling - 49,782
-------------- -----------
115,075 91,049
Property & equipment, net $ 85,737 $ 44,315
============== ===========
|
13. LINE OF CREDIT
On February 16, 2004, Remedent N.V. entered into a (Euro) 1,050,000 (US $1,289,715 at March 31, 2004) Line of Credit Facility (the "Facility") with the ING bank (Formerly BBL), consisting of a (Euro) 800,000 credit line based on the companies receivable on the specific customer Omega Pharma N.V. and a (Euro ) 250,000 general line of credit. Advances were approved by the bank based upon bonds issued and approved by Omega Pharma N.V. as settlement for Remedent's accounts receivable. Advances on this line were assessed costs at a drawee rate of 7.55%. As of March 31, 2004, $546,683 (Euro 445,073) was received as advances under this line of credit against documents. The general line of credit was secured by the fixed income marketable securities owned by Remedent N.V. with a market value of 235,000 Euros as well as the personal guarantee of Guy de Vreese, the Company's Chairman. As of March 31, 2004, $245,660 was outstanding under this line of credit for a combined total for both components of the facility of $792,343.
On October 8, 2004, the Company obtained a new line of credit facility with a new Belgian bank for (Euro) 1,050,000 (US $1,361,325 at March 31, 2005) Line of Credit Facility (the "Facility") with a Belgian bank which no longer required as collateral the fixed income securities or the guarantee of Mr. DeVreese, the Company's Chairman, consisting of a (Euro) 800,000 (US $1,037,200) credit line based on the eligible accounts receivable and a (Euro) 250,000 (US $324,125) general line of credit. Advances are approved by the bank based upon dated bills of exchange issued and signed by the customer for shipped goods. These advances are discounted at a rate of 2.125%. As of March 31, 2005, Remedent N.V. had no advances outstanding under this line of credit facility. Interest chargeable on the general line of credit was 4.61 % at March 31, 2005. As of May 3, 2005, the Company and the bank agreed to increase the general line of credit to (Euro) 500,000 ($648,250) and decrease the credit line based on the eligible accounts receivable to (Euro) 550,000 ($713,075). All other terms and conditions remained unchanged.
14. NOTES PAYABLE
March 31, 2005 March 31, 2004
Convertible Debentures:
Maturity Dates: September 1, 2001 thru February 8, 2002
Interest rate: 10% per annum
Debentures are unsecured
Convertible at 30% of the average trading price (average of bid and ask) for
the 30 days immediately prior to the maturity date
Unpaid principal balance $ 20,000 $ 73,578
Union Bank Debt:
Maturity Dates: April 26, 2005
Interest rate: 7.5% per annum
Security: All of the assets of the company
Unpaid principal balance 11,282 11,279
|
Convertible Promissory Note:
Maturity Date: September 30, 2004
Interest rate: 10% per annum
Conversion rate: Balance of note shall be converted into
the number of shares necessary to provide the note holder
with two percent of the Company's outstanding shares of
common stock, calculated on a fully diluted basis.(See Note 5)
Promissory note is secured by a first security interest in
assets of the Company pursuant to the terms of the Security
Agreement. This note converted to 197,839 shares of common stock on June 3,
2005 (See Note 5)
Unpaid principal balance 100,000 100,000
Loan(s) Payable -Fortis Bank
(1) Original principal balance (Euro) 200,000 ($201,750)
Maturity: October 9, 2005, Interest Rate: 4.09%, Unsecured
Payable in twelve equal monthly installments of 12,783 (Euro) ($17,193)
(2) Original principal balance (Euro) 50,000 ($64,825)
Maturity: December 31,2006, Interest Rate: 1.32%, Unsecured
Payable in twelve equal monthly installments of 4,166 (Euro) ($5,402)
Unpaid principal balance 163,040 -
Loans payable -others
Maturity Dates - April 15, 2006, Interest rate 10%,
Unsecured, Convertible into one share of Remedent N.V.
Common stock
Unpaid balance (Company repaid principal prior to maturity) - 197,689
----------- ----------
Notes Payable $ 294,322 $ 382,546
=========== ==========
|
15. DUE TO RELATED PARTIES
Balances due to related consist of the following:
March 31, 2005 March 31, 2004
Convertible Debentures:
Due on demand, Interest rate: 10% per annum
Debentures are unsecured.
Unpaid principal balance $ - $ 69,002
Demand loan from a former officer
and major stockholder 58,958 58,958
---------- -----------
$ 58,958 $ 127,960
========== ===========
|
16. ACCRUED LIABILITIES
Accrued liabilities are summarized as follows:
March 31, 2005 March 31, 2004
-------------- --------------
Accrued interest $ 20,470 $ 56,380
Accrued audit and tax preparation fees 37,500 32,883
Accrued consulting fees 1,700 4,500
Accrued employee benefit taxes 190,973 119,484
Accrued VAT taxes payable - 44,398
Reserve for warranty costs 19,448
Other accrued expenses 97,764 90,846
---------- -----------
$ 367,854 $ 348,491
========== ===========
|
17. INCOME TAXES
The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109). Under the asset and liability method of SFAS No. 109, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
The domestic and foreign ("Belgium") components of income (loss) before income taxes and minority interest were comprised of the following:
March 31, 2005 March 31, 2004
Domestic $ (269,069) $ (212,090)
Foreign 1,115,986 819,561
------------ ------------
$ 846,917 $ 607,471
============ ============
|
The Company's domestic and foreign components of deferred income taxes are as follows:
March 31, 2005 March 31, 2004
-------------- --------------
Domestic - Net operating loss carryforward 1,416,697 1,319,379
Foreign - Net operating loss carryforward - 36,630
-------------- --------------
1,416,697 1,356,009
Less: valuation allowance (1,416,697) (1,356,009)
-------------- --------------
Net deferred tax assets $ - $ -
-------------- --------------
|
The principal reasons for the difference between the income tax (benefit) and
the amounts computed by applying the statutory income tax rates to the income
(loss) for the year ended March 31, 2005 and March 31, 2004 are as follows:
March 31, 2005 March 31, 2004
-------------- --------------
Domestic
Pre tax income $ (269,069) $ (212,090)
Statutory tax rate 35% 35%
-------------- --------------
Tax benefit based upon statutory rate (94,174) (74,232)
Increase in valuation allowance 94,174 74,232
-------------- --------------
Net domestic income tax (benefit) - -
-------------- --------------
Foreign
Pre tax income 1,115,986 819,561
Statutory tax rate 32% 33%
-------------- --------------
Tax benefit based upon statutory rate 357,116 270,455
Permanent differences 42,586
Net operating loss (36,630) (270,455)
-------------- --------------
Net foreign income tax expense 363,072 -
-------------- --------------
Total income tax expense $ 363,072 $ -
-------------- --------------
|
18. STOCKHOLDER'S DEFICIENCY
During the quarter ended June 30, 2003, the Company issued 37,500 shares of common stock in conjunction with the sale of the Toothbrush Division pursuant to which Famcare 2000 assumed responsibility for $335,000 in liabilities.
During the quarter ended June 30, 2003, the Company issued 20,000 shares of common stock for the repayment of $20,000 in accounts payable indebtedness.
During March 2004, the Company issued 25,000 shares of common stock for the settlement of consulting fees for a total of $22,700.
On March 23, 2004, the Company issued 5,250 shares of its common stock to three individuals for the purchase of an aggregate of 14.85% of Pure White International BV valued at $3,282.
During September 2004, the Company issued 12,500 shares of stock to an unrelated third party for the settlement of consulting fees for a total of $2,500.
During the quarter ended December 31, 2004, the Company executed agreements effective as of December 31, 2004 which converted convertible debentures totaling $127,580 in principal plus $57,187 in interest into 184,767 shares of common stock which was issued in March, 2005.
19. STOCK OPTIONS
The Board of Directors and stockholders approved the Nonstatutory Stock Option Plan (the "Plan") and adopted it on May 29, 2001. The Company has reserved 250,000 shares of its common stock for issuance to the directors, employees and consultants under the Plan. The Plan is administered by the Board of Directors. Vesting terms of the options range from immediate to five years.
The Company accounts for its Employee Plan in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees", Interpretation No. 44, and other related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price.
A summary of the option activity for the years ended March 31, 2005 and March 31, 2004, pursuant to the terms of the plan is as follows:
Weighted Average
Outstanding Options Exercise Price
Options outstanding, March 31, 2003 231,045 $ 1.40
Granted - -
Exercised - -
Cancelled or expired (21,045) 5.20
-------------- ----------
Options outstanding , March 31, 2004 210,000 1.20
Granted 12,500 2.00
Exercised - -
Cancelled or expired - -
-------------- ----------
Options outstanding , March 31, 2005 222,500 $ 1.29
-------------- ----------
Options exercisable March 31, 2005 215,500 $ 1.30
-------------- ----------
Exercise price range $1.00 to $4.00
--------------
Weighted average remaining life 7 years
=============
|
The weighted average fair value of the 12,500 options granted for the year ended March 31, 2005 were estimated as of the date of grant using the Black-Scholes stock option pricing model assuming an exercise price of $2.00 per share, a market value as of the grant date of $0.80 per share, a volatility factor of 1.55, a ten year expected life and a risk free interest rate of 5% resulting in a value of $0.80 per option granted.
For purposes of proforma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting periods. The Company's proforma information follows:
March 31, 2005 March 31, 2004
-------------- --------------
Net income (loss):
As reported $ (103,428) $ 16,149
Pro forma $(113,428) $ 16,149
Earnings per share:
Basic
As reported $ (0.05) $0.01
Pro forma $ (0.05) $0.01
Diluted
As reported $ (0.04) $0.01
Pro forma $ (0.04) $0.01
|
In an Information Statement on Schedule 14 (c) mailed on May 9, 2005 to all stockholders of record as of the close of business on February 1, 2005 and became effective June 3, 2005, the Company authorized the implementation of a 2004 Incentive and Nonstatutory Stock Option Plan reserving 800,000 shares of common stock for issuance to employees, directors and consultants of the Company or any subsidiaries. This plan was to become effective after the Company had completed a one for twenty reverse split.
20. COMMON STOCK PURCHASE WARRANTS
As of March 31, 2005 and March 31, 2004, the Company has 201,565 warrants to purchase the Company's common stock outstanding at prices ranging between $2.00 and $10.00 per share with expiration dates between January and August 2007.
Weighted Average
Outstanding Warrants Exercise Price
Warrants outstanding, March 31, 2003 151,565 $ 7.21
Granted - -
Exercised - -
Cancelled or expired - -
Warrants outstanding , March 31, 2004 151,565 7.21
Granted 50,000 3.00
Exercised - -
Cancelled or expired - -
Warrants outstanding , March 31, 2005 201,565 $ 6.16
Warrants exercisable March 31, 2005 201,565 $ 6.16
Exercise price range $3.00 to $10.00
Weighted average remaining life 5.5 years
|
21. COMMITMENTS AND CONTINGENCIES
Real Estate Lease
The Company leases its 26,915 square feet office and warehouse facility in Deurle, Belgium from an unrelated party pursuant to a nine year lease commencing
December 20, 2001 at a base rent of (Euro) 6,560 per month ($8,505 per month at March 31, 2005). In addition, the Company is responsible for the payment of annual real estate taxes for the property which totaled (Euro) 3,245 ($4,207) for calendar year 2004. The minimum aggregate rent to be paid over the lease term based upon the conversion rate for the (Euro) at March 31, 2005 is $918,540.
Rent expense for the foregoing lease for the year ended March 31, 2005 and was $92,706 and $96,200 respectively.
Equipment Lease
In November 2004, the Company leased new computer equipment from a Belgium based Lessor pursuant to a three year operating lease with monthly payments of (Euro) 1,005 ($1,303). The aggregate rent to be paid over the lease term is $46,908.
Minimum monthly lease payments for real estate and equipment for the next five years are as follows based upon the conversion rate for the (Euro) at March 31, 2005.
March 31, 2006 $117,695 March 31, 2007 $117,695 March 31, 2008 $112,483 March 31, 2009 $102,060 March 31, 2010 $102,060 |
22. CUSTOMERS OUTSIDE OF THE UNITED STATES
Sales to customers outside of the United States were 99% of total sales for the year ended 2005 and 99% of total sales for the year ended March 31, 2004. The sales were made mostly to customers in countries that are members of the European Union ("EU").
March 31, 2005 March 31, 2004
-------------- --------------
U.S. sales $ 56,590 $ 48,704
Foreign sales 7,015,710 5,186,151
-------------- --------------
$ 7,072,300 $ 5,234,855
============== ==============
|
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Nevada General Corporation Law and our Amended and Restated
Articles of Incorporation, our directors will have no personal liability to us
or our stockholders for damages incurred as the result of the breach or alleged
breach of fiduciary duty as a director of the Company involving any act or
omission of any such director. This provision does not apply to the directors'
(i) acts or omissions that involve intentional misconduct, fraud or knowing
violation of law, or (ii) approval of an unlawful dividend, distribution, stock
repurchase or redemption under Section 78.300 of the Nevada Revised Statutes.
This provision would generally absolve directors of personal liability for
negligence in the performance of duties, including gross negligence.
The effect of this provision in our Amended and Restated Articles of
Incorporation, is to eliminate the rights of our Company and our stockholders
(through stockholder's derivative suits on behalf of our Company) to recover
damages against a director for breach of his fiduciary duties as a director
(including breaches resulting from negligent or grossly negligent behavior)
except in the situations described in clauses (i) and (ii) above. This provision
does not limit nor eliminate the rights of our Company or any stockholder to
seek relief such as an injunction or rescission in the event of a breach of a
director's fiduciary duties. The Nevada General Corporation Law grants
corporations the right to indemnify their directors, officers, employees and
agents in accordance with applicable law. In addition, our Amended and Restated
Bylaws authorizes the Company to indemnify directors and officers of the Company
in cases where such officer or director acted in good faith and in a manner
reasonably believed to be in the best interest of the Company, and with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by us in connection with the issuance and distribution of the securities being registered hereunder. No expenses will be borne by the Selling Stockholders. All of the amounts shown are estimates, except for the SEC registration fee.
SEC registration fee $ 1,351.95
Printing and engraving expenses $ 250.00
Accounting fees and expenses $ 5,000.00
Legal fees and expenses $ 75,000.00
Transfer agent and registrar fees $ 470.00
Fees and expenses for qualification under state securities laws $ 16,000.00
Engineering fees $ 0.00
Federal taxes $ 0.00
State taxes $ 0.00
Miscellaneous $ 0.00
-----------
Total $98,071.95
|
II-1
RECENT SALES OF UNREGISTERED SECURITIES
During the first past three years, we have sold and issued the following securities:
1. On October 30, 2003, the Company sold 18,750 shares of common stock to one accredited United States investor not affiliated with the Company for $1.60 per share for total proceeds of $30,000. The issuances consisted of restricted securities bearing the Rule 144 legend and were exempt from the registration provisions of the Securities Act of 1933 by virtue of Section 4(2).
2. Pursuant to a Development Agreement, dated March 15, 2004, an individual unaffiliated with the Company is entitled to receive a warrant to purchase 50,000 shares of Company common stock for an exercise price of $3.00 per share in partial consideration for product design services. The shares underlying the warrant are restricted securities pursuant to Rule 144 and are exempt from the registration provisions of the Securities Act of 1933 by virtue of Section 4(2).
3. On March 23, 2004, the Company issued 20,500 shares of its common stock, which had been recorded as common stock Subscribed as of April, 2002, to A. Rubin and 7,259 shares of common stock, which had been recorded as common stock Subscribed as of April, 2002, to J. Siegel to settle an outstanding debt in the amount of approximately $61,602 owed to Messrs. Rubin And Siegel owed for accounting services provided to the Company by their now defunct accounting firm, Rubin & Siegel. Of the 7,259 shares to be issued to J. Siegel, 241 of these shares were never issued and the subscription has been cancelled by the Company. The issuances consisted of restricted securities bearing the Rule 144 legend and were exempt from the registration provisions of the Securities Act of 1933 by virtue of Section 4(2).
4. On March 23, 2004, the Company also issued 25,000 shares of common stock to Robin List pursuant to an oral agreement for consulting services performed and recorded as an expense in February 2002 valued at $22,700 related to developing the IMDS business concept. The consulting services consisted of supplying Dutch dentists to serve as customers of IMDS and Belgium dentists to work in the Netherlands. This issuance consisted of restricted securities bearing the Rule 144 legend and was exempt from the registration provisions of the Securities Act of 1933 by virtue of Section 4(2).
5. On March 23, 2004, the Company issued 1,750 shares of its common stock to three individuals unaffiliated with the Company residing in the Netherlands. These issuances were pursuant to agreements dated October 17, 2003 for the purchase of each individual's 4.95% ownership interest in Pure White International BV, a Dutch company. In these transactions, the Company purchased an aggregate of 14.85% of Pure White International BV for issuances totaling 5,250 shares of Company common stock. Pure White International BV is the former distributor for the CleverWhite tooth whitening kits for the Dutch market. The Pure White International, BV shares acquired by the Company were valued at $3,282. These issuances consisted of restricted securities bearing the Rule 144 legend and were exempt from the registration provisions of the Securities Act of 1933 by virtue of Section 4(2).
6. On July 20, 2005, we completed a private placement offering of 2,520,661 Units consisting of one share of its common stock (the "Shares") and one common stock purchase warrant (the "Warrants") at a price of $1.50 per Unit for a total of $3,780,985 (the "Units"). The Warrants are exercisable for a period of five years and shall entitle the holder to purchase one share of common stock (the "Warrant Shares") for $1.75 per Warrant Share. We have the right to redeem the Warrants for $0.01 per Warrant Share covered by the Warrants after July 6, 2007 if the Shares trade on the Over-The-Counter Bulletin Board above $3.50 per share for thirty consecutive trading days provided that certain conditions are met (the "Redemption Right"). Once the Redemption Right vests, we will have the right, but not the obligation, to redeem the Warrants for $0.01 per Warrant Share covered by the Warrants upon thirty days written notice to the holders of the Warrants.
II-2
The sales and issuances of common stock and warrants to purchase common stock in private placements listed above were made by us in reliance upon the exemptions from registration provided under Section 4(2) and 4(6) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D, promulgated by the Securities and Exchange Commission under federal securities laws and comparable exemptions for sales to "accredited" investors under state securities laws. The offers and sales were made to accredited investors as defined in Rule 501(a) under the Securities Act, no general solicitation was made by us or any person acting on our behalf; the securities sold were subject to transfer restrictions, and the certificates for those shares contained an appropriate legend stating that they had not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption there from.
Exhibits Exhibit No. Description ----------- ----------- |
2.1 Stock Exchange Agreement with Resort World Enterprises, Inc.(1)
3.1 Articles of Incorporation of Jofran Confectioners International, Inc., a Nevada corporation, dated July 31, 1986(1)
3.2 Amendment to Articles of Incorporation changing name from Jofran Confectioners International, Inc., a Nevada corporation, to Cliff Typographers, Inc., a Nevada corporation, dated July 31, 1986(1)
3.3 Amendment to Articles of Incorporation changing name from Cliff Typographers, Inc., a Nevada corporation, to Cliff Graphics International, Inc., a Nevada corporation, dated January 9, 1987(1)
3.4 Amendment to Articles of Incorporation changing name from Cliff Graphics International, Inc., a Nevada corporation, to Global Golf Holdings, Inc., a Nevada corporation, dated March 8, 1995(1)
3.5 Amendment to Articles of Incorporation changing name from Global Golf Holdings, Inc., a Nevada corporation, to Dino Minichiello Fashions, Inc., a Nevada corporation, dated November 20, 1997(1)
3.6 Amendment to Articles of Incorporation changing name from Dino Minichiello Fashions, Inc., a Nevada corporation, to Resort World Enterprises, Inc., a Nevada corporation, dated August 18, 1998(1)
3.7 Amendment to Articles of Incorporation changing name from Resort World Enterprises, Inc., a Nevada corporation, to Remedent , Inc., dated October 5, 1998(1)
3.8 Amended and Restated Articles of Incorporation changing name from Remedent, USA, Inc. to Remedent, Inc. and to effect a one-for-twenty reverse stock split on June 3, 2005(2)
3.9 Amended and Restated Bylaws (2)
II-3
4.1 Specimen of Stock Certificate(7)
4.2 Form of Subscription Agreement (5)
4.3 Form of Warrant for Common Stock (5)
4.4 Form of Registration Rights Agreement (5)
4.5 Form of Warrant for Unit
5.1 Opinion by Bullivant Houser Bailey PC
10.1 Incentive and Nonstatutory Stock Option Plan, dated May 29, 2001(1)
10.2 2004 Incentive and Nonstatutory Stock Option Plan
10.3 Exchange Agreement by and among Remedent, Inc. and Lausha, N.V. and Robin List dated June 3, 2005(2)
10.4 Line of Credit Agreement by and Between Remedent, N.V. and Fortis Bank dated May 3, 2005 (6)
10.5 Exclusive License Agreement between Remedent, Inc. and Dan Darnell dated October 11, 2004(6)
10.6 Amendment to Development Agreement between Remedent, Inc. and P. Michael Williams dated August 4, 2004(6)
10.7 Option Agreement between Remedent, N.V. and Lident NV dated July 6, 2004(6)
10.8 Development Agreement between Remedent, Inc. and P. Michael Williams dated March 15, 2004(6)
10.9 Convertible Promissory Note dated March 23, 2004(3)
10.10 Letter Agreement by and between MDB Capital Group, Inc. and Remedent, Inc. dated September 22, 2003(6)
10.11 Stock Purchase Agreement with Dental Advisors, dated September 14, 2001(1)
10.12 Asset Purchase Agreement for IMDS, dated January 15, 2001(1)
10.13 Stock Purchase Agreement, dated January 11, 2002 (1)
10.14 Stock Purchase Agreement, dated May 1, 2002 (1)
10.15 Securities Purchase Agreement dated July 6, 2005 (5)
II-4
10.16 Registration Rights Agreement dated July 6, 2005 (5)
10.17 Warrant dated July 6, 2005(5)
10.18 Amendment to Warrant
10.19 Employment Agreement between Remedent N.V. and Philippe Van Acker(7)
10.20 Agreement between Remedent N.V. and Omega Pharma NV dated as of September 9, 2003(7)
10.21 Addendum to Distribution Agreement between Remedent N.V. and Omega Pharma NV dated September 24, 2003(7)
10.22 Addendum to Distribution Agreement between Remedent N.V. and Omega Pharma NV dated February 4, 2004(7)
10.23 Lease Agreement dated December 20, 2001(7)
10.24 Employment Agreement between Remedent, Inc. and Judd D. Hoffman
14.1 Code of Ethics, adopted March 25, 2003 (4)
21.1 List of Subsidiaries
23.1 Consent of Farber & Hass, LLP
23.2 Consent of PKF Bedrijfsrevisoren, Antwerp, Belgium
23.3 Consent of Bullivant Houser Bailey (contained in Exhibit 5.1)
(1) Incorporated by reference from Registration Statement on Form SB-2 filed
with the SEC on July 24, 2002.
(2) Incorporated by reference from Form 8-K filed with the SEC on June 8, 2005.
(3) Incorporated by reference from Form 10-KSB/A filed with the SEC on February
8, 2005.
(4) Incorporated by reference from Form 10-KSB filed with the SEC on July 15,
2003.
(5) Incorporated by reference from Form 8-K filed with the SEC on July 11,
2005.
(6) Incorporated by reference from Form 10-KSB filed with the SEC on July 14,
2005.
(7) Incorporated by reference from Form SB-2 filed with the SEC on August 4,
2005.
UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
II-5
(i) To include any Prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of Prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering.
* * * * *
(h) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(i) (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted form the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form or prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunder duly authorized, in Deurle, Belgium.
REMEDENT, INC.,
a Nevada Corporation
Dated: October 26, 2005 /s/ Robin List
---------------------------------------
By: Robin List
Its: Chief Executive Officer (Principal
Executive Officer) and Director
Dated: October 26, 2005 /s/ Philippe Van Acker
---------------------------------------
By: Philippe Van Acker
Its: Chief Financial Officer (Principal
Financial Officer and Principal
Accounting Officer)
|
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Dated: October 26, 2005 /s/ Robin List
---------------------------------------
Robin List, Chief Executive Officer and
Director
Dated: October 26, 2005 /s/ Guy De Vreese
---------------------------------------
Guy De Vreese, Chairman of the Board of
Directors
Dated: October 26, 2005 /s/ Stephen Ross
---------------------------------------
Stephen Ross, Secretary and Director
Dated: October 26, 2005 /s/ Fred Kolsteeg
---------------------------------------
Fred Kolsteeg, Director
|
II-7
EXHIBIT 4.5
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE TRANSFERRED EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (B) UPON RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL, WHICH OPINION OF COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE ISSUER, TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER, OR NOT SUBJECT TO, THE ACT AND SUCH STATE SECURITIES LAWS.
UNIT WARRANT CERTIFICATE
OF
REMEDENT, INC.
Date of Issuance: _________, 20__ No. _____
THIS UNIT WARRANT CERTIFICATE ("Warrant Certificate") certifies that, for value received, ____________________, or its permitted assigns registered on the books (collectively, the "Holder") of Remedent, Inc., a Nevada corporation (the "Company"), having its principal place of business at Xavier de Cocklaan 42, 9831 Deurle, Belgium, is entitled to purchase at any time on or prior to the Expiration Date (hereinafter defined), up to ____________units (the "Units") consisting of one share of Common Stock of the Company and one Common Stock Purchase Warrant in the form attached hereto as Exhibit "A" at $1.50 per Unit (the "Purchase Price"). The Purchase Price and number of Units issuable are subject to adjustment as provided in Section 9.
Section 1. Registration. The Company shall maintain books for the transfer and registration of this Warrant Certificate. Upon the initial issuance of this Warrant Certificate, the Company shall issue and register the Warrant Certificate in the name of the Holder.
Section 2. Transfers. As provided herein, this Warrant Certificate may be transferred only pursuant to a registration statement filed under the Securities Act of 1933, as amended (the "Securities Act") and the applicable state securities laws or an exemption from such registrations. Subject to such restrictions, the Company shall transfer this Warrant Certificate from time to time upon the books to be maintained by the Company for that purpose, upon surrender thereof for transfer properly endorsed or accompanied by appropriate instructions for transfer and such other documents as may be reasonably required by the Company, including, if required by the Company, an opinion of its counsel to the effect that such transfer is exempt from the registration requirements of the Securities Act, to establish that such transfer is being made in accordance with the terms hereof, and a new Warrant Certificate shall be issued to the transferee and the surrendered Warrant Certificate shall be canceled by the Company.
Section 3. Exercise of Warrant Certificate. Subject to the provisions hereof, the Holder may exercise this Warrant Certificate in whole or in part at any time prior to its expiration upon surrender of the Warrant Certificate, together with delivery of the duly executed Warrant Exercise Form attached hereto as Exhibit "B" (the "Exercise Agreement") and payment by cash, certified check or wire transfer of funds (or, in certain circumstances, by cash-less exercise as provided below) for the aggregate amount equal to the Purchase Price multiplied by the number of Units then being purchased, to the Company during normal business hours on any business day at the Company's principal executive offices (or such other office or agency of the Company as it may designate by notice to the Holder). The Units so purchased shall be deemed to be issued to the Holder or the Holder's designee, as the record owner of such Units, as of the close of business on the date on which this Warrant Certificate shall have been surrendered (or evidence of loss, theft or destruction thereof and security or indemnity satisfactory to the Company), the total Purchase Price shall have been paid and the completed Exercise Agreement shall have been delivered. Certificates and warrants for Units so purchased, representing the aggregate number of Units specified in the Exercise Agreement, shall be delivered to the Holder within a reasonable time, not exceeding five (5) business days, after this Warrant Certificate shall have been so exercised. The certificates so delivered shall be in such denominations as may be requested by the Holder and shall be registered in the name of the Holder or such other name as shall be designated by the Holder. If this Warrant Certificate shall have been exercised only in part, then, unless this Warrant Certificate has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the Holder a new Warrant Certificate representing the number of Units with respect to which this Warrant Certificate shall not then have been exercised. As used herein, "business day" means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business.
Section 4. Expiration. The term "Expiration Date" shall mean 5:00 p.m. (PST) on July 20, 2010 or if such date shall be a holiday or a day on which banks are authorized to close, then 5:00 p.m. (PST) the next following date which is not a holiday or a day on which banks are not authorized to close.
Section 5. Compliance with the Securities Act of 1933. The Company may cause the legend set forth on the first page of this Warrant Certificate to be set forth on each subsequent Warrant Certificate or similar legend on any security issued or issuable upon exercise of this Warrant Certificate, unless counsel for the Company is of the opinion as to any such security that such legend is unnecessary.
Section 6. Payment of Taxes. The Company will pay any documentary stamp taxes attributable to the initial issuance of Units issuable upon the exercise of the Warrant Certificate; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates or warrants for the Units in a name other than that of the Holder in respect of which such Units are issued, and in such case, the Company shall not be required to issue or deliver any certificate or warrants in connection with the Units until the person requesting the same has paid to the Company the amount of such tax or has established to the Company's reasonable satisfaction that such tax has been paid. The Holder shall be responsible for income taxes due under federal, state or other law, if any such tax is due.
Section 7. Mutilated or Missing Warrant Certificate. In case this Warrant Certificate shall be mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and substitution of and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and for the purchase of a like number of Units, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of the Warrant Certificate, and with respect to a lost, stolen or destroyed Warrant Certificate, reasonable indemnity or bond with respect thereto, if requested by the Company.
Section 8. Reservation of Common Stock. The Company hereby represents and warrants that there have been reserved, and the Company shall at all applicable times keep reserved until issued (if necessary) as contemplated by this Section 8, out of the authorized and unissued shares of Common Stock, sufficient shares to provide for the exercise of the rights of purchase represented by this Warrant Certificate The Company agrees that all Units issued upon due exercise of this Warrant Certificate shall be, at the time of delivery, duly authorized, validly issued, fully paid and non-assessable.
Section 9. Adjustments. Subject and pursuant to the provisions of this
Section 9, the Purchase Price and number of Units subject to this Warrant
Certificate shall be subject to adjustment from time to time as set forth
hereinafter.
(a) If the Company shall, at any time or from time to time while this Warrant Certificate is outstanding, pay a dividend or make a distribution on its Common Stock in shares of Common Stock, subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares or issue by reclassification of its outstanding shares of Common Stock any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then the number of Units purchasable upon exercise of the Warrant Certificate and the Purchase Price in effect immediately prior to the date upon which such change shall become effective, shall be adjusted by the Company so that the Holder thereafter exercising the Warrant Certificate shall be entitled to receive the number of Units Holder would have received if the Warrant Certificate had been exercised immediately prior to such event upon payment of the Purchase Price that has been adjusted to reflect a fair allocation of the economics of such event to the Holder. Such adjustments shall be made successively whenever any event listed above shall occur.
(b) If any capital reorganization, reclassification of the capital stock of the Company, consolidation or merger of the Company with another corporation in which the Company is not the survivor, or sale, transfer or other disposition of all or substantially all of the Company's assets to another corporation shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be made whereby each Holder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Units immediately theretofore issuable upon exercise of the Warrant Certificate, such Units, shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of Units equal to the number of Units immediately theretofore issuable upon exercise of the Warrant Certificate, had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interests of each Holder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Purchase Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any Units, shares of stock, securities or assets thereafter deliverable upon the exercise hereof. The Company shall not effect any such consolidation, merger, sale, transfer or other disposition unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Holder, at the last address of the Holder appearing on the books of the Company, such Units, shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to purchase, and the other obligations under this Warrant Certificate. The provisions of this paragraph (b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers or other dispositions.
(c) In case the Company shall fix a payment date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends or distributions referred to in Section 9(a)), or subscription rights or warrants, the Purchase Price to be in effect after such payment date shall be determined by multiplying the Purchase Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the Market Price (as defined below) per share of Common Stock immediately prior to such payment date, less the fair market value (as determined by the Company's Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such Market Price per share of Common Stock immediately prior to such payment date. "Market Price" as of a particular date (the "Valuation Date") shall mean the following: (a) if the Common Stock is then listed on a national stock exchange, the closing sale price of one share of Common Stock on such exchange on the last trading day prior to the Valuation Date; (b) if the Common Stock is then quoted on The Nasdaq Stock Market, Inc. ("Nasdaq"), the National Association of Securities Dealers, Inc. OTC Bulletin Board (the "Bulletin Board") or such similar exchange or association, the closing sale price of one share of Common Stock on Nasdaq, the Bulletin Board or such other exchange or association on the last trading day prior to the Valuation Date or, if no such closing sale price is available, the average of the high bid and the low asked price quoted thereon on the last trading day prior to the Valuation Date; or (c) if the Common Stock is not then listed on a national stock exchange or quoted on Nasdaq, the Bulletin Board or such other exchange or association, the fair market value of one share of Common Stock as of the Valuation Date, shall be determined in good faith by the Board of Directors of the Company and the Holder. If the Common Stock is not then listed on a national securities exchange, the Bulletin Board or such other exchange or association, the Board of Directors of the Company shall respond promptly,
in writing, to an inquiry by the Holder prior to the exercise hereunder as to the fair market value of a share of Common Stock as determined by the Board of Directors of the Company. In the event that the Board of Directors of the Company and the Holder are unable to agree upon the fair market value in respect of subpart (c) hereof, the Company and the Holder shall jointly select an appraiser, who is experienced in such matters. The decision of such appraiser shall be final and conclusive, and the cost of such appraiser shall be borne equally by the Company and the Holder. Such adjustment shall be made successively whenever such a payment date is fixed.
(d) An adjustment to the Purchase Price shall become effective immediately after the payment date in the case of each dividend or distribution and immediately after the effective date of each other event which requires an adjustment.
(e) In the event that, as a result of an adjustment made pursuant to this Section 9, the Holder shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, the number of such other shares so receivable upon exercise of this Warrant Certificate shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Units contained in this Warrant Certificate.
(f) Except as provided in subsection (g) hereof, if and whenever the
Company shall issue or sell, or is, in accordance with any of subsections
(f)(l) through (f)(7) hereof, deemed to have issued or sold, any shares of
Common Stock for no consideration or for a consideration per share less
than the Purchase Price in effect immediately prior to the time of such
issue or sale, then and in each such case (a "Trigger Issuance") the
then-existing Purchase Price, shall be reduced, as of the close of business
on the effective date of the Trigger Issuance, to a price determined as
follows:
Adjusted Purchase Price = (A x B) + D A+C
where
"A" equals the number of shares of Common Stock outstanding, including Additional Shares of Common Stock (as defined below) deemed to be issued hereunder, immediately preceding such Trigger Issuance;
"B" equals the Purchase Price in effect immediately preceding such Trigger Issuance;
"C" equals the number of Additional Shares of Common Stock issued or deemed issued hereunder as a result of the Trigger Issuance; and
"D" equals the aggregate consideration, if any, received or deemed to be received by the Company upon such Trigger Issuance;
provided, however, that in no event shall the Purchase Price after giving effect to such Trigger Issuance be greater than the Purchase Price in effect prior to such Trigger Issuance.
For purposes of this subsection (f), "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Company or deemed to be issued pursuant to this subsection (f), other than Excluded Issuances (as defined in subsection (g) hereof).
For purposes of this subsection (f), the following subsections (f)(l) to
(f)(7) shall also be applicable:
(f)(1) Issuance of Rights or Options. In case at any time the Company shall in any manner grant (directly and not by assumption in a merger or otherwise) any warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock (such warrants, rights or options being called "Options" and such convertible or exchangeable stock or securities being called "Convertible Securities") whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities (determined by dividing (i) the sum (which sum shall constitute the applicable consideration) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting of such Options, plus (y) the aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus (z), in the case of such Options which relate to Convertible Securities, the aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options) shall be less than the Purchase Price in effect immediately prior to the time of the granting of such Options, then the total number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total amount of such Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued for such price per share as of the date of granting of such Options or the issuance of such Convertible Securities and thereafter shall be deemed to be outstanding for purposes of adjusting the Purchase Price. Except as otherwise provided in subsection 9(f)(3), no adjustment of the Purchase Price shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such Options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities.
(f)(2) Issuance of Convertible Securities. In case the Company shall in any manner issue (directly and not by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (i) the sum (which sum shall constitute the applicable consideration) of (x) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus (y) the aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (ii) the total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Purchase Price in effect immediately prior to the time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued for such price per share as of the date of the issue or sale of such Convertible Securities and thereafter shall be deemed to be outstanding for purposes of adjusting the Purchase Price, provided that (a) except as otherwise provided in subsection 9(f)(3), no adjustment of the Purchase Price shall be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities and (b) no further adjustment of the Purchase Price shall be made by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Purchase Price have been made pursuant to the other provisions of subsection 9(f).
(f)(3) Change in Option Price or Conversion Rate. Upon the happening
of any of the following events, namely, if the purchase price provided for
in any Option referred to in subsection 9(f)(l) hereof, the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subsections 9(f)(l) or 9(f)(2), or
the rate at which Convertible Securities referred to in subsections 9(f)(l)
or 9(f)(2) are convertible into or exchangeable for Common Stock shall
change at any time (including, but not limited to, changes under or by
reason of provisions designed to protect against dilution), the Purchase
Price in effect at the time of such event shall forthwith be readjusted to
the Purchase Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold. On the
termination of any Option for which any adjustment was made pursuant to
this subsection 9(f) or any right to convert or exchange Convertible
Securities for which any adjustment was made pursuant to this subsection
9(f) (including without limitation upon the redemption or purchase for
consideration of such Convertible Securities by the Company), the Purchase
Price then in effect hereunder shall forthwith be changed to the Purchase
Price which would have been in effect at the time of such termination had
such Option or Convertible Securities, to the extent outstanding
immediately prior to such termination, never been issued.
(f)(4) Stock Dividends. Subject to the provisions of this Section
9(f), in case the Company shall declare a dividend or make any other
distribution upon any stock of the Company (other than the Common Stock)
payable in Common Stock, Options or Convertible Securities, then any Common
Stock, Options or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration.
(f)(5) Consideration for Stock. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for cash, the consideration received therefor shall be deemed to be the net amount received by the Company therefor, after deduction therefrom of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the fair value of such consideration as determined in good faith by the Board of Directors of the Company, after deduction of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. In case any Options shall be issued in connection with the issue and sale of other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued for such consideration as determined in good faith by the Board of Directors of the Company. If Common Stock, Options or Convertible Securities shall be issued or sold by the Company and, in connection therewith, other Options or Convertible Securities (the "Additional Rights") are issued, then the consideration received or deemed to be received by the Company shall be reduced by the fair market value of the Additional Rights (as determined using the Black-Scholes option pricing model or another method mutually agreed to by the Company and the Holder). The Board of Directors of the Company shall respond promptly, in writing, to an inquiry by the Holder as to the fair market value of the Additional Rights. In the event that the Board of Directors of the Company and the Holder are unable to agree upon the fair market value of the Additional Rights, the Company and the Holder shall jointly select an appraiser, who is experienced in such matters. The decision of such appraiser shall be final and conclusive, and the cost of such appraiser shall be borne evenly by the Company and the Holder.
(f)(6) Record Date. In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (ii) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.
(f)(7) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, and
the disposition of any such shares (other than the cancellation or retirement thereof) shall be considered an issue or sale of Common Stock for the purpose of this subsection (f).
(g) Anything herein to the contrary notwithstanding, the Company shall not be required to make any adjustment of the Purchase Price in the case of the issuance of (A) capital stock, Options or Convertible Securities issued to directors, officers, employees or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company pursuant to an equity compensation program approved by the Board of Directors of the Company or the compensation committee of the Board of Directors of the Company, (B) shares of Common Stock issued upon the conversion or exercise of Options or Convertible Securities issued prior to the date hereof, provided such securities are not amended after the date hereof to increase the number of shares of Common Stock issuable thereunder or to lower the exercise or conversion price thereof, (C) securities issued pursuant to that certain Purchase Agreement dated July 6, 2005, among the Company and the Investors named therein (the "Purchase Agreement") and securities issued upon the exercise or conversion of those securities, (D) the securities issued to the Other Investors pursuant to the Offering (as each of such terms are defined in the Purchase Agreement) and (E) shares of Common Stock issued or issuable by reason of a dividend, stock split or other distribution on shares of Common Stock (but only to the extent that such a dividend, split or distribution results in an adjustment in the Purchase Price pursuant to the other provisions of this Warrant Certificate) (collectively, "Excluded Issuances").
(h) Upon any adjustment to the Purchase Price pursuant to Section 9(f) above, the number of Units purchasable hereunder shall be adjusted by multiplying such number by a fraction, the numerator of which shall be the Purchase Price in effect immediately prior to such adjustment and the denominator of which shall be the Purchase Price in effect immediately thereafter.
(i) No adjustment of the Purchase Price shall be made in an amount of less than 1% of the Purchase Price in effect at the time of adjustment is otherwise required to be made, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with the adjustments so carried forward, shall amount to not less than 1% of the Purchase Price.
Section 10. Fractional Interest. The Company shall not be required to issue fractions of Units upon the exercise of this Warrant Certificate.
Section 11. Extension of Expiration Date. If the Company fails to cause any Registration Statement covering Registrable Securities (as defined in that certain Registration Rights Agreement dated July 6, 2005 between the Company and the Investors defined therein (the "Registration Rights Agreement")) to be declared effective prior to the applicable dates set forth therein, or if any of the events specified in Section 2(c)(ii) of the Registration Rights Agreement occurs, and the Blackout Period (whether alone, or in combination with any other Blackout Period) continues for more than 60 days in any 12 month period, or for more than a total of 90 days, then the Expiration Date of this Warrant Certificate shall be extended one day for each day beyond the 60-day or 90-day limits, as the case may be, that the Blackout Period continues.
Section 12. Benefits. Nothing in this Warrant Certificate shall be construed to give any person, firm or corporation (other than the Company and the Holder) any legal or equitable right, remedy or claim, it being agreed that this Warrant Certificate shall be for the sole and exclusive benefit of the Company and the Holder.
Section 13. Notices to Holder. Upon the happening of any event requiring an adjustment of the Purchase Price, the Company shall promptly give written notice thereof to the Holder at the address appearing in the records of the Company, stating the adjusted Purchase Price and the adjusted number of Units resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Failure to give such notice to the Holder or any defect therein shall not affect the legality or validity of the subject adjustment.
Section 14. Identity of Transfer Agent. The Transfer Agent for the Common Stock is Interwest Transfer Co., Inc. Upon the appointment of any subsequent transfer agent for the Common Stock or other shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrant Certificate, the Company will mail to the Holder a statement setting forth the name and address of such transfer agent.
Section 15. Notices. Unless otherwise provided, any notice required or permitted under this Warrant Certificate shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by telex or facsimile, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one business day after delivery to such carrier. All notices shall be addressed as follows: if to the Holder, at its address as set forth in the Company's books and records and, if to the Company, at the address as follows, or at such other address as the Holder or the Company may designate by ten days' advance written notice to the other:
If to the Company:
Remedent, Inc.
Xavier de Cocklaan 42
9831, Deurle, Belgium
Attention: Robin List, Chief Executive Officer
Fax: 011-32-9-321-7090
With a copy to:
Bartel Eng & Schroder 1331 Garden Hwy, Suite 300 Sacramento, California 95833 Attention: Scott Bartel, Esq.
Fax: (916) 442-3442
Section 16. Registration Rights. The initial Holder is entitled to the benefit of certain registration rights, as provided in the Registration Rights Agreement, with respect to the shares of Common Stock issuable upon the exercise of this Warrant Certificate and any subsequent Holder may be entitled to such rights subject to the terms of the Registration Rights Agreement.
Section 17. Successors. All the covenants and provisions hereof by or for the benefit of the Holder shall bind and inure to the benefit of its respective successors and assigns hereunder.
Section 18. Governing Law. This Warrant Certificate shall be governed by and construed in accordance with the laws of the State of Nevada, without regard to the conflicts of law provisions of the State of Nevada or of any other state.
Section 19. No Rights as Stockholder. Prior to the exercise of this Warrant Certificate, the Holder shall not have or exercise any rights as a stockholder of the Company by virtue of ownership of this Warrant Certificate.
Section 20. Amendment; Waiver. Any term of this Warrant Certificate may be amended or waived (including the adjustment provisions included in Section 9 of this Warrant Certificate) upon the written consent of the Company and the Holder hereof.
Section 21. Section Headings. The section headings in this Warrant Certificate are for the convenience of the Company and the Holder and in no way alter, modify, amend, limit or restrict the provisions hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed, as of the ___th day of ____, 2005.
REMEDENT, INC.
By:___________________________
Name: Robin List
Title: Chief Executive Officer
EXHIBIT "A"
FORM OF COMMON STOCK PURCHASE WARRANT
THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NEITHER THE WARRANTS REPRESENTED BY THE WARRANT CERTIFICATE NOR THE SECURITIES UNDERLYING THE WARRANTS MAY BE TRANSFERRED EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (B) UPON RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL, WHICH OPINION OF COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE ISSUER, TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER, OR NOT SUBJECT TO, THE ACT AND SUCH STATE SECURITIES LAWS.
FORM OF COMMON STOCK
PURCHASE WARRANT CERTIFICATE
OF
REMEDENT, INC.
Date of Issuance: __________ Certificate Number: W-___
THIS COMMON STOCK PURCHASE WARRANT CERTIFICATE ("Warrant Certificate") certifies that, for value received, ____________ or its permitted assigns registered on the books (collectively, the "Holder") of Remedent, Inc., a Nevada corporation (the "Company"), having its principal place of business at Xavier de Cocklaan 42, 9831 Deurle, Belgium, is entitled to purchase at any time on or prior to the Expiration Date (hereinafter defined), up to ___________shares of Common Stock of the Company ("Common Stock") at a purchase price as set forth below, subject to adjustment as hereinafter provided.
1. Warrant Purchase Price. Each Warrant shall entitle the Holder to purchase one share of Common Stock and the purchase price payable upon exercise of one Warrant shall be $1.75 per share ("Purchase Price"). The Purchase Price and number of shares of Common Stock ("Warrant Shares") issuable upon exercise of each Warrant are subject to adjustment as provided in Section 6.
2. Exercise of Warrant.
(a) Method of Exercise. Pursuant to the terms and conditions set forth in this Warrant Certificate, the Warrants are exercisable at any time, on or before the Expiration Date, at the option of the Holder, upon surrender of this Warrant Certificate to the Company together with a duly completed Notice of Exercise, in the form attached hereto as Exhibit A , and payment of an amount equal to the Purchase Price multiplied by the number of Warrants to be exercised. In the case of exercise of less than all the Warrants represented by this Warrant Certificate, the Company shall cancel this Warrant Certificate upon the surrender thereof and shall execute and deliver a new Warrant Certificate for the balance of such Warrants.
3. Expiration. The term "Expiration Date" shall mean 5:00 p.m. (PST) on ____________ (3 Years from Date of Issuance) or if such date shall be a holiday or a day on which banks are authorized to close, then 5:00 p.m. (PST) the next following date which is not a holiday or a day on which banks are not authorized to close.
4. Agreement of Holder. The Holder acknowledges that the Warrants represented by this Warrant Certificate have not been registered under the Act and accordingly that they will not be transferred or sold except pursuant to an effective registration statement under the Act or an exemption therefrom, or in a transaction not subject thereto, and in compliance with all state securities laws.
5. Loss or Mutilation. Upon receipt by the Company of reasonable evidence of the ownership of and the loss, theft, destruction or mutilation of this Warrant Certificate and, in the case of loss, theft or destruction, of indemnity reasonably satisfactory to the Company, or, in the case of mutilation, upon surrender and cancellation of the mutilated Warrant Certificate, the Company shall execute and deliver in lieu thereof a new Warrant Certificate representing an equal number of Warrants.
6. Adjustment of Purchase Price and Number of Warrant Shares. The number and kind of Warrant Shares purchasable upon the exercise of the Warrants and the Purchase Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:
(a) Splits, Combinations, Reclassifications. In the event the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to the Holders of the outstanding shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock through stock split or otherwise, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue by reclassification of its Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation) other securities of the Company, the number and/or nature of Warrant Shares purchasable upon exercise of each Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which it would have owned or have been entitled to receive after the happening of any of the events described above, had such Warrant been exercised immediately prior to the effective date of such event or any record date with respect thereto.
(b) Reorganizations, Mergers, Consolidations or Sales of Assets. In the event of any capital reorganization or any reclassification of the capital stock of the Company or in case of the consolidation or merger of the Company with another corporation (other than a consolidation or merger in which the outstanding shares of the Company's Common Stock are not converted into or exchanged for other rights or interests), or in the case of any sale, transfer or other disposition to another corporation of all or substantially all the properties and assets of the Company, the Holder of each Warrant shall thereafter be entitled to purchase (and it shall be a condition to the consummation of any such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition that appropriate provisions shall be made so that such Holder shall thereafter be entitled to purchase) the kind and amount of shares of stock and other securities and property (including cash) which the Holder would have been entitled to receive had such Warrants been exercised immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition.
(c) Notice of Capital Changes. If at any time the Company shall effect any of the events described in subsections (a) and (b) above, or there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company, then, in any one or more of said cases, the Company shall give the Holder written notice, by registered or certified mail, postage prepaid, of the date on which (i) a record shall be taken for such dividends, distributions and the like or (ii) such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up shall take place, as the case may be. Such written notice shall be given at least five business (5) days prior to the relevant event.
(d) Adjustment of Purchase Price. Upon each adjustment in the number of Warrant Shares purchasable hereunder, the Purchase Price shall be proportionately increased or decreased, as the case may be, in a manner that is the inverse of the manner in which the number of Warrant Shares purchasable hereunder shall be adjusted, as determined in good faith by the Board of Directors of the Company.
(e) Certificates of Adjustments. Whenever the Purchase Price or the number of Warrant Shares purchasable hereunder shall be adjusted pursuant to this Section 6, the Company shall prepare a certificate signed by the chief executive officer of the Company setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Purchase Price and the number of Warrant Shares purchasable hereunder after giving effect to such adjustment, and shall cause copies of such certificate to be mailed, by first class mail, postage prepaid, to the Holder.
7. No Voting Rights. Except as otherwise provided herein, this Warrant Certificate shall not be deemed to confer upon the Holder any right to vote or to consent to or receive notice as a shareholder of the Company, in respect of any matters whatsoever, prior to the exercise hereof.
8. Warrants Transferable. Subject to the provisions of Section 4, this Warrant Certificate and all rights hereunder are transferable, in whole or in part, at the principal offices of the Company by the Holder hereof, upon surrender of this Warrant Certificate properly endorsed; provided, however, that without the prior written consent of the Company, this Warrant Certificate and all rights hereunder may be transferred only to (i) an affiliate of the initial Holder hereof or successor in interest to any such person, or (ii) pursuant to the registration of the Warrants or the Warrant Shares under the Act, subsequent to one year from the date hereof pursuant to an exemption under Rule 144 under the Act or pursuant to another exemption from such registration or in a transaction not subject to registration. For the purposes of this section, "affiliate" means, with respect to any person, any entity controlling, controlled by or under common control with such designated person, and "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise.
9. Fractional Shares. Notwithstanding that the number of Warrant Shares purchasable upon the exercise of this Warrant may have been adjusted pursuant to the terms hereof, the Company shall nonetheless not be required to issue fractions of shares upon the exercise of the Warrants or to distribute certificates that evidence fractional shares nor shall the Company be required to make any cash payments in lieu thereof upon exercise of the Warrants. Holder hereby waives any right to receive fractional shares.
10. Redemption. This Warrant, to the extent that it has not been exercised,
may be redeemed by the Company on the terms and conditions set forth in this
Section 10.
10.1. Vesting of Redemption Right. The right of the Company to redeem this Warrant shall not vest unless and until the closing "bid" price of the Company's Common Stock exceeds $3.50 per share for thirty (30) consecutive trading days. Once the Company's right to redeem this warrant has vested, the Company shall have the right to redeem this Warrant during the remaining term of the Warrant.
10.2. Redemption Price. The redemption price to be paid by the Company
shall be $0.01 per Warrant Share (the "Redemption Price") remaining
unexercised by the Holder at the Effective Date of Redemption as provided
for herein. The Redemption Price shall be paid by the Company within ten
(10) business days from the Effective Date of Redemption.
10.3. Effective Date of Redemption. The redemption of this Warrant will be effective (the "Effective Date of Redemption") thirty days after the mailing of a written notice of redemption (the "Redemption Notice") to the Holder of this Warrant by first class mail to the address of the Holder appearing on the books and records of the Company, provided, however, that the Company's right to redeem this Warrant has vested and the condition precedent to the Company's right to redeem as provided for in Section 10.4 has been satisfied. This Warrant may be exercised by the Holder at any time prior to the Effective Date of Redemption.
10.4 Condition Precedent to Redemption. The Company's right to redeem this Warrant is subject to a condition precedent that the Warrant Shares underlying this Warrant have been included in a registration statement filed with, and declared effective by, the Securities and Exchange Commission (the "Commission" under the Securities Act of 1933, as amended, and such registration statement is not the subject of any stop order issued by the Commission and remains effective at all times from the mailing of the Redemption Notice to the Holder and the Effective Date of Redemption provided for in Section 10.3.
11. Successors and Assigns. This Warrant Certificate shall be binding on and inure to the benefit of the heirs, executors, administrators, successors, and assigns of the respective parties.
12. Governing Law. This Warrant Certificate shall be governed by and construed in accordance with the laws of the State of Nevada, without regard to the conflicts of law provisions of the State of Nevada or of any other state.
IN WITNESS WHEREOF, this Warrant Certificate has been executed as of this ___ day of _________, 200__.
REMEDENT, INC.
a Nevada corporation
By:
Robin List, President and CEO
EXHIBIT A
NOTICE OF EXERCISE
The undersigned hereby irrevocably elects to exercise, pursuant to Section 2 of the Warrant Certificate accompanying this Notice of Exercise, the Warrant to purchase shares of Common Stock of Remedent, Inc., a Nevada corporation (the "Warrant Shares"), in accordance with the terms of the Warrant Certificate, including but not limited to, the investor representations and warranties made in connection with the Warrant, and herewith makes payment of the Purchase Price of such Warrant Shares in full.
In connection to this Notice of Exercise the undersigned hereby represents and warrants to the Company as follows:
(a) The undersigned represents that the Warrant Shares to be received will be acquired for investment for its own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that it has no present intention of securing, granting any participation in or otherwise distributing the same. The undersigned further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to any of the Warrant Shares.
(b) The undersigned is fully aware of: (1) the highly speculative nature of the investment in the Warrant Shares; (2) the financial hazards involved; (3) the lack of liquidity of the Warrant Shares and the restrictions on transferability of the Warrant Shares; and (4) the qualifications and backgrounds of the management of the Company.
(c) The undersigned understands and acknowledges that the offering of the Warrant Shares have not and will not be registered under the Securities Act of 1933, as amended (the "Securities Act") on the ground that the sale and the issuance of securities hereunder is exempt pursuant to Section 4(2) of the Securities Act, and that the Company's reliance on such exemption is predicated on the undersigned's representations set forth herein.
(d) At no time was the undersigned presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and purchase of the Warrant Shares.
(e) The certificates for the Warrant Shares will bear one or more restrictive legends determined by counsel to the Company to be necessary or appropriate in order to comply with federal or state securities law or to secure or protect any applicable exemptions from registration or qualification.
(f) The undersigned represents that it is experienced in evaluating development stage companies such as the Company, is able to fend for itself in transactions, has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its prospective investment in the Company, and has the ability to bear the economic risks of the investment.
(g) The undersigned acknowledges and understands that the Warrant Shares, must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available, and that the Company is under no obligation to register the Warrant Shares.
(h) The undersigned acknowledges that it has been advised or is aware of the provisions of Rule 144 promulgated under the Securities Act, which permits limited public resales of securities acquired in a non-public offering, subject to the satisfaction of certain conditions. The undersigned understands that before the Warrant Shares, may be sold under Rule 144, the following conditions must be fulfilled, except as otherwise described below: (1) certain public information about the Company must be available, (2) the sale must occur at least one year after the later of the date the Warrant Shares were sold by the Company or the date they were sold by an affiliate of the Company, (3) the sale must be made in a broker's transaction or in a transaction directly with a market maker, and (4) the number of Warrant Shares sold must not exceed certain volume limitations. If, however, the sale occurs at least two years after the Warrant Shares were sold by the Company or an affiliate of the Company, and if the undersigned is not an affiliate of the Company, the foregoing conditions will not apply.
(i) The undersigned acknowledges that in the event the applicable requirements of Rule 144 are not met, registration under the Securities Act or compliance with another exemption from registration will be required for any disposition of its stock. The undersigned understands that although Rule 144 is not exclusive, the Securities and Exchange Commission has expressed its opinion that persons proposing to sell restricted securities received in a private offering other than in a registered offering or pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales and that such persons and the brokers who participate in the transactions do so at their own risk.
(j) The undersigned covenants that, in the absence of an effective registration statement covering the Warrant Shares, it will sell, transfer, or otherwise dispose of the Warrant Shares only in a manner consistent with its representations and covenants set forth herein. In connection therewith the undersigned acknowledges that the Company shall make a notation on its stock books regarding the restrictions on transfer set forth herein and shall transfer shares on the books of the Company only to the extent not inconsistent therewith.
Date: ________________20__
Name of Holder
Signature
Address
EXHIBIT "B"
FORM OF WARRANT EXERCISE FORM
REMEDENT, INC.
WARRANT EXERCISE FORM
To Remedent, Inc.:
The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant Certificate ("Warrant Certificate") for, and to purchase thereunder by the payment of the Purchase Price and surrender of the Warrant Certificate, _______________ Units, consisting of __________shares of Common Stock ("Warrant Shares") and warrants to purchase __________ shares of Common Stock ("Purchase Warrants") provided for therein, and requests that certificates for the Warrant Shares and the Purchase Warrants be issued as follows:
________________________________
Name
________________________________
Address
________________________________
________________________________
Federal Tax ID or Social Security No.
and delivered by (certified mail to the above address, or
(electronically (provide DWAC Instructions:________), or
(other (specify): ____________________________________).
|
and, if the number of Warrant Shares and Purchase Warrants shall not be all the Warrant Shares and Purchase Warrants purchasable upon exercise of the Warrant Certificate, that a new Warrant Certificate for the balance of the Units purchasable upon exercise of this Warrant Certificate be registered in the name of the undersigned or the undersigned's Assignee as below indicated and delivered to the address stated below.
Dated: ___________________, ____
Signature: _________________
Note: The signature must correspond with
the name of the Holder as indicated
on the first page of the Warrant Certificate ______________________________
in every particular, without alteration or Name (please print)
enlargement or any change whatever, unless the
Warrant Certificate has been assigned. ______________________________
______________________________
Address
______________________________
Federal Identification or
Social Security No.
Assignee:
______________________________
______________________________
______________________________
|
EXHIBIT 5.1
BULLIVANT HOUSER BAILEY PC
Attorneys at Law
October 26, 2005
Board of Directors
Remedent, Inc.
Xavier de Cocklaan 42
9831 Deurle, Belgium
Re: Common Stock of Remedent, Inc.
Dear Gentlemen:
We act as counsel to Remedent, Inc., a Nevada corporation (the "Company"), in connection with the registration of 6,090,052 shares of the Company's common stock (the "Shares") under the Securities Act of 1933, as amended (the "Securities Act"), of which 3,322,093 of the Shares will be issued upon exercise of the Company's warrants, and all of which will be sold by selling stockholders of the Company as defined and further described in the Company's registration statement on Form SB-2 filed under the Securities Act (the "Registration Statement").
For the purpose of rendering this opinion, we examined originals or copies of such documents as deemed to be relevant. In conducting our examination, we assumed, without investigation, the genuineness of all signatures, the correctness of all certificates, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted as certified or photostatic copies, and the authenticity of the originals of such copies, and the accuracy and completeness of all records made available to us by the Company. In addition, in rendering this opinion, we assumed that the Shares will be offered in the manner and on the terms identified or referred to in the Registration Statement, including all amendments thereto.
Our opinion is limited solely to matters set forth herein. The law covered by the opinions expressed herein is limited to the Federal Law of the United States and the law applicable to corporations of the State of Nevada.
October 26, 2005
Based upon and subject to the foregoing, after giving due regard to such issues of law as we deemed relevant, and assuming that (i) the Registration Statement becomes and remains effective, and the Prospectus which is a part of the Registration Statement (the "Prospectus"), and the Prospectus delivery requirements with respect thereto, fulfill all of the requirements of the Securities Act, throughout all periods relevant to the opinion, (ii) all offers and sales of the Shares will be made in compliance with the securities laws of the states having jurisdiction thereof, and (iii) the Company receives, to the extent applicable, the consideration set forth in the warrants, we are of the opinion that the Shares issued are, and the Shares to be issued will be, legally issued, fully paid and nonassessable under the corporate laws of the state of Nevada.
We hereby consent in writing to the use of our opinion as an exhibit to the Registration Statement and any amendment thereto. By giving such consent, we do not thereby admit that we come within the category of persons where consent is required under Section 7 of the Securities Act or the rules and regulations of the Securities and Exchange Commission.
Sincerely,
/s/ Bullivant Houser Bailey PC BULLIVANT HOUSER BAILEY PC |
EXHIBIT 10.2
REMEDENT, INC.
2004 INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN
1. PURPOSE. The purpose of this Plan is to provide incentives to attract, retain
and motivate Eligible Persons whose present and potential contributions are
important to the success of the Company, or a Subsidiary of the Company, by
offering them an opportunity to participate in the Company's future performance
through Options. Capitalized terms not defined in the text are defined in
Section 22.
2. ADOPTION AND STOCKHOLDER APPROVAL. This Plan shall be approved by the stockholders of the Company, consistent with applicable laws, after the date this Plan is adopted by the Board. No Option shall be granted after termination of this Plan but all Options granted prior to termination shall remain in effect in accordance with their terms. The Effective Date of this Plan will coincide with the stockholders approval. So long as the Company is subject to Section 16(b) of the Exchange Act, the Company will comply with the requirements of Rule 16b-3 (or its successor), as amended.
3. TERM OF PLAN. Unless earlier terminated as provided herein, this Plan will terminate ten (10) years from the date this Plan is adopted by the Board.
4. SHARES SUBJECT TO THIS PLAN.
4.1. Number of Shares Available. Subject to Section 4.2, the total number Shares reserved and available for grant and issuance pursuant to this Plan will be eight hundred thousand (800,000). Outstanding shares of the Company shall, for the purposes of such calculation, include the number of shares of Stock into which other securities or instruments issued by the Company are currently convertible (e.g., convertible preferred stock, convertible debentures, or warrants for common stock, but not outstanding Options to acquire Stock.
a. Subject to Sections 4.2, Shares that are subject:
i. to issuance upon exercise of an Option but cease to be subject to such Option for any reason other than exercise of such Option;
ii. to an Option granted hereunder but are forfeited; or
iii. to an Option that otherwise terminates without Shares being issued;
will again be available for grant and issuance in connection with future Options
under this Plan. However, in the event that prior to the Option's forfeiture,
termination, expiration or lapse, the holder of the Option at any time received
one or more elements of "beneficial ownership" pursuant to such Option (as
defined by the SEC, pursuant to any rule or interpretations promulgated under
Section 16 of the Exchange Act), the Shares subject to such Option shall not
again be made available for regrant under the Plan.
b. At all times, the Company shall reserve and keep available a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding Options granted under this Plan. The Shares to be issued hereunder upon exercise of an Option may be either authorized but unissued, or previously issued and subsequently reacquired. However, when the exercise price for an Option granted under this Plan is paid in an "immaculate" or "cashless" exercise
with previously outstanding shares or with the shares underlying the Option which is being exercised, the total number of Shares for which Options granted under this Plan may thereafter be exercised shall be irrevocably reduced by the total number of Shares for which such Option is thus exercised without regard to the number of shares received or retained by the Company in connection with that exercise. The following rules shall apply for purposes of the determination of the number of Shares available for grant under the Plan:
i. The grant of an Option shall reduce the Shares available for grant under the Plan by the number of Shares subject to such Option.
ii. While an Option is outstanding, it shall be counted against the authorized pool of Shares regardless of its vested status.
4.2. Adjustments. Should any change be made to the Stock of the Company by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Company's receipt of consideration, the Administrator shall make appropriate adjustments to (i) the maximum number and/or class of securities issuable under the Plan and (ii) the number and/or class of securities and the exercise price per Share in effect under each outstanding Option in order to prevent the dilution or enlargement of benefits thereunder; provided however, that the number of Shares subject to any Option shall always be a whole number and the Administrator shall make such adjustments as are necessary to insure Options of whole Shares.
5. ADMINISTRATION OF THIS PLAN.
5.1. Authority. Authority to control and manage the operation and administration of this Plan shall be vested in the Board, which may delegate such responsibilities in whole or in part to a committee or subcommittee consisting of two (2) or more members of the Board, all of whom are Outside Directors and who satisfy the requirements under the Exchange Act for administering this Plan (the "Committee"). Members of the Committee may be appointed from time to time by, and shall serve at the pleasure of, the Board. The Board at any time may abolish the Committee and reinvest in the Board the administration of this Plan. As used herein, the term "Administrator" means the Board or, with respect to any matter as to which responsibility has been delegated to the Committee, the term Administrator shall mean the Committee.
5.2. Interpretation. Subject to the express provisions of this Plan, the Administrator shall have the authority to construe and interpret this Plan and any agreements defining the rights and obligations of the Company and Participants under this Plan; to select Participants; determine the form and terms of Options; determine the number of Shares or other consideration subject to Options; determine whether Options will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Options under this Plan or any other incentive or compensation plan of the Company; to further define the terms used in this Plan; to correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Option Agreement; to provide for rights of refusal and/or repurchase rights; to amend outstanding Option Agreements to provide for, among other things, any change or modification which the Administrator could have provided for upon the grant of an Option or in furtherance of the powers provided for herein; to prescribe, amend and rescind rules and regulations relating to the administration of this Plan; to determine the duration and purposes of leaves of absence which may be granted to Participants without constituting a termination of their employment for purposes of this Plan; to accelerate the vesting of any Option; and to make all other determinations necessary or advisable for the administration of this Plan.
Any decision or action of the Administrator in connection with this Plan or Options granted or shares of Stock purchased under this Plan shall be final and binding. The Administrator shall not be liable for any decision, action or omission respecting this Plan, or any Options granted or shares of Stock sold under this Plan.
5.3. Limitation on Liability. To the extent permitted by applicable law in effect from time to time, no member of the Committee or the Board of Directors shall be liable for any action or omission of any other member of the Committee or the Board of Directors nor for any act or omission on the member's own part, excepting only the member's own willful misconduct or gross negligence, arising out of or related to this Plan. The Company shall pay expenses incurred by, and satisfy a judgment or fine rendered or levied against, a present or former director or member of the Committee or Board in any action against such person (whether or not the Company is joined as a party defendant) to impose liability or a penalty on such person for an act alleged to have been committed by such person while a director or member of the Committee or Board arising with respect to this Plan or administration thereof or out of membership on the Committee or Board or by the Company, or all or any combination of the preceding, provided, the director or Committee member was acting in good faith, within what such director or Committee member reasonably believed to have been within the scope of his or her employment or authority and for a purpose which he or she reasonably believed to be in the best interests of the Company or its stockholders. Payments authorized hereunder include amounts paid and expenses incurred in settling any such action or threatened action. The provisions of this section shall apply to the estate, executor, administrator, heirs, legatees or devisees of a director or Committee member, and the term "person" as used on this section shall include the estate, executor, administrator, heirs, legatees, or devisees of such person.
6. GRANT OF OPTIONS; TERMS AND CONDITIONS OF GRANT.
6.1. Grant of Options. One or more Options may be granted to any Eligible Person. Subject to the express provisions of this Plan, the Administrator shall determine from the Eligible Persons those individuals to whom Options under this Plan may be granted. Each Option granted under this Plan will be evidenced by an Option Agreement, which will expressly identify the Option as an Incentive Stock Option or a Non-qualified Stock Option.
Further, subject to the express provisions of this Plan, the Administrator shall specify the Grant Date, the number of Shares covered by the Option, the exercise price and the terms and conditions for exercise of the Options. If the Administrator fails to specify the Grant Date, the Grant Date shall be the date of the action taken by the Administrator to grant the Option. As soon as practicable after the Grant Date, the Company will provide the Participant with a written Option Agreement in the form approved by the Administrator, which sets out the Grant Date, the number of Shares covered by the Option, the exercise price and the terms and conditions for exercise of the Option.
The Administrator may, in its absolute discretion, grant Options under this Plan at any time and from time to time before the expiration of this Plan.
6.2. General Terms and Conditions. Except as otherwise provided herein, the Options shall be subject to the following terms and conditions and such other terms and conditions not inconsistent with this Plan as the Administrator may impose:
6.2.1. Exercise of Option. The Administrator may determine in its discretion whether any Option shall be subject to vesting and the terms and conditions of any such vesting. The Option Agreement shall contain any such vesting schedule.
6.2.2. Option Term. Each Option and all rights or obligations thereunder shall expire on such date as shall be determined by the Administrator, but not later than 10 years after the grant of the Option (5 years in the case of an Incentive Stock Option when the Optionee owns more than 10% of the total combined voting power of all classes of stock of the Company ("Ten Percent Stockholder")), and shall be subject to earlier termination as hereinafter provided.
6.2.3. Exercise Price. The Exercise Price of any Option shall be determined by the Administrator when the Option is granted and may not be less than one hundred percent (100%) of the Fair Market Value of the Shares on the date of grant, and the Exercise Price of any Incentive Stock Option granted to a Ten Percent Stockholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased shall be made in accordance with Section 7 of this Plan. The Administrator is authorized to issue Options, whether Incentive Stock Options or Non-qualified Stock Options, at an Option price in excess of the Fair Market Value on the date the Option is granted (the so-called "Premium Price" Option) to encourage superior performance.
6.2.4. Method of Exercise. Options may be exercised only by delivery to the Company of a written stock option exercise agreement (the "Exercise Agreement") in a form approved by the Administrator (which need not be the same for each Participant), stating the number of Shares being purchased, the restrictions imposed on the Shares purchased under such Exercise Agreement, if any, and such representations and agreements regarding the Participant's investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws, together with payment in full of the Exercise Price for the number of Shares being purchased.
6.2.5. Transferability of Options. Except as otherwise provided below for Non-qualified Stock Options, no Option shall be transferable other than by will or by the laws of descent and distribution and during the lifetime of a Participant, only the Participant, his guardian or legal representative may exercise an Option. A Participant may designate a beneficiary to exercise his or her Options after the Participant's death. At its discretion, the Administrator may provide for transfer of an Option (other than an Incentive Stock Option), without payment of consideration, to the following family members of the Participant, including adoptive relationships: a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, niece, nephew, former spouse (whether by gift or pursuant to a domestic relations order), any person sharing the employee's household (other than a tenant or employee), a family-controlled partnership, corporation, limited liability company and trust, or a foundation in which family members heretofore described control the management of assets. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the Option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the Option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Administrator may deem appropriate. A request to assign an Option may be made only by delivery to Company of a written stock option assignment request (the "Assignment Request") in a form approved by the Administrator, stating the number of Options and Shares underlying Options requested for assignment, that no consideration is being paid for the assignment, identifying the proposed transferee, and containing such other representations and agreements regarding the Participant's investment intent and access to information and other matters, if any, as may be required or desirable by Company to comply with applicable securities laws.
6.2.6. Exercise After Certain Events.
i. Termination of Employment - Employee/Officer
(1) Incentive Stock Options.
(a) Termination of All Services. If for any reason other than retirement (as defined below), permanent and total disability (as defined below) or death, a Participant Terminates employment with the Company or a Subsidiary (including employment as an officer of Company or a Subsidiary), vested Incentive Stock Options held at the date of such termination (to the extent then exercisable) may be exercised, in whole or in part, at any time within three (3) months after the date of such Termination or such lesser period specified in the Option Agreement (but in no event after the earlier of (i) the expiration date of the Incentive Stock Option as set forth in the Option Agreement, and (ii) ten years from the Grant Date (five years for a Ten Percent Stockholder)).
(b) Continuation of Services as Consultant/Advisor. If a Participant granted an Incentive Stock Option terminates employment but continues as a consultant, advisor or in a similar capacity to the Company or a Subsidiary, Participant need not exercise the Incentive Stock Option within three months of termination of employment but shall be entitled to exercise within three (3) months of termination of services to Company or the Subsidiary (one (1) year in the event of permanent and total disability or death) or such lesser period specified in the Option Agreement (but in no event after the earlier of (i) the expiration date of the Option as set forth in the Option Agreement, and (ii) ten years from the Grant Date). However, if Participant does not exercise within three (3) months of termination of employment, the Option will not qualify as an Incentive Stock Option.
(2) Non-Qualified Stock Options.
(a) Termination of All Services. If for any reason other than Retirement (as defined below), permanent and total disability (as defined below) or death, a Participant Terminates employment with the Company or a Subsidiary (including employment as an Officer of the Company or a Subsidiary), vested Non-qualified Stock Options held at the date of such Termination (to the extent then exercisable) may be exercised, in whole or in part, at any time within three (3) months of the date of such Termination or such lesser period specified in the Option Agreement (but in no event after the earlier of (i) the expiration date of the Option as set forth in the Option Agreement, and (ii) ten years from the Grant Date).
(b) Continuation of Services as Consultant/Advisor. If a Participant granted a Non-qualified Stock Option Terminates employment but continues as a consultant, advisor or in a similar capacity to the Company or a Subsidiary, Participant need not exercise the Option within three (3) months of Termination but shall be entitled to exercise within three (3) months of termination of services to the Company or the Subsidiary (one (1) year in the event of permanent and total disability or death) or such lesser period specified in the Option Agreement (but in no event after the earlier of (i) the expiration date of the Option as set forth in the Option Agreement, and (ii) ten years from the Grant Date).
ii. Retirement. If a Participant granted an Option ceases to be an employee of Company or Subsidiary (including as an officer of Company or Subsidiary) as a result of Retirement, Participant need not exercise the Option within three (3) months of Termination of employment but shall be entitled to exercise the Option within the maximum term of the Option to the extent the Option was otherwise exercisable at the date of Retirement. However, if Participant does not exercise within three (3) months of termination of employment, the Option will not qualify as an Incentive
Stock Option if it otherwise so qualified. The term "Retirement" as used herein means such Termination of employment as shall entitle the Participant to early or normal retirement benefits under any then existing pension or salary continuation plans of Company or Subsidiary excluding 401(k) participants (except as otherwise covered under other pension or salary continuation plans).
iii. Permanent Disability and Death of Employee/Officer. If a
Participant becomes permanently and totally disabled (within the meaning of
Section 22(e)(3) of the Code), or dies, while employed by Company or
Subsidiary (including as an officer of Company or Subsidiary), vested
Options, whether Incentive Stock Options or Non-qualified Options, then
held (to the extent then exercisable) may be exercised by the Participant,
the Participant's personal representative, or by the person to whom the
Option is transferred by will or the laws of descent and distribution, in
whole or in part, at any time within one (1) year after the termination of
employment because of the disability or death or any lesser period
specified in the Option Agreement (but in no event after the earlier of (i)
the expiration date of the Option as set forth in the Option Agreement, and
(ii) ten years from the Grant Date (five years for a Ten Percent
Stockholder if the option is an Incentive Stock Option)).
iv. Termination of Directorship. If for any reason, including permanent and total disability or death, a Participant ceases to be a director of Company or Subsidiary, vested Options held at the date of such termination held at the date of such termination (to the extent then exercisable and not forfeited in accordance with the provisions of this Plan or pursuant to an Option Agreement) may be exercised, in whole or in part, at any time during the maximum term of the Option (but in no event after the earlier of (i) the expiration date of the Option as set forth in the Option Agreement, and (ii) ten years from the Grant Date (five years for a Ten Percent Stockholder if the option is an Incentive Stock Option)). However, if Participant holds Incentive Stock Options and does not exercise within three (3) months of Termination of employment, the Options will not qualify as Incentive Stock Options.
6.2.7. Suspension and Cancellation of Options. In the event the Administrator reasonably believes a Participant has committed an act of misconduct including, but limited to acts specified below, the Administrator may suspend the Participant's right to exercise any Option granted hereunder pending final determination by the Board. If a Participant is determined by the Board to have:
i. committed an act of embezzlement, fraud, dishonesty, breach of fiduciary duty to Company or a Subsidiary;
ii. deliberately disregarded the rules of Company or a Subsidiary which resulted in loss, damage or injury to Company or a Subsidiary;
iii. made any unauthorized disclosure of any trade secret or confidential information of Company or a Subsidiary;
iv. induced any client or customer of Company or a Subsidiary to break any contract with Company or a Subsidiary or induced any principal for whom Company or a Subsidiary acts as agent to terminate such agency relations; or
v. engaged in any substantial conduct which constitutes unfair competition with Company or a Subsidiary, neither the Participant nor his estate shall be entitled to exercise any Option hereunder.
The determination of the Board shall be final and conclusive. In making its determination, the Board shall give the Participant an opportunity to appear and be heard at a hearing before the full Board and present evidence on the Participant's behalf. Without limiting the generality of the foregoing, the
Agreement may provide that the Participant shall also pay to Company any gain realized by the Participant from exercising all or any portion of the Options hereunder during a period beginning six (6) months prior to such suspension or cancellation.
The Administrator may provide in the Agreement that cancellation of the Option shall also apply if the Participant is determined by the Board to have:
i. engaged in any commercial activity in competition with any part of the business of Company or a Subsidiary;
ii. diverted or attempted to divert from Company or a Subsidiary business of any kind, including, without limitation, interference with any business relationship with suppliers, customers, licensees, licensors or contractors;
iii. made, or caused or attempted to cause any other person to make, any statement, either written or oral, or conveying any information about Company or a Subsidiary which is disparaging or which in any way reflects negatively upon Company or a Subsidiary;
iv. engaged in any other activity that is inimical, contrary or harmful to the interests of Company or a Subsidiary, including influencing or advising any person who is employed by or in the service of Company or a Subsidiary to leave such employment or service to compete with Company or a Subsidiary or to enter into the employment or service of any actual or prospective competitor of Company or a Subsidiary, or to have influenced or advised any competitor of Company or a Subsidiary to employ or to otherwise engage the services of any person who is employed by Company or in the service of Company, or improperly disclosed or otherwise misused any confidential information regarding Company or a Subsidiary; or
v. refused or failed to provide, upon the request of Company or a Subsidiary, a certification, in a form satisfactory to Company or a Subsidiary, that he or she is in full compliance with the terms and conditions of this Plan.
Should any provision to this Section 6.2.7. be held to be invalid or illegal, such illegality shall not invalidate the whole of this Section 6, but, rather, this Plan shall be construed as if it did not contain the illegal part or narrowed to permit its enforcement, and the rights and obligations of the parties shall be construed and enforced accordingly.
6.3. Limitations on Grant of Incentive Stock Options.
6.3.1. The aggregate Fair Market Value (determined as of the Grant Date) of the Stock for which Incentive Stock Options may first become exercisable by any Participant during any calendar year under this Plan, together with that of Shares subject to Incentive Stock Options first exercisable (other than as a result of acceleration pursuant to Section 17) by such Participant under any other plan of the Company or any Subsidiary, shall not exceed $100,000. For purposes of this Section 6.3.1, all Shares in excess of the $100,000 threshold shall be treated as Non-qualified Stock Options.
6.3.2. There shall be imposed in the Option Agreement relating to Incentive Stock Options such terms and conditions as are required in order that the Option be an "incentive stock option" as that term is defined in Code Section 422.
6.3.3. No Incentive Stock Option may be granted to any person who is not an employee of the Company or a Subsidiary of the Company.
7. PAYMENT FOR SHARE PURCHASES.
7.1. Payment. Payment for Shares purchased pursuant to this Plan may be made in cash (by check) or, where expressly approved for the Participant at the discretion of the Administrator and where permitted by law:
7.1.1. by cancellation of indebtedness of the Company to the Participant;
7.1.2. by surrender of shares of Stock of the Company that either: (1) have been owned by the Participant for more than six (6) months (and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares); or (2) were obtained by the Participant in the public market;
7.1.3. by tender of a full recourse promissory note having such terms as may be approved by the Administrator and bearing interest at a rate sufficient to avoid imputation of income under Code Sections 483 and 1274; provided, however, that Participants who are not employees or directors of the Company will not be entitled to purchase Shares with a promissory note unless the note is adequately secured by collateral other than the Shares;
7.1.4. with respect only to purchases upon exercise of an Option, and provided that a public market for the Company's stock exists:
i. through a "same day sale" commitment from the Participant and a broker-dealer that is a member of the National Association of Securities Dealers (a "NASD Dealer") whereby the Participant irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased to pay for the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or
ii. through a "margin" commitment from the Participant and a NASD Dealer whereby the Participant irrevocably elects to exercise the Option and to pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or
7.1.5. by forfeiture of Option shares equal to the value of the exercise price pursuant to a so-called "immaculate cashless exercise," or
7.1.6. by any combination of the foregoing methods of payment or any other consideration or method of payment as shall be permitted by applicable corporate law.
The Administrator may provide, in an Agreement or otherwise, that a Participant who exercises an Option and pays the Exercise Price in whole or in part with Stock then owned by the Participant will be entitled to receive another Option covering the same number of shares tendered and with a price of no less than Fair Market Value on the date of grant of such additional Option ("Reload Option"). Unless otherwise provided in the Agreement, a Participant, in order to be entitled to a Reload Option, must pay with Stock that has been owned by the Participant for at least the preceding six (6) months.
7.2. Loan Guarantees. At its sole discretion, the Administrator may help the Participant pay for Shares purchased under this Plan by authorizing a guarantee by the Company of a third-party loan to the Participant.
8. WITHHOLDING TAXES.
8.1. Withholding Generally. Whenever Shares are to be issued in satisfaction of Options granted under this Plan or Shares are forfeited pursuant to an "immaculate cashless exercise," the Company may require the Participant to remit to the Company an amount sufficient to satisfy federal, state and local taxes and FICA withholding requirements prior to the delivery of any certificate or certificates for such Shares. When, under applicable tax laws, a Participant incurs tax liability in connection with the exercise or vesting of any Option, the disposition by a Participant or other person of Options of Shares of an Option prior to satisfaction of the holding period requirements of Section 422 of the Code, or upon the exercise of a Non-qualified Stock Option, the Company shall have the right to require such Participant or such other person to pay by cash, or check payable to the Company, the amount of any such withholding with respect to such transactions. Any such payment must be made promptly when the amount of such obligation becomes determinable (the "Tax Date").
8.2. Stock for Withholding. To the extent permissible under applicable tax, securities and other laws, the Administrator may, in its sole discretion and upon such terms and conditions as it may deem appropriate, permit a Participant to satisfy his or her obligation to pay any such withholding tax, in whole or in part, with Stock up to an amount not greater than the Company's minimum statutory withholding rate for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income. The Administrator may exercise its discretion, by (a) directing the Company to apply shares of Stock to which the Participant is entitled as a result of the exercise of an Option, or (b) delivering to the Company shares of Stock owned by the Participant (other than in connection with an option exercise triggering withholding taxes within the last six (6) months). The shares of Stock so applied or delivered for the withholding obligation shall be valued at their Fair Market Value as of the date of measurement of the amount of income subject to withholding.
9. NO PRIVILEGES OF STOCK OWNERSHIP. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant. After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are restricted stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock; and provided, further, that the Participant will have no right to retain such stock dividends or stock distributions with respect to Shares that are repurchased at the Participant's Exercise Price or Purchase Price pursuant to Section 10. Subject to Sections 17 and 18, no adjustment shall be made for dividends or other rights for which the record date is prior to the date title to the shares of Stock has been acquired by the Participant.
10. RESTRICTION ON SHARES. At the discretion of the Administrator, the Company may reserve to itself and/or its assignee(s) in the Option Agreement a right to repurchase at the Exercise Price of the Shares acquired under an Option or impose other restrictions on such Shares during a period not to exceed one hundred eighty (180) days from the date of exercise or purchase. After one hundred eighty (180) days, at the discretion of the Administrator, the Company may reserve to itself and/or its assignee(s) in the Option Agreement a right to repurchase the Shares acquired under an Option at the Fair Market Value at the time of repurchase. The terms and conditions of any such rights or other restrictions shall be set forth in the Option Agreement evidencing the Option.
11. CERTIFICATES. All certificates for Shares or other securities delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Administrator may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted.
12. ESCROW, PLEDGE OF SHARES. To enforce any restrictions on a Participant's Shares, the Administrator may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Administrator, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Administrator may cause a legend or legends referencing such restrictions to be placed on the certificates. Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of such Participant's obligation to the Company under the promissory note; provided, however, that the Administrator may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant's Shares or other collateral. In connection with any pledge of the Shares, the Participant will be required to execute and deliver a written pledge agreement in such form, as the Administrator will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.
13. EXCHANGE AND BUYOUT OF OPTIONS. The Administrator may, at any time or from time to time, authorize the Company, with the consent of the respective Participants, to issue new Options in exchange for the surrender and cancellation of any or all outstanding Options. The Administrator may at any time buy from a Participant an Option previously granted with payment in cash, Shares (including restricted stock) or other consideration, based on such terms and conditions as the Administrator and the Participant may agree.
14. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Option will not be
effective unless such Option is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Option and also on the date of exercise or other issuance.
Notwithstanding any other provision in this Plan, the Company will have no
obligation to issue or deliver certificates for Shares under this Plan prior to
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable; and/or (b) completion of any registration
or other qualification of such Shares under any state or federal laws or rulings
of any governmental body that the Company determines to be necessary or
advisable. The Company will be under no obligation to register the Shares with
the SEC or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or automated quotation
system, and the Company will have no liability for any inability or failure to
do so. Upon exercising all or any portion of an Option, a Participant may be
required to furnish representations or undertakings deemed appropriate by the
Company to enable the offer and sale of the Shares or subsequent transfers of
any interest in such shares to comply with applicable securities laws. Evidences
of ownership of Shares acquired pursuant to an Option shall bear any legend
required by, or useful for purposes of compliance with, applicable securities
laws, this Plan or the Option Agreement.
15. RIGHTS OF EMPLOYEES.
15.1. No Obligation to Employ. Nothing in this Plan or any Option granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or to limit in any way the right of the Company to terminate such Participant's employment or other relationship at any time, with or without cause.
15.2. Compliance with Code Section 162(m). At all times when the Administrator determines that compliance with Code Section 162(m) is required or desired, all Options granted under this Plan to Named Executive Officers shall comply with the requirements of Code Section 162(m). In addition, in the event that changes are made to Code Section 162(m) to permit greater flexibility with respect to any Option or Options under this Plan, the Administrator may, subject to this Section 15, make any adjustments it deems appropriate.
16. ADJUSTMENT FOR CHANGES IN CAPITALIZATION. The existence of outstanding Options shall not affect the Company's right to effect adjustments, recapitalizations, reorganizations or other changes in its or any other corporation's capital structure or business, any merger or consolidation, any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Stock, the dissolution or liquidation of the Company's or any other corporation's assets or business or any other corporate act whether similar to the events described above or otherwise. Shares shall be adjusted pursuant to Section 4.2.
17. DISSOLUTION, LIQUIDATION, MERGER.
17.1. Company Not the Survivor. In the event of a dissolution or liquidation of the Company, a merger, consolidation, combination or reorganization in which the Company is not the surviving corporation, or a sale of substantially all of the assets of the Company (as determined in the sole discretion of the Board of Directors), the Administrator, in its absolute discretion, may cancel each outstanding Option upon payment in cash to the Participant of the amount by which any cash and the fair market value of any other property which the Participant would have received as consideration for the Shares covered by the Option if the Option had been exercised before such liquidation, dissolution, merger, consolidation, combination, reorganization or sale exceeds the exercise price of the Option or negotiate to have such option assumed by the surviving corporation. In addition to the foregoing, in the event of a dissolution or liquidation of the Company, or a merger, consolidation, combination, or reorganization in which the Company is not the surviving corporation, or a sale or transfer of all or substantially all of the Company's assets, the Administrator, in its absolute discretion, may accelerate the time within which each outstanding Option may be exercised, provided however, that the Change of Control Section 18.1 will control with respect to acceleration in vesting in the event of a merger, consolidation, combination or reorganization that results in a change of control as so defined.
17.2. Company is the Survivor. In the event of a merger, consolidation, combination or reorganization in which the Company is the surviving corporation, the Board of Directors shall determine the appropriate adjustment of the number and kind of securities with respect to which outstanding Options may be exercised, and the exercise price at which outstanding Options may be exercised. The Board of Directors shall determine, in its sole and absolute discretion, when the Company shall be deemed to survive for purposes of this Plan.
18. CHANGE OF CONTROL.
18.1. Definition. If there is a "change of control" in the Company, all outstanding Options shall fully vest immediately upon the Company's public announcement of such a change. A "change of control" shall mean an event
involving one transaction or a related series of transactions, in which (i) the
Company issues securities equal to 50% or more of the Company's issued and
outstanding voting securities, determined as a single class, to any individual,
firm, partnership, limited liability company, or other entity, including a
"group" within the meaning of SEC Exchange Act Rule 13d-3, (ii) the Company
issues voting securities equal to 50% or more of the issued and outstanding
voting stock of the Company in connection with a merger, consolidation other
business combination, (iii) the Company is acquired in a merger, consolidation,
combination or reorganization in which the Company is not the surviving company,
or (iv) all or substantially all of the Company's assets are sold or
transferred. The Administrator, in its discretion, may adjust the percentage of
securities the Company may issue to constitute a change of control under (i) and
(ii) in an individual Award Agreement.
18.2. Limitation on Options. Notwithstanding any other provisions of this Plan and unless provided otherwise in the Option Agreement, if the right to receive or benefit from an Option under this Plan, either alone or together with payments that a Participant has a right to receive from the Company, would constitute a "parachute payment" (as defined in Code Section 280G), all such payments shall be reduced to the largest amount that will result in no portion being subject to the excise tax imposed by Code Section 4999.
19. TERMINATION; AMENDMENT. The Board may amend, suspend or terminate this Plan at any time and for any reason, but no amendment, suspension or termination shall be made which would impair the right of any person under any outstanding Options without such person's consent not unreasonably withheld. Further, the Board may, in its discretion, determine that any amendment should be effective only if approved by the Stockholders even if such approval is not expressly required by this Plan or by law.
20. DEFERRALS. The Administrator may permit a Participant to defer to another plan or program such Participant's receipt of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option. If any such deferral election is required or permitted, the Administrator shall, in its sole discretion, establish rules and procedures for such deferrals.
21. GOVERNING LAW. This Plan and the rights of all persons under this Plan shall be construed in accordance with and under applicable provisions of the laws of the State of California.
22. DEFINITIONS. As used in this Plan, the following terms will have the following meanings:
22.1. "Board" means the Board of Directors of the Company.
22.2. "Code" means the Internal Revenue Code of 1986, as amended from time to time.
22.3. "Committee" means the Committee appointed by the Board to administer this Plan, or if no such committee is appointed, the Board.
22.4. "Company" means Remedent, Inc., a Nevada corporation and its subsidiaries, or any successor corporation.
22.5. "Disability" means a disability, whether temporary or permanent, partial or total, within the meaning of Section 22(e)(3) of the Code, as determined by the Committee.
22.6. "Effective Date" has the meaning set forth in Section 2.
22.7. "Eligible Person" means, in the case of the grant of an Incentive Stock Option, all employees of the Company or a subsidiary of the Company and, in the case of a Non-qualified Stock Option, any director, officer or employee of the Company or other person who, in the opinion of the Board, is rendering valuable services to the Company, including without limitation, an independent contractor, outside consultant, or advisor to the Company.
22.8. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time and any successor statute.
22.9. "Exercise Price" means the price at which a holder of an Option may purchase the Shares issuable upon exercise of the Option.
22.10. "Fair Market Value" means (i) if the Stock is listed or admitted to trade on a national securities exchange, the closing price of the Stock on the Composite Tape, as published in the Western Edition of the Wall Street Journal, of the principal national securities exchange on which the Stock is so listed or admitted to trade, on such date, or, if there is no trading of the Stock on such date, then the closing price of the Stock as quoted on such Composite Tape on the next preceding date on which there was trading in such Stock; (ii) if the Stock is not listed or admitted to trade on a national securities exchange, the closing price for the Stock on such date, as furnished by the National Association of Securities Dealers, Inc. ("NASD") through the NASDAQ National Market System or a similar organization if the NASD is no longer reporting such information; (iii) if the stock is not reported on the National Market System, the mean between the closing bid and asked prices for the stock on such date, as furnished by the NASD, and if no bid and asked prices are quoted on such date, the bid and asked prices on the next preceding day on which such prices were quoted; and (iv) if the stock is not reported on the National Market System and if bid and asked prices for the stock are not furnished by the NASD or a similar organization, the value established by the Administrator for purposes of granting options under this Plan.
22.11. "Incentive Stock Option" means an option, which is an option within the meaning of Section 422 of the Code, the Option of which contains such provisions as are necessary to comply with that section.
22.12. "Named Executive Officer" means, if applicable, a Participant who,
as of the date of vesting and/or payout of an Option is one of the group of
"covered employees," as defined in the regulations promulgated under Code
Section 162(m), or any successor statute.
22.13. "NASD Dealer" means a broker-dealer that is a member of the National Association of Securities Dealers.
22.14. "Non-qualified Stock Option" means an option, which is designated a Non-qualified Stock Option.
22.15. "Officer" means an officer of the Company and an officer who is subject to Section 16 of the Exchange Act.
22.16. "Option" means an option to purchase Shares pursuant to Section 6.
22.17. "Option Agreement" means, with respect to each Option, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Option.
22.18. "Optionee" means the holder of an Option.
22.19. "Outside Director" means any director who is not (a) a current employee of the Company; (b) a former employee of the Company who is receiving compensation for prior services (other than benefits under a tax-qualified pension plan); (c) a current or former officer of the Company; or (d) currently receiving compensation for personal services in any capacity, other than as a director, from the Company; and as may otherwise be defined in regulations promulgated under Section 162(m) of the Code
22.20. "Participant" means a person who receives an Option under this Plan.
22.21. "Plan" means this Remedent, Inc. 2004 Stock Option Plan, as amended from time to time.
22.22. "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange Act, as amended from time to time, and any successor rule.
22.23. "SEC" means the Securities and Exchange Commission.
22.24. "Securities Act" means the Securities Act of 1933, as amended from time to time.
22.25. "Shares" means shares of the Company's Common Stock reserved for issuance under this Plan, as adjusted pursuant to Section 4, and any successor security.
22.26. "Stock" means the Common Stock of the Company, and any successor entity.
22.27. "Subsidiary" means any corporation in an unbroken chain of corporations beginning with the Company if, at the time of granting of an Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
22.28. "Termination" or "Terminated" means, for purposes of this Plan with respect to a Participant, that the Participant has for any reason ceased to provide services as an employee, officer, director, consultant, independent contractor or advisor of the Company. An employee will not be deemed to have ceased to provide services in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of absence approved by the Administrator; provided, that such leave is for a period of not more than ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute or unless provided otherwise pursuant to formal policy adopted from time to time by the Company and issued and promulgated to employees in writing. In the case of any employee on an approved leave of absence, the Administrator may make such provisions respecting suspension of vesting of the Option while on leave from the employ of the Company as it may deem appropriate, except that in no event may an Option be exercised after the expiration of the term set forth in the Option Agreement. The Administrator will have sole discretion to determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the "Termination Date").
22.29. "Unvested Shares" means "Unvested Shares" as defined in the Option Agreement.
22.30. "Vested Shares" means "Vested Shares" as defined in the Option Agreement.
22.31. "Vesting Date" means the date on which an Option becomes wholly or partially exercisable, as determined by the Administrator in its sole discretion.
EXHIBIT 10.18
AMENDMENT TO THE WARRANT
This Amendment to Warrant No. W-1 of Remedent Inc.(this "Amendment") to that certain Warrant No. W-1 of Remedent, Inc., dated July 6, 2005 (the "Original Warrant") issued to Special Situations Private Equity Fund, L.P. (the "Holder") by Remedent, Inc. (the "Company"), is made as of August 4, 2005. Pursuant to the terms and conditions hereof, this Amendment is hereby incorporated into the Original Warrant as if fully set forth therein. This Amendment and the Original Warrant shall be read together as a consistent agreement. Capitalized terms used herein and not otherwise defined shall have the meaning assigned in the Original Warrant. The integrated agreement of the Original Warrant and this Amendment is herein called the Warrant.
NOW, THEREFORE, in consideration of the promises and the mutual promises set forth in this Amendment, the parties agree as follows:
1. Amendment. Section 18 of the Original Warrant is amended in its entirety as follows:
"Section 18. Call Provision. Notwithstanding any other provision contained
herein to the contrary, in the event that the closing bid price of a share of
Common Stock as quoted on the Bulletin Board (or such other exchange or stock
market on which the Common Stock may then be listed or quoted) equals or exceeds
$3.50 (appropriately adjusted for any stock split, reverse stock split, stock
dividend or other reclassification or combination of the Common Stock occurring
after the date hereof) for thirty (30) consecutive trading days commencing after
the second anniversary of the Closing Date (as defined in the Purchase
Agreement) and the Registration Statement (as defined in the Registration Rights
Agreement) has been declared effective, the Company, upon thirty (30) days prior
written notice (the "Notice Period") given to the Warrantholder within one
business day immediately following the end of such thirty (30) trading day
period, may, but shall not have the obligation to, call this Warrant, in whole
but not in part, at a redemption price equal to $0.01 per share of Common Stock
then purchasable pursuant to this Warrant; provided that (i) the Company
simultaneously calls all Company Warrants (as defined below) on the same terms,
(ii) all of the shares of Common Stock issuable hereunder either (A) are
registered pursuant to an effective Registration Statement (as defined in the
Registration Rights Agreement) which is not suspended and for which no stop
order is in effect, and pursuant to which the Warrantholder is able to sell such
shares of Common Stock at all times during the Notice Period or (B) no longer
constitute Registrable Securities (as defined in the Registration Rights
Agreement) and (iii) this Warrant is fully exercisable for the full amount of
Warrant Shares covered hereby. Notwithstanding any such notice by the Company,
the Warrantholder shall have the right to exercise this Warrant prior to the end
of the Notice Period."
2. Effect of Amendment. Except as expressly amended hereby, the Original Warrant is in all respects ratified and confirmed, and all the terms, conditions and provisions thereof shall remain in full force and effect. To the extent that there are any inconsistencies between this Amendment and the Original Warrant, the terms and provisions of this Amendment shall control.
3. Retroactive Effect. The foregoing amendments shall have effect retroactive as of execution and delivery of the Original Warrant on July 6, 2005.
4. Counterparts; Facsimile. This Amendment may be executed in any number of counterparts, each of which shall be an original, but all of which together shall be deemed to constitute one instrument. Executed copies of this Amendment may be exchanged via facsimile, and such signatures shall be deemed as originals.
IN WITNESS WHEREOF, this Amendment is executed and appended to the Original Warrant as of the date first written above.
Holder: Remedent, Inc.
By: /s/ Marianne Hicks /s/ Robin List
Name: Marianne Hicks Robin List, Chief Executive Officer
Title: Administrator
/s/ Austin Marxe
Austin Marxe
Managing Director
|
EMPLOYMENT AGREEMENT
BETWEEN
REMEDENT, INC.
AND
JUDD HOFFMAN
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made effective as of October 12, 2005 ("Effective Date"), is entered into by and between Remedent, Inc., a Nevada corporation (the "Company"), and Judd D Hoffman (the "Executive"), collectively referred to herein as the "parties."
WHEREAS, the Company wishes to employ the Executive to serve as its Vice President-Worldwide Sales and Operations as well as to perform other lawful duties on behalf of the Company.
NOW, THEREFORE, for and in consideration of the mutual promises and conditions made herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows.
ARTICLE I
EMPLOYMENT AND TERM OF EMPLOYMENT
1.1. Employment and Term. The Company hereby employs Executive to render full-time services to the Company, subject to Section 2.2 of this Agreement, and except during vacation periods and reasonable periods of absence due to sickness, personal injury or other disability, upon the terms and conditions set forth below, from the Effective Date of this Agreement until the employment relationship is terminated in accordance with the provisions of this Agreement. This Agreement is for a term of three (3) years from the Effective Date (the "Stated Term") unless renewed or terminated earlier as provided for herein (the "Employment Term").
1.2 Renewal. This Agreement will be automatically renewed for an additional one (1) year period (without any action by either party) at the end of the Stated Term and on each anniversary thereof ("Renewal Period"), unless one party gives to the other written notice sixty 60 days in advance of the beginning of any of the Renewal Period that this Agreement is to be terminated.
1.3. Acceptance. Executive hereby accepts employment with the Company and
agrees to devote his full-time attention and best efforts to rendering the
services described below. The Executive shall accept and follow the reasonable
and lawful direction and authority of the Company's Board of Directors
("Board"), Chairman of the Board (Chairman") and Chief Executive Officer ("CEO")
in the performance of his duties, and shall comply with all reasonable and
lawful existing and future regulations applicable to senior management level
employees of the Company and to the Company's business.
1.4. Termination of Prior Agreements. Upon execution of this Agreement, all prior employment and/or consultant agreements between Executive and the Company or its subsidiaries shall be deemed terminated and there shall be no right to severance or other related benefits thereunder; provided, however, that the foregoing will not apply to any obligation of the Company or any of its subsidiaries to indemnify Executive against any losses, costs, damages or expenses.
ARTICLE II
DUTIES OF EMPLOYEE
2.1. General Duties. Executive shall serve as Vice President-Worldwide Sales and Operations. In such capacity, Executive shall do and perform all lawful services, acts, or other things necessary or advisable to manage and conduct the worldwide sales of the Company, including, but not limited to, the supervision, direction and control of the sales force and other employees of the Company, subject to the reasonable and lawful policies and direction of the Chairman, CEO, and/or the Board. To the extent consistent with the Company's Articles of Incorporation, as amended ("Articles") and Bylaws, as amended ("Bylaws"), Executive shall have all powers, duties and responsibilities necessary to carry out his duties, and such other powers and duties as the Chairman, CEO and/or the Board may reasonably and lawfully prescribe consistent with the Company's Articles and Bylaws. Executive shall not become a corporate officer or member of the Board without advance written consent by Executive.
2.2. Exclusive Services. It is understood and agreed that Executive may not engage in any other business activity during the Employment Term, whether or not for profit or other remuneration, without the prior written consent of the Company in its sole and absolute discretion; provided, however, that the Executive may (i) manage personal and family investments (ii) engage in charitable, philanthropic, educational, religious, civic and similar types of activities to the extent that such activities do not materially interfere with the business of the Company or any affiliate or subsidiary of the Company, or the performance of the Executive's duties under this Agreement and (iii) subject to the approval of the Board, which shall not be unreasonably withheld or delayed, serve as a director or as a member of an advisory board of another business enterprise.
2.3. Reporting Obligations. In connection with the performance of his duties hereunder, the Executive shall report directly to, and take direction from, the Chairman and the CEO of the Company. In the event that such direction from the Chairman and CEO is materially inconsistent or contradictory on a particular issue, Executive may follow the direction of the Board on such issues.
ARTICLE III
COMPENSATION AND BENEFITS OF EMPLOYEE
3.1. Annual Base Salary. The Company shall pay the Executive salary for the services to be rendered by him during the Employment Term at the rate of two hundred and seventy-five thousand dollars ($275,000) annually (prorated for any portion of a year), subject to increases, if any, as the Board may determine in its sole discretion after periodic review of the Executive's performance of his duties hereunder not less frequently than annually. Such base salary shall be payable in periodic installments in accordance with the terms of the Company's regular payroll practices in effect from the time during the term of this Agreement, but in no event less frequently than once each month.
3.2. Annual Cost of Living Increase. Executive's Annual Base Salary provided for in Section 3.1 of this Agreement shall be increased to reflect the increase in the cost of living in the Los Angeles MSA in an amount equal to the percentage increase in the Consumer Price Index for the Los Angeles MSA on each anniversary of the Effective Date as published by the United States Department of Labor, Bureau of Labor Statistics.
3.3. Bonuses. In addition to the Annual Base Salary provided for in Section 3.1 and adjusted as provided for in Section 3.2 of this Agreement and other benefits provided to Executive hereunder, Company shall also pay the following bonuses to Executive: Bonuses of twenty-five thousand dollars ($25,000) each quarter shall be paid by Company to Executive within thirty (30) days of the close of each calendar quarter (prorated for any portion of a calendar quarter) based upon Executive's attainment of reasonable and lawful objectives during each calendar quarter during the Employment Term. Such objectives shall be established by the Board in good faith and delivered to Executive in writing within thirty (30) days of the Effective Date and thirty (30) days prior to each quarter which the performance objectives and milestones are to apply.
3.4. Expenses. The Company shall pay or reimburse the Executive for all reasonable, ordinary and necessary business expenses actually incurred or paid by the Executive in the performance of Executive's services under this Agreement in accordance with the expense reimbursement policies of the Company in effect from time to time during the Employment Term, no later than fifteen (15) days following Executive's presentation of proper expense statements or vouchers or such other written supporting documents as the Company may reasonably require.
3.5. Vacation. The Executive shall be entitled to four (4) weeks paid vacation for each calendar year (prorated for any portion of a year, as applicable). Notwithstanding anything to the contrary in this Agreement, vacation time shall cease to accrue beyond eight (8) weeks at any given time during the Employment Term, and vacation time shall again accrue up to the maximum when Executive uses up vacation time to drop the vacation accrual below the maximum.
3.6. General Employment Benefits. Except where expressly provided for herein, the Executive shall be entitled to participate in, and to receive the benefits under, any pension, health, medical, life, accident and disability insurance plans or programs and any other employee benefit or fringe benefit plans that the Company makes available generally to its employees, and any such benefits and/or levels of benefits available to senior management of the Company, as the same may be in effect from time to time during the Employment Term.
3.7. Stock Options. On the Effective Date, the Executive is herby granted four hundred thousand (400,000) undiluted options under the Company's 2004 Incentive and Nonstatutory Stock Option Plan (the "2004 Option Plan"). The options will be priced at $4.00 per share, being the Company's share price at the close of business on the date the parties executed this Agreement. One third of the options shall vest on the last day of the first, second, and third years of the Employment Term resulting in one hundred percent (100%) vesting on the end of the third year of the Employment Term. The options shall have a term of no less than five (5) years from the date of each vesting within which they must be exercised and shall be subject to other standard terms and conditions under the applicable stock option plan of the Company, and shall contain standard anti-dilution language and have a provision for cashless exercise. All of the foregoing options shall be undiluted as of the date of the Effective Date. If the number of outstanding shares of Company stock are increased or decreased, or such shares are exchanged for a different number or kind of shares or securities of the Company through reorganization, merger, recapitalization, reclassification, stock dividend, stock split, combination of shares, or other similar transaction, the aggregate number of shares of Company stock subject to any options granted to Executive under this Agreement, or in any future grant of options, shall be deemed proportionately adjusted. Such adjustment shall not change the aggregate purchase price applicable to the unexercised portion of the options but shall have a proportionate adjustment in the price for each share covered by the option.
3.8. Location; Travel. In connection with his employment during the Employment Term, unless otherwise agreed by the Executive in writing, the Executive will be based in the Los Angeles Metropolitan Area... Executive will undertake reasonable business travel on behalf of the Company, the reasonable expenses of which will be paid by the Company pursuant to Section 3.4 of this Agreement.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1. Termination. The Employment Term may be terminated earlier as provided for in this Article IV, or extended as set forth herein. In the event of any termination, in addition to any other obligations of Company set forth below (e.g., Severance Benefits), Company shall pay Executive (or the designated beneficiary as provided in Section 6.8 below, or the estate or personal representative of Executive ) shall be promptly provided with: (a) any accrued but unpaid salary, accrued but unused vacation time, un-reimbursed expenses which otherwise would be reimbursed in the normal course and vested benefits under any of the Company's benefit plans in which the Executive and/or his dependents or beneficiaries are participants or otherwise eligible for such benefits; (b) any quarterly or other bonus previously declared but not yet paid; and (c) any other amounts due to Executive pursuant to this Article IV.
4.2. Termination by Company for Cause. The Company reserves the right to terminate the Employment Term for cause upon: (a) Executive's willful and continued failure to substantially perform his duties with the Company (other than such failure resulting from his incapacity due to physical or mental illness); (b) Executive's willful engagement in gross misconduct in connection with Executive's work for Company, as determined by the Board in good faith, which is materially and demonstrably injurious to the Company; (c) Executive's willful breach of a material term of this Agreement, or (d) Executive's conviction of a felony, or an act of fraud against the Company or its affiliates; provided, however, the Company may not terminate the Executive's employment for cause unless the Company has first provided Executive with written notice, specifying in detail the act or acts alleged to constitute cause and the Board's good faith investigation thereof, and provided the Executive with a period of not less than thirty (30) calendar days to cure the failure in the manner specified in such notice. Upon a termination for cause, Executive shall not be entitled to any Severance Benefits (as defined below) and all stock options of the Company granted to Executive which have not vested shall be canceled upon termination for cause.
4.3. Termination by Company Without Cause. Notwithstanding anything to the contrary in this Agreement, the Company reserves the right to terminate the Employment Term at any time upon sixty (60) days' advance written notice to Executive, without cause, subject to the express terms and provisions set forth in Sections 4.5 and 4.6 of this Agreement.
4.4. Voluntary Termination by Executive. Notwithstanding anything to the contrary in this Agreement, Executive may terminate this Agreement at any time upon sixty (60) days advance written notice to the Company, subject to the terms and provisions below.
Except in the case of a termination for "good reason", as set forth in
Section 4.6 of this Agreement, the Company shall not be obligated to pay any
Severance Benefits to Executive if Executive terminates this Agreement pursuant
to this Section 4.4 of this Agreement. Except that Executive will vest options
on a pro-rata basis for employment of less than the entire year or vesting
period.
4.5. Severance Benefits. If in the event that during the Employment Term is terminated by the Company "without cause" (as set forth in Section 4.3 of this Agreement), or Executive terminates his employment for "good reason" (as set forth in Section 4.6 of this Agreement), Company shall provide Executive (or the designated beneficiary, as provided in Section 6.8 below, or the estate or personal representative of Executive) "Severance Benefits" as follows: (a) a cash payment equal to nine (9) months of Executive's annual base salary as provided for in Section 3.1 of this Agreement, or Executive's then current rate of compensation, whichever is greater paid in nine (9) equal monthly installments, less any taxes that must be withheld; and (b) any portion of any of stock options granted by Company to Executive pursuant to Section 3.7 or otherwise ("Options") that have not then vested shall immediately vest pro-rata as of the date Executive's employment with Company terminates. For purposes of
this Section, the term "pro-rata" means the number of months or portion thereof, exhausted in the current contract year of Executive's employment including the sixty (60) day notice period required by this Agreement, divided by twelve (12) months. For example, if Company gives sixty (60) days notice of termination of Executive's employment without cause that will be effective upon a date that is seven (7) months into the first year of employment, then seven-twelfths (7/12) of the options otherwise eligible for vesting that year will fully vest as of the date of termination of employment. All vested options shall be exercisable until and including ninety (90) days after the termination.
4.6. Termination by Executive for Good Reason. The Executive may terminate the Employment Term for "good reason" after giving the Company written notice thereof, if the Company shall have failed to cure the event or circumstance constituting "good reason" within ten (10) business days after receiving such notice. Good reason shall mean the occurrence of any of the following without the written consent of the Executive: (a) the assignment to the Executive of duties inconsistent with this Agreement or a change in his reporting obligations, positions, titles or authority; (b) any failure by the Company to comply with Article III hereof in any material way; (c) the failure of the Company to comply with and satisfy Section 6.2 of this Agreement; (d) a Change of Control (as defined in Section 4.7 of this Agreement) or a termination by Employee following the commencement of any discussion with a third person that ultimately results in a Change in Control; (e) the relocation of the principal place where the Executive regularly performs services for the Company outside of the Los Angeles Metropolitan Area; (f) at any time after the Company has notified the Executive pursuant to Section 1.2 of this Agreement that the Company does not intend to renew the Agreement and the Executive's employment at the end of the Employment Term, including any previous renewals, rather than to allow the Agreement automatically to renew; (g) any material breach of this Agreement by the Company; or (h) any misrepresentation by Company to any government or other violation of law. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting "good reason" hereunder.
4.7. Change of Control. In the event that during the Employment Term the Executive is terminated by the Company or the Executive terminates his employment for "good reason," as set forth in Section 4.6 of this Agreement, within twelve (12) months following a "change of control" (as defined below) occurs after the Effective Date (a "Change of Control Termination"), the Executive shall promptly be paid (i) any accrued but unpaid salary, accrued but unused vacation time, un-reimbursed expenses which otherwise would be reimbursed in the normal course and vested benefits under any of the Company's benefit plan in which the Executive is a participant, (ii) any bonus previously declared but not yet paid, and (iii) a cash payment equal to nine (9) months of Executive's annual base salary as provided for in Section 3.1 of this Agreement, paid in nine (9) equal monthly installments, less any taxes that must be withheld. In addition, upon a Change of Control Termination, any portion of any of the Options granted but unvested shall be forfeited and the Executive shall have no rights thereunder. Vesting for the purposes of this clause will be on a pro-rata basis, in that if the Executive had worked for a partial year the pro-rata amount will vest. A "Change in Control Termination" will also include a termination of the Executive by the Company without cause or a termination by the Executive of his employment for "good reason," as set forth in Section 4.6 of this Agreement, in either case, following the commencement of any discussion with a third person that ultimately results in a "change in control" (as defined below).
For purposes of this Agreement, a "change of control" shall mean an event involving one transaction or a series of related transactions in which (a) the Company issues securities representing more than fifty percent (50%) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended ("the "Exchange Act"), or any successor provision) of the outstanding voting power of the then outstanding securities entitled to vote generally in the election of directors ("Voting Stock") of the Company to any individual, firm, partnership, or other entity, including a "group" within the meaning of Section 13(d)(3) of the Exchange Act;
(b) the Company issues securities representing more than fifty percent (50%)
voting stock of the Company in connection with a merger, consolidation or other
business combination (other than for purposes of reincorporation); (c) the
Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation (other than a
reincorporation); (d) more than fifty percent (50%) of the Company's Voting
Stock, consolidated assets or earning power are sold or transferred; or (e) the
Board of the Company determines, in its sole and absolute discretion, that there
has been a change in control of the Company; provided, however, that clauses
(b), (c) and (d), above, will constitute a "change in control" only if all or
substantially all of the individuals and entities who were the beneficial owners
of Voting Stock of the Company immediately prior to such merger, consolidation
or other business combination or sale or transfer of earning power or assets
(each, a "Business Combination") beneficially own less than 50% of the combined
voting power of the then outstanding shares of Voting Stock of the entity
resulting from such Business Combination (including, without limitation, an
entity which as a result of such transaction owns the Company or all or
substantially all of the Company's earning power or assets either directly or
through one or more subsidiaries).
4.8. Disability. If Executive becomes permanently and totally disabled, this Agreement shall be terminated. Executive shall be deemed permanently and totally disabled if he is unable to engage in the activities required by this Agreement by reason of any medically determinable physical or mental impairment, as confirmed by three independent physicians, which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months. Upon termination due to disability, any portion of any of the Options granted to the Executive that is not then vested shall vest and all Options shall be exercisable by Executive until ninety (90) days after the termination. This Section 4.8 will not limit the entitlement of the Executive to any other rights or benefits then available to the Executive under any plan or program of the Company or under applicable law.
4.9. Death. If Executive dies during the Employment Term, the Employment shall be terminated on the last day of the calendar month of his death and any portion of any of the Options granted to the Executive that is not then vested shall become vested and all Options shall be exercisable by the designated beneficiary, as provided in Section 6.8 below, the estate or personal representative of Executive until ninety (90) days after death. This Section 4.9 will not limit the entitlement of the Executive's estate, personal representative or beneficiaries to any death or other benefits then available to the Executive under any life insurance, stock ownership, stock options, or other benefit plan or policy that is maintained by the Company for the Executive's benefit.
4.10. Effect of Termination. Except as expressly provided for in this Agreement, the termination of employment shall not impair any obligation that accrued prior to termination, nor shall it excuse the performance of any obligation which is required or contemplated hereunder to be performed after termination, and any such obligation shall survive the termination of employment and this Agreement.
ARTICLE V
COVENANTS AND REPRESENTATIONS
5.1. Unfair and Non-Competition. The Executive acknowledges that he will have access at the highest level to, and the opportunity to acquire knowledge of, the Company's customer lists, customer needs, business plans, trade secrets and other confidential and proprietary information from which the Company may derive economic or competitive advantage, and that he is entering into the covenants and representations in this Article V in order to preserve the goodwill and going concern value of the Company, and to induce the Company to enter into this Agreement. The Executive agrees not to compete with the Company or to engage in any unfair competition with the Company during the Employment Term. For purposes of this Agreement, the phrase "compete with the Company," or the substantial equivalent thereof, means that Executive, either alone or as a partner, member, director, employee, shareholder or agent of any other business, or in any other individual or representative capacity, directly or indirectly
owns, manages, operates, controls, or participates in the ownership, management, operation or control of, or works for or provides consulting services to, or permits the use of his name by, or lends money to, any business or activity which is or which becomes, at the time of the acts or conduct in question, directly or indirectly competitive with the development, financing and/or marketing of the products, proposed products or services of the Company. During the Employment Term, Executive shall not directly or indirectly acquire any stock or interest in any corporation, partnership, or other business entity that competes, directly or indirectly, with the business of the Company without obtaining the prior written consent of the Company. Notwithstanding the foregoing, this Section 5.1 shall not apply to the ownership or acquisition of stock or an interest representing less than a 5% beneficial interest in a corporation that is obligated to file reports with the Securities and Exchange Commission pursuant to the Exchange Act.
In addition, Executive and the Company each agree to treat each other respectfully and professionally and Executive and Company agrees not disparage each other (or the Company's party's officers or directors) in any manner likely to be harmful to each other or its business, business reputation or personal reputation. Furthermore, the Executive and company agrees not to interfere with any of the Company's contractual obligations.
5.2. Confidential Information. During the Employment Term and thereafter, Executive agrees to keep secret and to retain in the strictest confidence all material confidential matters which relate to the Company or its "affiliate" (as that term is defined in the Exchange Act), including, without limitation, customer lists, client lists, trade secrets, pricing lists, business plans, financial projections and reports, business strategies, internal operating procedures, and other confidential business information from which the Company derives an economic or competitive advantage, or from which the Company might derive such advantage in its business whether or not it is labeled "secret" or "confidential" or some similar term, and not to intentionally disclose any such information to anyone outside of the Company, whether during or after the Employment Term, except in connection with pursuing in good faith the interests and business of the Company. The foregoing restrictions and obligations under this Section 5.2 will not apply: (a) to any confidential information that is or becomes generally available to the public or generally known to persons engaged in businesses similar to or related to that of the Company, other than as a result of an unauthorized disclosure by Executive; (b) if the Executive is required by law to make disclosure; or (c) the disclosure to any director of the Company. The Company may waive application of the foregoing restrictions and obligations in its sole discretion from time to time. The Executive will use only such confidential information for purposes of performing its duties under this Agreement.
5.3. Non-Solicitation of Customers. During the Employment Term, the Executive will have access to confidential records and data pertaining to the Company's customers, their needs, and the relationship between the Company and its customers. Such information is considered secret and is disclosed during the Employment Term in confidence. Accordingly, during the Employment Term and for a period of nine (9) months thereafter, Executive and any entity controlled by him or with which he is associated (as the terms "control" and "associate" are defined in the Exchange Act) shall not, directly or indirectly: (a) solicit for a competitive purpose, interfere with, induce or entice away any person or entity that is or was a client, customer or agent of the Company or its affiliates (as the term "affiliate" is defined in the Exchange Act); or (b) in any manner persuade or attempt to persuade any such person or entity (A) to discontinue its business relationship with the Company or its affiliates, or (B) to enter into a business relationship with any other entity or person the loss of which the Executive should reasonably anticipate would be detrimental to the Company or its affiliates in any respect.
5.4. Non-Solicitation of Employees. The Executive and any entity controlled by him or with which he is associated (as the terms "control" and "associate" are defined in the Exchange Act) shall not, during the Employment Term and for a term of eighteen (18) months thereafter, directly or indirectly solicit, interfere with, offer to hire or induce any person who is or was an officer or
employee of the Company or any affiliate (as the term "affiliate" is defined in the Exchange Act) (other than secretarial personnel) to discontinue his or her relationship with the Company or an affiliate of the Company, in order to accept employment by, or enter into a business relationship with, any other entity or person. (These acts are hereinafter referred to as the "prohibited acts of solicitation.") The foregoing restriction, however, shall not apply to any business with which Executive may become associated after the Employment Term.
5.5. Return of Property. Upon termination of employment, and at the request of the Company, the Executive agrees to promptly deliver to the Company all Company or affiliate memoranda, notes, records, reports, manuals, drawings, designs, computer files in any media, and any other documents (including extracts and copies thereof) relating to the Company or its affiliates, and all other property of the Company. Upon termination, the Executive shall cease to use all such materials and information set forth under Section 5.2.
5.6. Inventions. All processes, inventions, patents, copyrights, trademarks, and other intangible rights that may be conceived or developed by the Executive, either alone or with others, during the Employment Term, whether or not conceived or developed during Executive's working hours, and with respect to which the equipment, supplies, facilities or trade secret information of the Company was used, or that relate at the time of conception or reduction to practice of the invention to the business of the Company, or to the Company's actual or demonstrably anticipated research or development, or that result from any work performed by Executive for the Company, shall be the sole property of the Company. Upon the request of the Company, Executive shall disclose to the Company all inventions or ideas conceived during the Employment Term, whether or not the property of the Company under the terms of this provision, provided that such disclosure shall be received by the Company in confidence. Upon the request of the Company, Executive shall execute all documents, including patent applications and assignments, required by the Company to establish the Company's rights under this provision.
5.7. Representations. The Executive represents and warrants to the Company that he has full power and authority to enter into this Agreement and perform his duties hereunder, and that he has no outstanding agreement, whether oral or written or any obligation that is or may be in conflict with any of the provisions of this Agreement or that would preclude Executive from complying with the provisions of this Agreement, including but not limited to any such arrangement with Discus Dental; and the performance of his duties shall not result in a breach of, or constitute a default under, any agreement , whether oral or written, including, without limitation, any restrictive covenant or confidentiality agreement, to which he is a party or by which he may be bound, including but not limited to any such agreement with Discus Dental. Executive further represents and warrants that he has not misappropriated any confidential information and/or trade secrets of any third party that he intends to use in the performance of his duties under this Agreement. Company and the individual signing this Agreement on behalf of Company each represent and warrant that they each have full power and authority to enter into this Agreement, that there are no agreements whether oral or written, or legal requirements, that conflict with any provisions of this Agreement, and that the performance of this Agreement shall not result in a breach of, or constitute a material default, under, any such agreement or legal requirement.
5.8. Indemnities.
(a) Executive-Executive shall indemnify and hold harmless the Company from and against any losses, claims, damages or liabilities which arise out of any breach of Executive's representations and warranties set forth in Section 5.7 of this Agreement as determined in a court of law and made part of a final judgment after exhaustion of, or the time has lapsed for, any appeal thereof.
(b) Company- shall defend, indemnify and hold Executive harmless from and against any losses, claims, damages or liabilities which arise out of any: (a) action or inaction taken or not taken by him in the ordinary course of Company's business or as directed by the Chairman, CEO or the Board; and (b) any legal action taken by Discus Dental or its affiliates (e.g., claims for unfair competition, etc. unless a court of law determines that Executive has breached the Executive's representations and warranties set forth in Section 5.7 of this Agreement as part of a final judgment after exhaustion of, or the time has lapsed for, any appeal thereof
5.9. Non-Payment Upon Non-Compliance. Should Executive breach any one of the covenants set forth in this Article V, the Company shall have no obligation to make the payments or to provide Executive the benefits described in Sections 4.5 above, in addition to all other rights and remedies the Company may have available at law or in equity. The Company shall provide written notice to Executive, fifteen (15) days prior to an expected payment, of the breach of a covenant and the ensuing non-payment thereof; provided, however, that if the Company learns of the breach without sufficient time to provide fifteen (15) days notice, the Company shall provide written notice as soon thereafter as practicable.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1. Notices. All notices to be given by either party to the other shall be in writing and may be transmitted by personal delivery, facsimile transmission, overnight courier or mail, registered or certified, postage prepaid with return receipt requested; provided, however, that notices of change of address or telex or facsimile number shall be effective only upon actual receipt by the other party. Notices shall be delivered at the following addresses, unless changed as provided for herein.
To the Executive: Judd Hoffman
702 North Juanita Ave
Redondo Beach, CA
90277 USA
Facsimile: (310) 379-8732
With a copy to: Mark E. Terman
Reish Luftman Reicher & Cohen
11755 Wilshire Blvd., Tenth Floor
Los Angeles, CA 90025
Facsimile: (310) 478-5831
To the Company: Board of Directors
Remedent, Inc.
Xavier de Cocklaan 42
9831 Deurle, Belgium
Facsimile: 011-32-9-321-7090
With a copy to: Scott E. Bartel
Bullivant|Houser|Bailey PC
1331 Garden Highway, Suite 300
Sacramento, CA 95833
Facsimile (916) 442-3442
|
6.2. No Assignment, In General. Except as provided below, this Agreement, and the rights and obligations of the parties, may not be assigned by either party without the prior written consent of the other party.
6.3. Entire Agreement. This Agreement and the documents delivered pursuant hereto supersedes any and all other agreements or understandings of the parties, either oral or written, with respect to the employment of the Executive by the Company, and contains the complete and final agreement and understanding of the parties with respect thereto. The Executive acknowledges that no representation, inducements, promises, or agreements, oral or otherwise, have been made by the Company or any of its officers, directors, employees or agents, which are not expressed herein, and that no other agreement shall be valid or binding on the Company.
6.4. Amendments and Modifications. This Agreement may be amended or modified only by a writing signed by both parties hereto.
6.5. Withholding Taxes. All amounts payable under this Agreement to Executive, whether such payment is to be made in cash or other property, including without limitation stock of the Company, shall be subject to withholding for Federal, state and local income taxes, employment and payroll taxes, and other legally required withholding taxes and contributions to the extent appropriate in the good faith determination of the Company, and the Executive agrees to report all such amounts on his personal income tax returns and for all other purposes, as called for.
6.6. Severability. If any provision of this Agreement is held to be invalid or unenforceable by any judgment of a tribunal of competent jurisdiction, the remaining provisions and terms of this Agreement shall not be affected by such judgment, and this Agreement shall be carried out as nearly as possible according to its original terms and intent and, to the full extent permitted by law, any provision or restrictions found to be invalid shall be amended with such modifications as may be necessary to cure such invalidity, and such restrictions shall apply as so modified, or if such provisions cannot be amended, they shall be deemed severable from the remaining provisions and the remaining provisions shall be fully enforceable in accordance with law.
6.7. Effect of Waiver. The failure of either party to insist on strict compliance with any provision of this Agreement by the other party shall not be deemed a waiver of such provision, or a relinquishment of any right thereunder, or to affect either the validity of this Agreement, and shall not prevent enforcement of such provision, or any similar provision, at any time.
6.8. Designation of Beneficiary. If the Executive shall die before receipt of all payments and benefits to which he is entitled under this Agreement, payment of such amounts or benefits in the manner provided herein shall be made to such beneficiary as he shall have designated in writing filed with the Secretary of the Company or, in the absence of such designation, to his estate or personal representative.
6.9. Attorneys Fees. In any proceeding brought to enforce any provision of this Agreement, or to seek damages for a breach of any provision hereof, or when any provision hereof is validly asserted as a defense, the prevailing party will be entitled to receive from the other party all reasonable attorney's fees and costs in connection therewith.
6.10. Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of California, without regard to its conflict of laws principles. The venue for any lawsuit between the parties shall be in a court located in Los Angeles County, California.
6.11. Counterparts. This Agreement may be executed in one or more counterparts, each of which, shall be deemed to be an original, but all of which together shall constitute one and the same instrument. For the purpose of proving the authenticity of this Agreement, facsimile signature shall be treated the same as original signatures.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written.
COMPANY: REMEDENT, INC.
By: /s/ Robin List
---------------------------
Robin List, President
EXECUTIVE: /s/ Judd D Hoffman
---------------------------
Judd D Hoffman
|
Exhibit 21.1
Subsidiaries of Remedent, Inc.
Remedent Professional Holdings, Inc., a California corporation
Remedent Professional, Inc., a California corporation
Remedent N.V., a Belgium corporation
Remedent Asia Pte Ltd, a Singapore company
EXHIBIT 23.1
CONSENT OF
FARBER & HASS, LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Remedent, Inc.
Xavier de Cocklaan 42
9831 Deurle, Belgium
We consent to the use of our report dated May 28, 2004, except Note 2 as to which the date is January 20, 2005 with respect to the consolidated financial statements of Remedent, Inc. as of March 31, 2004 and for the year then ended, in the Amendment No. 1 to the Registration Statement on Form SB-2 (the "Registration Statement") and related Prospectus of Remedent, Inc., filed with the Securities and Exchange Commission on or about October 26, 2005 We further consent to the reference to our firm under the heading "Experts" in the Registration Statement.
/s/ FARBER & HASS LLP FARBER & HASS LLP Camarillo, California Dated: October 21, 2005 |
EXHIBIT 23.2
CONSENT OF
PKF BEDRIJFSREVISOREN, ANTWERP, BELGIUM
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
REMEDENT, INC.
Xavier de Cocklaan 42
9831 Deurle, Belgium
We consent to the use of our report dated July 13, 2005, except Note 3 as to which the date is September 22, 2005 with respect to the consolidated financial statements of Remedent, Inc. as of March 31, 2005 and for the year then ended, in the Amendment No. 1 to the Registration Statement on Form SB-2 (the "Registration Statement") and related Prospectus of Remedent, Inc. We further consent to the reference to our firm under the heading "Experts" in the Registration Statement.
Antwerp, Belgium
Dated: October 18, 2005
PKF bedrijfsrevisoren
Represented by
/s/ Ria Verheyen Ria Verheyen |