SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 2003
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-15975
REMEDENT USA, INC.
(Name of small business issuer as specified in its charter)
NEVADA 86-0837251
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
[1921 MALCOLM AVENUE, #101
LOS ANGELES, CALIFORNIA 90025]
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(Address of principal executive offices) (Zip code)
(310) 922-5685
(Issuer's telephone number, including area code)
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Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Number of shares of issuer's common stock outstanding as of March 31, 2003:
30,886,558.
Transitional Small Business Disclosure Format (check one). Yes [ ] No [X]
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated herein by reference: Registration Statement on Form SB-2, filed on July 24, 2002 (Registration No. 333-96999).
TABLE OF CONTENTS
PART I PAGE
Item 1 Description of Business.........................................................1
Item 2 Properties......................................................................6
Item 3 Legal Proceedings...............................................................6
Item 4 Submission of Matters to a Vote of Security Holders.............................6
PART II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters.............................................................7
Item 6 Management's Discussion and Analysis of
Financial Condition and Results of Operations...................................8
Item 7 Financial Statements...........................................................12
Item 8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................................12
PART III
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act..............................13
Item 10 Executive Compensation.........................................................14
Item 11 Security Ownership of Certain Beneficial Owners and
Management.....................................................................16
Item 12 Certain Relationships and Related Transactions.................................17
Item 13 Exhibits and Reports on Form 8-K...............................................19
Item 14 Controls and Procedures
Financial Statements..........................................................F-1
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PART I
ITEM 1 - DESCRIPTION OF BUSINESS
HISTORY AND ORGANIZATION
Remedent USA, Inc. was incorporated under the laws of Arizona in September 1996. We were initially formed for the purposes of developing, marketing and distributing the Remedent Toothbrush, a single-handle toothbrush, gumbrush and tongue cleaner designed to improve oral care at an affordable price. However, due to the extremely cost-intensive nature of retail marketing, we were unable to adequately increase the exposure of this product. As a result, we incurred substantial net losses resulting in working capital and shareholder deficits.
As a result of these substantial net losses, at the beginning of the fiscal year ended March 31, 2002, we reassessed our operations and business structure and implemented a complete corporate reorganization plan. This plan included the sale of the Remedent Toothbrush division and expansion into diversified business ventures, including the development of high-technology dental equipment for marketing within the professional dental market and the acquisition of a dental employee leasing firm. On March 14, 2002, we entered into an Asset Purchase Agreement selling our Remedent Toothbrush division to Famcare 2000, LLC. (See "Certain Relationships and Related Transactions.")
On July 1, 2001, in connection with this diversification, we formed three subsidiary corporations, Remedent Professional Holdings, Inc., Remedent Professional, Inc., and Remedent NV.
During the fourth quarter of the fiscal year ending March 31, 2002, we completed the acquisition of a dental employee-outsourcing firm in Belgium, International Medical & Dental Support. However, Remedent no longer operates International Medical & Dental Support and, at March 31, 2003 Remedent recorded a full impairment loss ($330,000) on the goodwill of that company.
We own 22% of Remedent NV, located in Ghent, Belgium, a manufacturer of professional dental equipment. Remedent Professional, Inc., our wholly-owned subsidiary, is the United States sales organization for equipment manufactured by Remedent NV. Remedent Professional Holdings, Inc., our wholly owned subsidiary, is currently inactive.
Remedent USA, Inc. is now headquartered in Ghent, Belgium and has no offices, employees or assets in the United States.
OUR BUSINESS
During the fourth quarter of the fiscal year ended March 31, 2002, we initiated our entrance into the professional dental equipment market, with the introduction of the RemeCure CL-15, high-speed dental curing light.
COMPETITION
The dental products market is intensely competitive. Within this market, there are at least 12 companies which offer dental curing and whitening lamps and intraoral cameras. Our competitors have greater financial and other resources, and, consequently, are better able to market and generate consumer awareness of their product.
Within the dental products market, we will be competing with other companies primarily on the basis of price, technology, customer service and value-added services, with our principal competitors being Patterson Dental Co., Henry Schein, Inc., Dentsply, Ultrak, Air Techniques, Kreativ Products, American Dental Technologies and Argon Laser.
BUSINESS STRATEGY
We compete within the high-technology dental equipment market, a highly competitive market. To compete within this market, our business strategy is to:
o Strengthen and broaden core brands through marketing and advertising, product development and manufacturing;
o Emerge with cutting-edge technology.
o Expand our presence in all markets in which we compete and enter new markets where there are opportunities for growth; and
o Continue to reduce costs and manage working capital, and improve operating efficiencies, customer service and product quality.
MARKETING STRATEGIES
Within the dental equipment market, we market our technology through dental equipment distributors, sharing the marketing efforts with these distributors through attendance at dental conferences and a combination of direct mail solicitations, professional publications and website-based advertising.
In connection with our entrance into the dental equipment market, we continue to analyze the most cost-effective manufacturing and distribution methods. The current method entails turn-key manufacturing with a large manufacturer with distribution occurring through both drop shipments from the manufacturer and shipments from our own facility. This provides highly predictable and controllable cost of sales and essentially eliminates all indirect manufacturing overhead costs.
DISTRIBUTION METHODS
We currently distribute our dental equipment through both drop shipments from the manufacturer and shipments from our own facility, providing highly predictable and controllable cost of sales and essentially eliminating all indirect manufacturing overhead costs.
PRINCIPAL SUPPLIERS
Consistent with our goal for highly predictable and controllable cost of sales and the elimination of indirect manufacturing overhead costs, we do not procure raw materials or manufacture our products in-house. As such, we have retained a contract manufacturer, located in France, for the complete production of our initial professional dental product, the RemeCure CL-15 high-speed curing light. The agreement provides that the manufacturer will procure all raw materials necessary for the production of the product, and will charge a set price to us for the product and the related quality control testing. Additionally, the manufacturer provides a 14 month warranty from the date of receipt.
While we believe our contract manufacturer will enable us to meet our current and anticipated operational requirements, we can provide no assurance that such availability will continue or that the terms will remain commercially reasonable.
MAJOR CUSTOMERS
For the fiscal year ended March 31, 2003, the company had three significant customers, accounting for 31%, 21%, and 18%, respectively, of consolidated revenue. For the fiscal year ended March 31, 2002, the company had two significant customers, accounting for 38% and 13%, respectively, of consolidated revenue.
INTELLECTUAL PROPERTY
Within the dental products market, we are developing products, which we believe do not infringe upon any valid existing proprietary rights of third parties. We plan to seek patent protection for all technology developed for distribution within this market. We can provide no assurance the steps taken to seek patent protection will be successful. Additionally, if received, we can provide no assurance third parties will not assert infringement claims against us. Defending such claims can be both expensive and time-consuming, and there can be no assurance that we will be able to successfully defend against or similarly prosecute an infringement claim. The loss of such rights (or our failure to obtain similar licenses or agreements) would have a materially adverse effect on our business, financial condition, and results of operations. We can provide no assurance the steps taken to protect intellectual property will be adequate to prevent misappropriation of that intellectual property, or that our competitors will not independently develop products substantially equivalent or superior to our products.
GOVERNMENTAL APPROVAL
We market dental products which are legally defined to be medical devices, therefore, 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 and the corresponding agencies of the states and foreign countries in which a Company sells its 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, premarket notification and adherence to the Quality System Regulation ("QSR") as well as medical device reporting ("MDR"), 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 premarket approval by the FDA pursuant to a premarket approval ("PMA") application 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 they can be marketed, most medical devices introduced to the United States market 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 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. 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 application. 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.
Generally, if we are in compliance with FDA and California regulations, we may market our products throughout the United States. 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 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. Exports of most medical devices are also subject to certain limited FDA regulatory controls.
We will ensure all regulations are complied with, all registrations are performed and all required clearances are received.
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 would lead to liability as a landowner. Therefore, we do not anticipate that there will be any costs associated with the compliance of environmental laws and regulations.
EMPLOYEES
We currently retain seven full-time employees in Belgium, all of which were hired in connection with our entrance into the dental equipment market. We hire independent contractors on an "as needed" basis only. We have no collective bargaining agreements with our employees. We believe that our employee relationships are satisfactory. Long term, we will attempt to hire additional employees as needed based on our growth rate.
RESEARCH AND DEVELOPMENT
Research and Development (R&D) costs have been decreasing during the current fiscal year. R&D costs were $93,186 and $270,395 for the fiscal years ended March 31, 2003 and 2002, respectively. The decrease for fiscal year 2003 reflects the decrease in expenses for design and development of the new curing light technology introduced during the first quarter of 2002, and intraoral camera technology.
ITEM 2 - DESCRIPTION OF PROPERTY
In Ghent, Belgium, we lease office and warehouse space on a month-to-month lease, for approximately (euro)6,300 ($7,107.35 as of July 14, 2003) per month.
ITEM 3 - LEGAL PROCEEDINGS
To the best knowledge of management, there are no legal proceedings pending or threatened against the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 27, 2002, the Company's Board of Directors approved an Asset Purchase Agreement for the sale of our toothbrush business to Famcare 2000, LLC (the "Asset Sale"). Eleven shareholders own a majority of the Company's voting stock, and on July 1, 2002, they executed a written consent as majority stockholders approving the Asset Sale.
PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Our common stock is traded on the Over-the-Counter Bulletin Board, under the symbol REMM. Prior to September 18, 2001, our common stock was traded on the pink sheets included in the NASD Electronic Bulletin Board under the symbol REMM.
The following is the range of high and low bid prices for our common stock for
the periods indicated:
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Bid Prices
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High Low
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Quarter ended June 30, 2001 0.36 0.09
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Quarter ended September 30, 2001 0.23 0.09
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Quarter ended December 31, 2001 0.18 0.05
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Quarter ended March 31, 2001 0.09 0.05
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Quarter ended June 30, 2002 0.08 0.04
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Quarter ended September, 2002 0.15 0.04
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Quarter ended December 31, 2002 0.10 0.03
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Quarter ended March 31, 2003 0.07 0.04
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Bid quotations represent interdealer prices without adjustment for retail markup, markdown and/or commissions and may not necessarily represent actual transactions.
STOCKHOLDERS
As of March 31, 2003, the number of stockholders of record was 429, not including beneficial owners whose shares are held by banks, brokers and other nominees. The Company estimates that it has approximately 2,400 stockholders in total.
DIVIDENDS
We have not paid any dividends on our common stock, and we do not anticipate paying any dividends in the foreseeable future. Our Board of Directors intends to follow a policy of retaining earnings, if any, to finance the growth of the company. The declaration and payment of dividends in the future will be determined by our Board of Directors in light of conditions then existing, including the company's earnings, financial condition, capital requirements and other factors.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion and financial statements contained herein are for the fiscal years ended March 31, 2003 and 2002. The following discussion regarding the financial statements of the Company should be read in conjunction with the financial statements of the Company included herewith.
OVERVIEW
The Company develops, markets and distributes high-technology dental equipment for sale within the professional dental market.
RESULTS OF OPERATIONS
Comparative details of results of operations for the years ending March 31, 2003 and 2002.
YEAR ENDING YEAR ENDING
MARCH 31, 2003 MARCH 31, 2002
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NET SALES $ 1,969,144 $ 733,853
COST OF SALES 1,062,681 502,013
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GROSS PROFIT 906,463 231,840
Operating Expenses
Research and Development 93,186 270,395
Sales and Marketing 64,132 49,582
General and Administrative 1,354,554 1,793,361
Impairment loss on IMDS Goodwill (330,000) 000,000,000
Depreciation and Amortization 21,804 12,711
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TOTAL OPERATING EXPENSES 1,863,676 2,126,049
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LOSS FROM OPERATIONS (957,213) (1,894,209)
OTHER INCOME (EXPENSES)
Interest/Other Income 21,195 44,290
Interest Expense (70,356) (113,887)
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TOTAL OTHER INCOME (EXPENSES) (379,161) (69,597)
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LOSS BEFORE INCOME TAXES (1,006,374) (1,963,806)
Income Tax Benefit (Expense) -- --
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NET LOSS $ (1,006,374) $ (1,963,806)
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FISCAL YEAR ENDING MARCH 31, 2003 COMPARED TO FISCAL YEAR ENDING MARCH 31, 2002
(AUDITED)
For the fiscal year ending March 31, 2003, net sales increased by $1,235,291 from $733,853 in 2002 to $1,969,144 in 2003. This represents a 168% increase over the comparable period in the prior year. The increase was due to the commencement of dental equipment sales in our European subsidiary, partially offset by the continued reduction in sales within the oral hygiene market throughout the year, and complete termination of these sales as of December 31, 2001. As the Company has initiated its presence within the professional dental equipment market, our European subsidiary has begun sales of our initial technology, a high-speed dental curing light, as well as after-market products, including accessories and repair services. These revenues were partially offset by the continued reduction in oral hygiene revenues throughout the year, consistent with our reorganization plan, as we reposition assets and resources to the professional dental equipment market, and finalize the sale of the oral hygiene division.
Cost of goods sold were $1,062,681 in 2003 as compared to $502,013 in 2002, an increase of $560,668 or 112% over the comparable period ended March 31, 2002. This represents a corresponding increase to the increase in sales during the current fiscal year end. Cost of goods sold as a percentage of sales decreased 14%, from 68% of sales in 2002 to 54% of sales in 2003.
Gross profit was $906,463 in 2003 as compared to $231,840 in 2002, an increase of $674,623 or 291% over the comparable period. Gross profit as a percentage of sales increased 14%, from 32% of sales in 2002 to 46% of sales in 2003. This increase is the result of our shift in sales to the higher-margin professional dental equipment market during the current fiscal year.
Research and development expenses were $93,186 for 2003 as compared to $270,395 for 2002, a decrease of $177,209, or 66%, over the prior fiscal year, due primarily to the research and development costs incurred during the start-up phase of the Company's high-technology dental equipment segment in the prior fiscal year. These expenditures relate primarily to the labor and materials to design and manufacture our new curing light technology, in addition to the completion of 15 prototypes. We expect we will continue to invest in research and development, and anticipate significant costs in the near future as we continue to develop products for the dental equipment markets.
Sales and marketing costs as of March 31, 2003 and 2002 were $64,132 and $49,582 respectively, which represents an increase of $14,550 or 29%. As a percentage of sales, sales and marketing expenses decreased from 7% of sales in 2002, to 3% of sales in 2003. This decrease is a result of the shift in business focus from the retail selling of oral hygiene products to the wholesale selling of professional dental products. We have shifted into the professional dental equipment market, whereby we focus on the less capital-intensive sale of units to large distributors. This marketing and distribution method allows for significantly less marketing and provides more predictable revenue flow.
General and administrative costs for 2003 and 2002 were $1,354,554 and $1,793,361 respectively, a decrease of $438,807 or 25%. As a percentage of sales, general and administrative expenses decreased from 244% of sales in 2002, to 69% of sales in 2003. This decrease is a result of the Company's focused efforts to internally reorganize in order to use resources more effectively. The Encino, California office was closed, and the two employees of that office were laid off.
At March 31, 2003 the Company recorded a full impairment loss of $330,000 against the goodwill recorded in fiscal 2002 in connection with the acquisition of the dental outsourcing business known as IMDS. The Company is no longer actively operating this business.
Net interest expense was $49,161 for 2003 as compared to $113,887 for 2002, a decrease of $64,726, or 57%, over the comparable period. The decrease in interest expense was largely due to the conversion of debt into common stock during the current fiscal year.
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
On March 31, 2003, our current liabilities exceeded our current assets by $1,231,809. Our business operations will require substantial capital financing on a continuing basis. The availability of that financing will be essential to our continued operation and expansion. In addition, cash flow and liquidity is contingent upon the success of our restructuring plan. The inability to continue to develop and market high-technology dental equipment or operate our dental outsourcing business will force us to raise additional capital to support operations by selling equity securities or incurring additional debt.
Since our inception in 1996, we have sustained net losses and negative cash flow, due largely to start-up costs, general and administration expenses, inventory, marketing and other expenses related to market development and new product launch. As a result, we have financed our working capital requirements principally through loans and the private placement of our common stock to accredited investors.
In February 2002, we entered into a line of credit facility with the Bank
Brussels Lambert ("BBL") consisting of an accounts receivable factoring line for
(euro)991,000 ($1,079,298 at March 31, 2003) and a general line of credit for
(euro)250,000 ($272,275 at March 31, 2003). As of March 31, 2003, we had drawn
(euro) 261,572 ($292,450 or July 15, 2003) from this facility.
During the fiscal year ended March 31, 2002, we received advances of $150,799 from officers and directors in the form of working capital loans. These loans bear no interest and are due upon demand. We repaid $11,314 of these advances with cash and settled $88,308 of these advances with the issuance of common stock valued at $0.50 a share.
On December 11, 1998, Remedent received a $50,000 line of credit from Union Bank of Arizona. We have drawn upon the full amount. The interest rate was 10.25% with a
maturity date of December 31, 1999. On April 26, 2000, the loan balance of $49,971 was converted to a five-year loan with an interest rate of prime + 2.5% (6.75% at March 31, 2003), monthly payments of $1,099, and a maturity date of April 26, 2005. Monthly payments include payments towards both principal and interest. As of March 31, 2003, the balance due on this loan was $22,971.
During the fiscal year ended March 31, 2001, the Company borrowed $149,002 from shareholders and a director in the form of convertible debentures. These debentures are unsecured, due on demand and bear interest at 10% per annum. In addition, at the sole discretion of the holder, can be converted to stock at 37.5% of the average trading price 30 days prior to maturity.
We expect to continue to experience negative cash flow possibly through the end of the current calendar year, and may continue to do so thereafter while we attempt to increase development and marketing of our products. Unless we are able to generate sufficient revenue or acquire additional debt or equity financing to cover our present and ongoing operation costs and liabilities, we may not be able to continue as a going concern. Our auditors note that we have sustained substantial net losses since our inception in September 1996. In addition, as of March 31, 2003, we had a working capital deficit totaling $1.231,809 and a shareholders deficit of $1,185,973.
For the year ending March 31, 2003, liabilities totaled $1,702,643 and $1,516,336 for the year ending March 31, 2002, which represents an increase of $186,307. This was largely due to increases in our trade accounts payable and accrued liabilities.
Frequently we have been unable to make timely payments to our trade and service vendors. As of March 31, 2003, we had past due payables in the amount of $280,043, representing a 111% increase from the prior fiscal year. This increase is due primarily to our inability to generate sufficient revenue from operations to fund our ongoing operations. We continue to utilize funds raised from sales of equity instruments to fund current operations. Deferred payment terms have been negotiated with most vendors, which has allowed us to continue to make shipments on time and no orders have been cancelled to date.
For the years ending March 31, 2003 and 2002, net cash used for operating activities was $582,745 and $790,109, respectively. As of March 31, 2003 we had a working capital deficiency of $1,231,809 as compared to a working capital deficiency of $1,121,304 at March 31, 2002.
Our business operations will require substantial capital financing on a continuing basis. Based upon our cash flow projections, significant capital infusion is necessary to fully implement our restructuring plan and pay existing delinquent payables. We plan to finance such through loans, equity investments and other transactions. We reasonably believe that the net proceeds from our efforts, assuming the maximum amount is raised and loans are obtained, plus revenues generated from operations, will be sufficient to fund our operations. However, there can be no assurance that we will be able secure the necessary financing. In the event that we are unsuccessful in completing financing arrangements, we would have
difficulty meeting our operation expenses, satisfying our existing or future debt obligations, or succeeding in implementing our restructuring plan. Without sufficient cash flow we are unable to satisfy our debt obligations, our ongoing growth and operations are, and will continue to be, restricted and there is substantial doubt as to our ability to continue as a going concern.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This filing contains statements that constitute forward-looking statements within the meaning of Section 21E of the 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 filing 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 filing, for the reasons, among others, described within the various sections. You should read the filing carefully, and should not place undue reliance on any forward-looking statements, which speak only as of the date of this filing. 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 filing or to reflect the occurrence of unanticipated events.
ITEM 7. FINANCIAL STATEMENTS
The Financial Statements that constitute Item 7 are included at the end of this report beginning on Page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Effective May 1, 2002, the Board of Directors of the Company dismissed Siegel Smith LLP ("Siegel Smith") as its independent auditors for the fiscal year ended March 31, 2002 and approved the engagement of Farber & Hass LLP ("Farber & Hass") as Siegel Smith's replacement. Siegel Smith had previously been the Company's independent auditors. The decision to change auditors was approved by the Company's Board of Directors.
Since the date of their engagement on November 5, 1999, there have been no disagreements with Siegel Smith on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to the satisfaction of Siegel Smith would have caused Siegel Smith to make reference to the matter in their report.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of the current directors and executive officers of the Company, the principal offices and positions with the Company held by each person and the date such person became a director or executive officer of the Company. The executive officers of the Company are elected annually by the Board of Directors. Each year the stockholders elect the board of directors. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. There was no arrangement or understanding between any executive officer and any other person pursuant to which any person was elected as an executive officer.
------------------------------------------- ------------- ------------------------------------------------------------ PERSON AGE POSITION ------------------------------------------- ------------- ------------------------------------------------------------ Guy De Vreese 47 Chairman ------------------------------------------- ------------- ------------------------------------------------------------ Robin List 31 Director, Chief Executive Officer ------------------------------------------- ------------- ------------------------------------------------------------ Stephen Ross 42 Director, Chief Financial Officer, Secretary ------------------------------------------- ------------- ------------------------------------------------------------ Kenneth J. Hegemann 53 Director ------------------------------------------- ------------- ------------------------------------------------------------ Fred Kolsteeg 58 Director ------------------------------------------- ------------- ------------------------------------------------------------ |
GUY DE VREESE, CHAIRMAN-Mr. De Vreese served as President of DMDS, Ltd., a developer and marketer of high-tech dental equipment from 1998 to 2001. Mr. De Vreese founded in 1997 DMD N.V., the independent European distributor for DMDS products and was its Chief Executive Officer until D.M.D.S. purchased its distribution rights. Prior to 1998 Mr. De Vreese served as a board member of Styles On Video Inc., Dycam Inc. and New Image Industries, Inc.
ROBIN LIST, CHIEF EXECUTIVE OFFICER - Mr. List served as director of operations of DMDS Ltd. a, European based, developer and marketer of high-tech dental equipment from 1998 to 2001. Prior to 1998 Mr. List held positions such as director of a firm specialized in imaging software and commercial director/partner in a digital services corporation.
STEPHEN ROSS, DIRECTOR, CFO, SECRETARY - Mr. Ross was the former CFO of a professional dental equipment manufacturer where, over a three year tenure, oversaw all financial and operational matters. Prior to 1998, Mr. Ross served in such positions as senior management consultant with a corporate restructuring and management firm, CFO and co-founder of a personal care company, and a tax manager with an accounting firm.
KENNETH J. HEGEMANN, DIRECTOR - Mr. Hegemann has been the president of CRA Labs, Inc. and Oralbotic Research, Inc. for the past five years, firms specializing in the development of automated tooth brushing technology and conduct of various engineering projects.
FRED KOLSTEEG, DIRECTOR - Mr. Kolsteeg is the president of WAVE Communications, a Dutch based advertising agency that provides marketing services for world-renowned customers such as Coca-Cola and Philip Morris. Mr. Kolsteeg learned the advertising business at Phillips before he became Managing Director of Intermarco Publicis. Prior to founding WAVE in 1996, he successfully founded several advertising agencies such as ARA, Team and Team Saatchi.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our officers and directors, and persons who own more than ten percent of our Common Stock, to file reports of ownership and changes in ownership with the Securities and Exchange Commission ("SEC"). Officers, directors and greater than ten percent stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely on our review of the copies of such forms we received, or written representations from certain reporting persons, we believe that during our 2003 fiscal year, all such filing requirements applicable to our officers, directors, and greater than 10% beneficial owners were complied with.
ITEM 10-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 $25,000 or 10% of such officer's cash compensation:
SUMMARY COMPENSATION TABLE
===================================================================================================================================
ANNUAL COMPENSATION LONG TERM COMPENSATION
AWARDS PAYOUTS
-----------------------------------------------------------------------------------------------------------------------------------
Securities
Name and Principal Other Restricted Underlying LTIP All other
Position Annual stock Options/ pay-outs compensation
Year Salary ($) Bonus ($) compensation ($) award(s) ($) SARs (#) ($) ($)
-----------------------------------------------------------------------------------------------------------------------------------
Guy DeVreese, 2003 $132,000 $-0- $-0- $-0- $-0- $-0- $-0-
Chairman(1) 2002 $90,000 $-0- $-0- $-0- -0- $-0- $-0-
2001 N/A N/A N/A N/A N/A N/A N/A
Robin List, CEO(2) 2003 $110,000 $-0- $-0- $-0- $-0- $-0- $-0-
2002 $75,000 $-0- $-0- $-0- -0- $-0- $-0-
2001 N/A N/A N/A N/A N/A N/A N/A
Stephen F. Ross, 2003 $60,000 $-0- $-0- $-0- $-0- $-0- $-0-
CFO, Secretary(3) 2002 $28,951 $-0- $-0- $-0- -0- $-0- $-0-
2001 N/A N/A N/A N/A N/A N/A N/A
Kenneth Hegemann, 2003 N/A N/A N/A N/A N/A N/A N/A
Chairman(4) 2002 $60,300 $-0- $-0- $-0- -0- $-0- $-0-
2001 $80,400 $-0- $-0- $-0- -0- $-0- $-0-
Rebecca Inzunza, 2003 N/A N/A N/A N/A N/A N/A N/A
President, CEO, 2002 $46,900 $-0- $-0- $-0- -0- $-0- $-0-
CFO(5) 2001 $80,400 $-0- $-0- $-0- -0- $-0- $-0-
Robert E. 2003 N/A N/A N/A N/A N/A N/A N/A
Hegemann, Sr. 2002 $28,951 $-0- $-0- $-0- -0- $-0- $-0-
V.P., Treasurer(6) 2001 $40,872 $-0- $-0- $-0- -0- $-0- $-0-
===================================================================================================================================
|
EMPLOYMENT AGREEMENTS
While we do not currently have any employment agreements, we anticipate having employment contracts with executive officers and key personnel as necessary, in the future.
COMPENSATION OF DIRECTORS
Except for the Chairman of the Board, our directors do not receive any cash compensation, but are entitled to reimbursement of their reasonable expenses incurred in attending directors' meetings.
STOCK OPTION PLAN
On May 29, 2001, the Board of Directors adopted an Incentive and Nonstatutory Stock Option Plan (the "Plan"), reserving 5,000,000 shares underlying options for issuance under this plan. There is a restriction that no more than 1,000,000 options may be granted to any one individual or entity in any one calendar year under the Plan. As of March 31, 2003, 4,620,900 options are outstanding.
ITEM 11- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 31, 2003 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.
-------------------------------------------------- --------------------------- ----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT AND NATURE OF PERCENT OF CLASS
BENEFICIAL OWNER
-------------------------------------------------- --------------------------- ----------------------
Guy De Vreese (2) 8,268,571 23.8%
(Chairman)
Xavier de Cocklaan 42
9831 Deurle, Belgium
-------------------------------------------------- --------------------------- ----------------------
Robin List (3)
(Director, CEO)
Xavier de Cocklaan 42 2,212,500 6.4%
9831 Deurle, Belgium
-------------------------------------------------- --------------------------- ----------------------
Stephen Ross (4)
(Director, CFO)
1921 Malcolm #101 1,000,000 2.9%
Los Angeles, CA 90025
-------------------------------------------------- --------------------------- ----------------------
Fred Kolsteeg (5)
(Director)
Managelaantje 10 1,000,000 3.0%
3062 CV Rotterdan
The Netherlands
-------------------------------------------------- --------------------------- ----------------------
Kenneth Hegemann (7)
(Director)
1220 Birch Way 1,045,000 3.1%
Escondido, CA 92097
-------------------------------------------------- --------------------------- ----------------------
All Officers and Directors as a group 13,526,071 36.7%
(5 persons)
-------------------------------------------------- --------------------------- ----------------------
Dental Advisors, Inc. (8)
1220 Birch Way 3,388,000 9.6%
Escondido, CA 92027
-------------------------------------------------- --------------------------- ----------------------
Rebecca Inzunza
1220 Birch Way 2,679,495 8.0%
Escondido, CA 92027
-------------------------------------------------- --------------------------- ----------------------
Jonathan J. Marine (9)
448 21st Street 2,400,000 6.8%
Manhattan Beach, CA 90266
-------------------------------------------------- --------------------------- ----------------------
KolsteegBeleggingsmaatschappij B.V.(6)
Managelaantje 10
3062 CV Rotterdan 1,200,000 3.6%
The Netherlands
-------------------------------------------------- --------------------------- ----------------------
|
* Less than 1%
(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 1,060,000 shares in his own name, including 1,000,000
shares of Common Stock underlying options which were exercisable on or
which will become exercisable within 60 days of April 15, 2002; 5,949,971
shares of Common Stock held in the name of New Bitsnap N.V., a Belgian
company controlled by Guy De Vreese, including 26,400 shares of Common
Stock underlying warrants which were exercisable on or which will become
exercisable within 60 days of April 15, 2002; and 1,258,600 shares held in
the name of Lausha N.V., a Belgian company controlled by Guy De Vreese,
including 173,600 shares of Common Stock underlying warrants which were
exercisable on or which will become exercisable within 60 days of June 21,
2002.
(3) Includes 1,000,000 shares of Common Stock underlying options which were
exercisable on or which will become exercisable within 60 days of June 21,
2002.
(4) Includes 1,000,000 shares of Common Stock underlying options which were
exercisable on or which will become exercisable within 60 days of June 21,
2002.
(5) Includes 100,000 shares of Common Stock underlying options which were
exercisable on or which will become exercisable within 60 days of June 21,
2002.
(6) Includes 200,000 shares of Common Stock underlying warrants which were
exercisable on or which will become exercisable within 60 days of June 21,
2002.
(7) Includes 100,000 shares of Common Stock underlying options which were
exercisable on or which will become exercisable within 60 days of June 21,
2002.
(8) Includes 1,694,000 shares of Common Stock underlying warrants which were
exercisable on or which will become exercisable within 60 days of June 21,
2002.
(9) Includes 250,000 shares of Common Stock underlying warrants which were
exercisable on or which will become exercisable within 60 days of June 21,
2002.
ITEM 12-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, a director. The Agreement provides for the sale of our 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. However, due to recurring net losses and increasing working capital and shareholder deficits, we implemented, in July 2001, a complete corporate reorganization plan. This plan included the ceasing of direct sales and marketing of the Remedent Toothbrush, and acquisition of and expansion into diversified business ventures.
On February 12, 2002, our subsidiary, Remedent NV, entered into a loan agreement for (euro)125,000 ($136,138 at March 31, 2003), with a company owned and operated by Guy De
Vreese, an officer. The agreement was entered into in connection with a line of credit established with the Bank Brussel Lambert ("BBL") for (euro)250,000 ($272,275 at March 31, 2003. Due to the insufficient assets maintained by the Company as of the date of the line of credit, the BBL imposed two requirements for the extension of credit: (1) Mr. De Vreese personally guarantee the line of credit, and (2) the company owned by Mr. De Vreese repay its existing line of credit in full. As such, the loan received was utilized to repay the existing line of credit. Repayment of the loan will occur upon our ability to provide sufficient assets to replace the personal guarantee of Mr. De Vreese.
Between April 15, 2001 and August 21, 2001, in consideration of $69,002, we issued convertible debentures issued to Edward Quincy, who was a director of the Company from inception to April 1, 2002. These convertible debentures are due on demand, bearing interest at 10% per annum, and convertible into common stock at the sole discretion of the holder. The debentures are convertible into common stock at percentages between 30% and 37.5% of the average trading price for the stock for the 30 day period immediately prior to the maturity date. $54,002 of the debentures carry a 37.5% conversion percentage, while $15,000 carry a 30% conversion percentage. In connection with this conversion feature, the Company recorded a charge of $59,002 and $10,000 to interest expense during the fiscal years ended March 31, 2003 and 2002, respectively. These amounts were calculated on the 30 day period prior to the dates of the notes, and are subject to change based on the 30 day period prior to the maturity dates. As of March 31, 2003, $20,472 was accrued for unpaid interest.
We formerly leased 1,000 square feet of office space at 1220 Birch Way, Escondido, California. This dwelling belongs to Ms. Inzunza and acted as our headquarters. We also utilized warehouse space located within the home of one of our officers, Robert Hegemann, in Phoenix, Arizona, rent-free. In connection with her resignation as an officer and director on April 1, 2002, as part of our corporate reorganization, we no longer utilize the dwelling belonging to Ms. Inzunza, and as such no longer incur monthly rental charges for the property. Additionally, in connection with the sale of the Remedent Toothbrush business, which was operated solely out of the personal residence of Robert Hegemann, we no longer utilize, or incur monthly rental charges for, that space.
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
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 USA, Inc., dated October 5, 1998/1/
3.8 By-laws/1/
10.1 Incentive and Nonstatutory Stock Option Plan, dated May 29, 2001/1/
10.6 Loan Agreement, dated September 9, 2001/1/
10.7 Investment Banking Agreement with Lincoln Equity Research, LLC, dated September 13, 20011/1/
10.8 Stock Purchase Agreement with Dental Advisors, dated September 14, 2001/1/
10.9 Loan Agreement, dated September 21, 2001/1/
10.10 Renegotiated Loan Agreement, dated December 21, 2001/1/
10.11 Asset Purchase Agreement for IMDS, dated January 15, 2001/1/
10.12 Line of Credit Agreement, dated February 11, 2002/1/
10.13 Loan Agreement, dated February 12, 2002/1/
10.14 Repayment Agreement, dated March 20, 2002/1/
10.15 Repayment Agreement, dated January 24, 2002/1/
10.16 Stock Purchase Agreement, dated January 11, 2002.
10.17 Repayment Agreement, dated April 26, 2002/1/
10.18 Repayment Agreement, dated May 1, 2002/1/
10.19 Repayment Agreement, dated May 1, 2002/1/
10.20 Repayment Agreement, dated May 1, 2002/1/
10.21 Stock Purchase Agreement, dated May 1, 2002/1/
10.22 Code of Ethics, adopted March 25, 2003
23 Consent of Farber & Hass, LLP
31.1 Certification of Chief Executive Officer Pursuant to the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant to the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32. Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
REPORTS ON FORM 8-K:
None.
ITEM 14 - CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer (the "Certifying Officers") are responsible for establishing and maintaining disclosure controls and procedures for the Company. The Certifying Officers have designed such disclosure controls and procedures to ensure that material information is made known to them, particularly during the period in which this report was prepared. The Certifying Officers have evaluated the effectiveness of the Company's disclosure controls and procedures within 90 days of the date of this report and believe that the Company's disclosure controls and procedures are effective based on the required evaluation. There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
REMEDENT USA, INC.
Dated: July 14, 2003 /S/ ROBIN LIST
------------------------------------------------
By: Robin List
Its: Chief Executive Officer (Principal
Executive Officer) and Director
Dated: July 14, 2003 /S/ STEPHEN F. ROSS
------------------------------------------------
By: Stephen F. Ross
Its: Chief Financial Officer
(Principal Financial Officer
and Principal
Accounting Officer) and Director
Dated: July 14, 2003 /S/ GUY DEVREESE
------------------------------------------
By: Guy DeVreese
Its: Chairman (Director)
|
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report F-1
Financial Statements:
Consolidated Balance Sheet as of March 31, 2003 F-2
Consolidated Statements of Operations for the years ended March 31, 2003 and 2002 F-4
Consolidated Statements of Changes in Stockholders' Deficit for the years ended
March 31, 2003 and 2002 F-5
Consolidated Statements of Cash Flows for the years ended March 31, 2003 and 2002 F-7
Consolidated Statements of Comprehensive Loss for the years ended March 31, 2003 and
2002 F-8
Notes to Consolidated Financial Statements F-9-F-22
|
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of REMEDENT USA, INC.
We have audited the accompanying consolidated balance sheet of Remedent USA, Inc. as of March 31, 2003, and the related consolidated statements of operations, comprehensive loss, changes in stockholders' deficit and cash flows for the years ended March 31, 2003 and 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the 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 financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Remedent USA, Inc. as of March 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 16 to the consolidated financial statements, the Company has suffered recurring losses from operations, has a net working capital deficiency, and its total liabilities exceed its total assets, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regards to these matters are also described in Note 16. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
FARBER & HASS LLP
/S/ FARBER & HASS LLP Oxnard, California July 13, 2003 |
PART I--FINANCIAL INFORMATION
Item 1--Consolidated Financial Statements
REMEDENT USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of March 31, 2003
ASSETS
CURRENT ASSETS
Accounts receivable, net $ 178,013
Due from related party 136,948
Inventories, net 116,830
Prepaid expense 39,043
-----------
TOTAL CURRENT ASSETS 470,834
Property & equipment, net 44,046
Other assets 1,790
-----------
TOTAL ASSETS $ 516,670
-----------
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Line of credit $ 261,572
Accounts payable 452,756
Due to related parties 283,777
Accrued liabilities 267,278
Net liabilities of Toothbrush Business to
be sold 335,713
Note payable 101,547
-----------
TOTAL CURRENT LIABILITIES 1,702,643
-----------
Commitments and contingencies
SHAREHOLDERS' DEFICIT
Common stock (50,000,000 shares
authorized, $0.001 par value;
30,886,558 issued and outstanding) 30,887
Additional paid in capital 4,005,131
Accumulated deficit (5,676,970)
Common stock subscribed
(6,104,166 shares) 438,357
Minority interest in Remedent NV 64,816
Cumulative translation adjustment (48,194)
-----------
TOTAL SHAREHOLDERS' DEFICIT (1,185,973)
-----------
TOTAL LIABILITIES AND SHAREHOLDERS'
DEFICIT $ 516,670
===========
|
The accompanying notes are an integral part of the consolidated financial statements.
REMEDENT USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended March 31, 2003 and March 31, 2002
For the years ended
March 31, 2003 March 31, 2002
------------ ------------
NET SALES $ 1,969,144 $ 733,853
COST OF SALES 1,062,681 502,013
GROSS PROFIT 906,463 231,840
------------ ------------
OPERATING EXPENSES:
Research and development 93,186 270,395
Sales and marketing 64,132 49,582
General and administrative 1,354,554 1,793,361
Depreciation and amortization 21,804 12,711
Impairment loss for IMDS Goodwill 330,000 --
------------ ------------
TOTAL OPERATING EXPENSES 1,863,676 2,126,049
------------ ------------
LOSS FROM OPERATIONS (957,213) (1,894,209)
------------ ------------
OTHER INCOME (EXPENSES):
Interest income 21,195 --
Interest expense (70,356) (113,887)
Other income (expense) -- 44,290
------------ ------------
TOTAL OTHER EXPENSES, NET (49,161) (69,597)
------------ ------------
LOSS BEFORE INCOME TAXES (1,006,374) (1,963,806)
Income tax benefit (expense) -- --
------------ ------------
NET (LOSS) $ (1,006,374) $ (1,963,806)
============ ============
LOSS PER SHARE $ (0.03) $ (0.11)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 30,855,308 18,009,722
============ ============
|
The accompanying notes are an integral part of the consolidated financial statements.
REMEDENT USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For the Years ended March 31, 2003 and 2002
Common Stock
------------------------
Additional
Paid-in Accumulated Common Stock
Shares Amounts Capital Deficit Subscribed Other Total
---------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, March 31, 2001 13,187,316 $ 13,187 $ 1,768,302 $(2,706,790) -- -- $ (925,301)
Common stock issued under
private placements 5,069,000 5,069 688,431 -- -- -- 693,500
Common stock issued for services 4,210,000 4,210 455,910 -- -- -- 460,120
Common stock issued for
repayment of debt 2,209,100 2,209 596,241 -- -- -- 598,450
Common stock issued upon
conversion of debenture 148,642 149 10,440 -- -- -- 10,589
Stock options issued for services -- -- 23,870 -- -- -- 23,870
Stock options issued to
employees and directors -- -- 133,000 -- -- -- 133,000
Common stock issued upon
acquisition of business 6,000,000 6,000 324,000 -- -- -- 330,000
Subscription receivable -- -- -- -- -- $ (77,848) (77,848)
Cumulative translation adjustment -- -- -- -- -- (10,866) (10,866)
Net loss -- -- -- (1,963,806) -- -- (1,963,806)
---------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, March 31, 2002 30,824,058 30,824 4,000,194 (4,670,596) -- (88,714) (728,292)
Common stock issued under
private placements 62,500 63 4,937 5,000
Subscription receivable 77,848 77,848
Common Stock Subscribed $ 438,357 438,357
Minority Interest in Remedent NV 64,816 64,816
Cumulative translation adjustment (37,328) (37,328)
Net loss (1,006,374) (1,006,374)
---------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, March 31, 2003 30,886,558 $ 30,887 $ 4,005,131 $(5,676,970) $ 438,357 $ 16,622 $(1,185,973)
========== =========== =========== =========== =========== =========== ===========
|
The accompanying notes are an integral part of the consolidated financial statements.
REMEDENT USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended March 31, 2003 and 2002
For the years ended
---------------------------------
March 31, 2003 March 31, 2002
-------------- ---------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $(1,006,374) $(1,963,806)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Depreciation and amortization 18,343 13,301
Inventory reserve -- 80,906
Stock and options issued for
services 6,225 483,990
Options for bonuses -- 133,000
Impairment loss on IMDS
Goodwill 330,000 --
Changes in operating assets and
liabilities:
Cash within division sold -- (2,093)
Accounts receivable (19,941) (102,275)
Notes receivable (1,615) --
Inventories 2,953 (99,858)
Prepaid expenses 1,198 (29,163)
Accounts payable 87,593 269,419
Accrued liabilities (1,127) 426,470
Deposits -- --
=========== ===========
NET CASH USED BY OPERATING
ACTIVITIES (582,745) (790,109)
=========== ===========
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of equipment -- (65,084)
Other assets 1,611 (3,236)
Notes from related parties -- (107,688)
=========== ===========
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 1,611 (176,008)
=========== ===========
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from notes and
debentures -- 120,000
Note payments (33,537) (11,138)
Proceeds from line of credit 76,353 136,144
Proceeds from sale of common
stock 607,743 693,500
Subscription receivable (145,319) (76,876)
Payments to related parties (5,952) (11,314)
Notes to related parties 56,825 150,799
=========== ===========
NET CASH PROVIDED BY FINANCING
ACTIVITIES 556,113 1,001,115
=========== ===========
NET (DECREASE) INCREASE IN
CASH (25,021) 34,998
Effect of exchange rate
changes on cash and cash
equivalents (6,919) (10,744)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 31,940 7,686
=========== ===========
CASH AND CASH EQUIVALENTS, END OF
YEAR $ -- $ 31,940
=========== ===========
Supplemental Information:
Interest paid $ 70,603 $ 12,951
Income taxes $ 800 $ -0-
|
The accompanying notes are an integral part of the consolidated financial statements.
REMEDENT USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the Years Ended March 31, 2003 and 2002
Year ended March 31,
-----------------------------
2003 2002
----------- -----------
Net loss $(1,006,374) $(1,963,806)
Other comprehensive income
(loss):
Foreign currency translation
adjustment (37,328) (10,866)
----------- -----------
Comprehensive loss $(1,043,702) $(1,974,672)
=========== ===========
|
The accompanying notes are an integral part of the consolidated financial statements.
REMEDENT USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
Remedent USA, Inc. (the "Company") is a holding company. The Company was originally incorporated on September 30, 1996 in the state of Arizona, and has offices in Los Angeles, California and Ghent, Belgium.
On October 2, 1998, Remedent USA ("Remedent") merged with Resort World Enterprises, Inc., a Nevada corporation ("RWE"). The surviving Company was RWE and immediately changed the name of the Corporation to Remedent USA, Inc. The exchange was a "reverse merger" and accounted for as a recapitalization of Remedent. As a result of the merger, RWE obtained all of the issued and outstanding stock of Remedent for approximately 79% of the new Remedent USA, Inc. stock. Financial statements for the pre-merger periods are the historical financial statements of Remedent.
On July 1, 2001, the Company formed three subsidiaries, Remedent Professional Holdings, Inc., Remedent Professional, Inc. and Remedent NV. The Company markets professional dental equipment through these subsidiaries. Remedent NV (a Belgian company) is based in Ghent, Belgium.
Remedent Professional Holdings, Inc. and Remedent Professional, Inc. are incorporated in the state of Nevada in the United States.
On December 31, 2001, the Company discontinued the distribution of its patented tooth & gumbrush in anticipation for the upcoming sale of this division. On March 14, 2002, the Company reached an agreement for the sale of this division.
2. Summary of Significant Accounting Policies
Basis for Presentation
The Company's consolidated financial statements have been prepared on an accrual basis of accounting, in conformity with accounting principles generally accepted in the United States. 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 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. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Principles of Consolidation
The consolidated financial statements include the accounts of Remedent USA, Inc. and its subsidiaries, Remedent NV, Remedent Professional Holdings Inc. and Remedent Professional Inc.. All inter-company balances and transactions have been eliminated. Corporate administrative costs are not allocated to subsidiaries. Remedent NV was the only operating subsidiary in fiscal 2003. Remedent Professional Holdings, Inc. and Remedent Professional, Inc. had no operations in fiscal 2003 and 2002.
Reclassifications
These financial statements reflect certain reclassifications made to the prior period balances to conform with the current year presentation.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade accounts receivable. At March 31, 2003, three customers accounted for 31%, 21% and 18%, respectively, of the Company's trade receivables. The Company performs ongoing credit evaluations of its customers and normally does not require collateral to support accounts receivable.
Revenue Recognition
REMEDENT USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Impairment of Long-Lived Assets
Long-lived assets consist primarily of property and equipment. The recoverability of long-lived assets is annually 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.
Pervasiveness of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant estimates made in the preparation of the consolidated financial statements relate to the assessment of the carrying value of accounts receivable, inventories and estimated provision for returns. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less to be cash or cash equivalents.
Accounts Receivable
The Company sells professional dental equipment to various companies, primarily to distributors located throughout the world. 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. As of March 31, 2003 and 2002, the allowance for doubtful accounts was $90,617 and $0, respectively. The Company uses the allowance method to account for uncollectable accounts receivable. The Company's estimate is based on historical collection experience and a review of the current status of trade accounts receivable.
Customers Outside of the United States
Sales to customers outside of the United States were 100% and 93% of total sales for the years ended March 31, 2003 and 2002, respectively. The sales were made to customers in countries that are members of the European Union ("EU").
Research and Development Costs
The Company expenses research and development costs as incurred.
Advertising Costs
Costs incurred for producing and communicating advertising are expensed when incurred and included in selling, general and administrative expenses. For the fiscal years ended March 31, 2003 and 2002, consolidated advertising expense amounted to $30,076 and $21,459, 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 basis 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.
REMEDENT USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 90 days from the date of shipment. A provision
for estimated future warranty costs is recorded when products are shipped.
Warranty costs were approximately $0 and $13,000 in fiscal 2003 and 2002,
respectively
Impact of New Accounting Standards
Statement of Financial Standards ("SFAS") Nos. 141 "Business Combinations" is effective for business combinations after June 30, 2001. It requires that the "purchase method" of accounting be used to account for all business combinations and specifies criteria for an acquired intangible asset to be recognized separately from goodwill. SFAS No. 142 is effective for financial statements beginning after December 15, 2000. It requires that goodwill no longer be amortized, but tested for impairment on an annual basis. The Company adopted the provisions of SFAS Nos. 141 and 142 for the fiscal year ended March 31, 2002.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS 143 establishes accounting standards for recognition and measurement of a liability for the costs of asset retirement obligations. Under SFAS 143, the costs of retiring an asset will be recorded as a liability when the retirement obligation arises, and will be amortized to expense over the life of the asset. The Company does not expect any effect on its financial position or results of operations from the adoption of this statement.
SFAS 144 establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinued operations. SFAS 144 superseded SFAS 121 and APB Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." The provisions of SFAS 144 are effective in fiscal years beginning after December 15, 2001, with early adoption permitted, and in general are to be applied prospectively. The Company adopted SFAS 144 effective April 1, 2002, which did not have a material impact on its consolidated results of operations or financial position.
In June of 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities," which nullifies EITF Issue 94-3. SFAS 146 is effective for exit and disposal activities that are initiated after December 31, 2002 and requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, in contrast to the date of an entity's commitment to an exit plan, as required by EITF Issue 94-3. The Company will adopt the provisions of SFAS 146 effective January 1, 2003.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure". This Statement amends SFAS No. 123, "Stock-Based Compensation", to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The alternative methods of transition of SFAS 148 are effective for fiscal years ending after December 15, 2002. The Company follows APB 25 in accounting for its employee stock options. The disclosure provision of SFAS 148 is effective for years ending after December 15, 2002 and has been incorporated into these consolidated financial statements and accompanying footnotes.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This Statement establishes standards for how an issuer of debt classifies and measures certain financial instruments with characteristics of both liabilities and equity.
REMEDENT USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
It requires that an issuer classify certain financial instruments as a liability (or an asset in some circumstances) instead of equity. The Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company will adopt this Statement on July 1, 2003. The Company does not believe that any of these recent accounting pronouncements will have a material impact on their financial position or results of operations.
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.
Common shares related to stock options and stock warrants that are antidilutive amounted to 6,844,000 and 6,819,000 for the fiscal years ended March 31, 2003 and 2002, respectively.
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 than 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 and cash flows 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 has not tax-effected the cumulative translation adjustment as there is no intention to remit the earnings.
Accounting for Stock Based Compensation
Stock option grants are set at the closing price of the Company's common stock on the day prior to the date of grant. Therefore, under the principles of APB Opinion No. 25, the Company does not recognize compensation expense associated with the grant of stock options. SFAS No. 123, "Accounting for Stock-Based Compensation," requires the use of option valuation models to provide supplemental information regarding options granted after 1994.
3. 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:
March 31, 2003 March 31, 2002
-------------- --------------
Inventory-Supplies $ -- $ --
Displays and Raw
Materials 88,717 5,270
Finished Goods 36,281 96,638
Less: Inventory
reserve (8,168) (4,362)
--------- ---------
Inventories, net $ 116,830 $ 97,546
========= =========
|
REMEDENT USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Due from Related Party
On February 12, 2002, Remedent NV entered into a loan agreement for (euro) 125,000 (US$136,138 at March 31, 2003), with 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 with the Bank Brussel Lambert ("BBL") for amounts up to (euro) 250,000 (US$272,275) (see Note 10). Due to the insufficient assets maintained by the Company as of inception date of the line of credit, the BBL imposed two requirements for the extension of credit; (1) Mr. De Vreese personally guaranteed the line of credit, and (2) another company owned by Mr. De Vreese was required to repay its existing line of credit in full. As such, the loan received was utilized to repay the other company's existing line of credit. Repayment of the loan will occur upon the Company's ability to provide sufficient assets to replace the personal guarantee of Mr. De Vreese.
5. Property and Equipment
Property and equipment are summarized as follows:
March 31, 2003 March 31, 2002
-------------- --------------
Machinery and equipment $ -- $ 3,548
Tooling 49,782 49,782
Furniture and fixtures 16,361 9,919
Less accumulated depreciation (22,097) (2,747)
-------- --------
Property and equipment, net $ 44,046 $ 60,502
======== ========
|
See Note 9 regarding property and equipment sold.
6. Goodwill
On January 15, 2002, Remedent NV acquired International Medical & Dental Support ("IMDS"), a dental practitioner outsourcing firm. The acquisition was for a total of 6,000,000 shares of common stock, valued at $330,000. The value of the common shares issued was determined based on the market price of the Company's common stock on the date of acquisition. As the firm was in the development stage, there were no assets and liabilities as of the acquisition date. As a result, the balance of the purchase price was allocated to goodwill.
On January 1, 2002, the Company adopted SFAS 142 and has ceased amortization of goodwill, which is deemed to have an indefinite life. Under the new rules, the Company is no longer permitted to amortize intangible assets with indefinite lives; instead they will be subject to periodic tests for impairment. SFAS 142 supercedes APB Opinion #17, Intangible Assets. In accordance with SFAS 142, as of March 31, 2002, management assessed the present value of the projected cash flows of the acquired business and the increased dental hardware sales attributable to outsourced dental practitioners, and believed there has been no impairment of the goodwill.
For the year ended March 31, 2003, management deemed the IMDS Goodwill to be fully impaired, as the dental outsourcing company is now dormant.
7. Due to Related Parties
Due to related parties are summarized as follows:
REMEDENT USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2003 March 31, 2003
-------------- --------------
Borrowings from a former director in
the form of convertible debentures $ 69,002 $ 69,002
Borrowings from employees in the form
of working capital loans 51,296 84,713
Borrowings in the form of
working capital loans 163,479 --
-------- --------
Due to related parties $283,777 $153,715
======== ========
|
The convertible debentures issued to the director are due on demand, bearing interest at 10% per annum, and convertible into common stock at the sole discretion of the holder. The debentures are convertible into common stock at percentages between 30% and 37.5% of the average trading price for the stock for the 30 day period immediately prior to the maturity date. In connection with this conversion feature, the Company recorded a charge of $59,002 and $10,000 to interest expense during the fiscal years ended March 31, 2001 and 2000, respectively. These amounts were calculated on the 30 day period prior to the dates of the notes, and are subject to change based on the 30 day period prior to the maturity dates. As of March 31, 2003 and 2002, $20,472 and $13,572, respectively, was accrued for unpaid interest.
8. Accrued Liabilities
Accrued liabilities are summarized as follows:
March 31, 2003 March 31, 2003
-------------- --------------
Accrued salaries and payroll taxes $ -- $167,535
Accrued interest 38,525 34,155
Accrued audit and tax fees 77,500 106,022
Accrued consulting 61,500 18,000
Accrued social taxes 63,189
Accrued other 26,564 20,305
-------- --------
Accrued liabilities $267,278 $346,017
======== ========
|
9. Net Liabilities to be Sold
On March 27, 2002, the Board of Directors approved an Asset Purchase Agreement (the "Agreement") entered into by the Company on March 14, 2002 with Famcare 2000, LLC, ("Famcare") a Nevada limited liability company. The Agreement provides for the sale of the Company's Remedent Tooth & Gumbrush business (the "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 Tooth & Gumbrush, had been the sole activity of the Company since its creation in 1996. However, due to recurring net losses and increasing working capital and shareholder deficits, the Company implemented, in July 2001, a complete corporate reorganization plan. This plan included the ceasing of direct sales and marketing of the Remedent Tooth & Gumbrush, and acquisition of and expansion into diversified business ventures.
As further discussed in Note 16, the Company has been developing technologies for introduction within the professional dental equipment market, and initiated shipments of its first product, a high-speed dental curing light, in the first quarter 2002.
In connection with the Company's shift in focus to high technology professional dental equipment, the Company discontinued the operations of the Toothbrush Business on December 31, 2001, in anticipation of the sale. The Company felt continued dedication to this business would not be in its shareholders' best interest. Additionally, with the business generating recurring net losses and raising
REMEDENT USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
deficits, Company resources can be more effectively utilized within these new markets. Throughout the fiscal year ended March 31, 2002, as the Company had been experiencing significant working capital shortages, the Company had been downsizing this business in anticipation of a sale or license of these operations. As such, the volume of the business, revenues and expenses, had been significantly reduced from previous fiscal years. Further, with the cost reduction measures taken, aside from the cost of the toothbrush, the overhead of the entire business include solely related party expenses of the salary of the sole employee, Rob Hegemann, and the allocated cost of the use of his personal residence as the primary place of operation for this business. As a result, the business has not been accruing expenses upon its shutdown on January 1, 2002.
In accordance with Article 210.11-02(a) of Regulation S-X, the following narrative description of the pro-forma adjustments related to the sale of the Company's Toothbrush Business is made a part of the Annual Report on Form 10-KSB. Pro-forma five-year information required by Item 301 of Regulation S-K, in the opinion of management, is not applicable as prior to April 1, 2001, the Company sole business was the Toothbrush Business. Effective April 1, 2001, the Company began operating a professional high-technology dental equipment business and during the fourth fiscal quarter of 2002, entered into the dental employee leasing business. During the fiscal years ended March 31, 2001, 2000 and 1999, which represent the entirety of the fiscal years publicly reported by the Company, the sole operating business was the Toothbrush Business.
The preparation of pro-forma financial disclosures requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and results of operations during the reporting period. Actual results could differ from those estimates. The sale of the Company's Toothbrush Business positions the Company to operate on a going-forward basis as a developer and marketer of high-technology dental equipment.
The transaction sold all of the assets of the Tooth & Gumbrush division as well as obligated the Buyer to be responsible for the Company's liabilities relating to the division. The business accounted for approximately $50,000 in revenues, from unit sales, for the fiscal nine months ending December 31, 2001, and approximately $440,000 for the fiscal year ended March 31, 2001.
The following table reports pro-forma adjusted balance sheet accounts and results of operations when compared to March 31, 2002.
03/31/02 Pro-Forma 03/31/02
As Reported Adjustment Pro-Forma
----------- ---------- ---------
Total Sales 733,853 50,270(a) 683,583
Cost of Sales 502,013 99,152(b) 402,861
Gross Profit 231,840 (48,882)(c) 280,722
Operating Expenses 2,126,049 76,128(d) 2,049,921
Operating Loss (1,894,209) (125,010)(e) (1,769,199)
Current Assets 395,032 25,303(f) 369,729
Total Assets 788,044 69,065(g) 718,979
Current Liabilities 1,516,336 404,778(h) 1,111,558
Total Liabilities 1,516,336 404,778(I) 1,111,558
---------------------------
|
a) Elimination of revenues reported for the nine months ended December 31,
2001, that related to Toothbrush Business revenue being sold
b) Elimination of the associated cost of sales related to the sale of Tooth &
Gumbrush units
c) Effect on gross profit on a pro-forma basis
d) Elimination of associated general and administrative expenses related to
the sale.
e) Net effect of the transaction on operating results
f) Current assets being sold are primarily inventory and accounts receivable
g) Total assets being sold are primarily inventory, accounts receivable,
furniture, fixtures and equipment, and patents.
h) Current liabilities being sold are primarily accounts payable and
royalties payable.
REMEDENT USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
i) Total liabilities being sold are primarily accounts payable and royalties payable.
Net liabilities to be sold, representing the assets and liabilities of the business upon its discontinuance on December 31, 2001, are summarized as follows:
Cash $ 2,092
Accounts receivable 7,729
Due from related parties 9,952
Inventory 5,530
Property & equipment, net 14,580
Patents, net 25,527
Other assets 3,655
Accounts payable (343,198)
Accrued liabilities (61,580)
--------------
Net liabilities to be sold $ (335,713)
==============
|
10. Line of Credit
On February 11, 2002, Remedent N.V. entered into a (euro)1,241,000 (US$1,351,573 at March 31, 2003) Line of Credit Facility (the "Facility") with the BBL, consisting of a (euro)991,000 (US$1,079,298) accounts receivable factoring line of credit and a (euro)250,000 (US$272,275) general line of credit. The factoring line of credit, to be secured by qualifying accounts receivable, will provide the Company 75% of the amount of qualifying invoices up to the maximum credit line. For each qualifying invoice, the BBL will assume all collection duties and charge a 0.47% fee on the invoice amount for these services. Advances on this line will bear interest at a rate of prime + 2.5%. As of March 31, 2003, no amounts were outstanding on this line of credit. The general line of credit is secured by the personal assets of Guy de Vreese, the Company's Chairman, and bears interest at a rate of prime + 2.5%. As of March 31, 2003, $261,572 was outstanding under this line of credit.
11. Notes Payable
Since the commencement of operations, the Company has borrowed various amounts from shareholders to provide working capital and fund operations. These borrowings are in the form of unsecured convertible debentures, due on demand and bearing an interest rate of 10%. In addition, at the sole discretion of the holder, the debenture is convertible into common stock at a percentage between 30% and 37.5% of the average trading price for the stock for the 30 day period immediately prior to the maturity date. As of March 31, 2003 and 2002, $17,853 and $10,583, respectively, was accrued for unpaid interest.
On December 11, 1998, the Company entered into a one-year Promissory Note for $50,000 with a bank, bearing interest at 10.25% annually. On April 26, 2000, the Company refinanced the debt by converting the original note into a five-year variable Promissory Note, payable on demand. The Note is secured by all of the Company's assets. The Note does not contain any restrictive financial covenants.
On September 9, 2001, the Company entered into a short-term working capital loan in the amount of $20,000. The loan matured in November 2001, with the principal and interest of $30,000 to be repaid in either cash or stock, at the Company's discretion. In May 2002, the Company negotiated for the full repayment of the principal and interest, with the issuance of 375,000 shares of common stock.
On September 21, 2001, the Company entered into a short-term working capital loan in the amount of $100,000. The loan matured in December 2001, with the principal and interest of $150,000 to be repaid in either cash or stock, at the Company's discretion. On December 21, 2001, the Company renegotiated the terms of the loan to provide for monthly principal repayments of $11,111 commencing April 1, 2002, and the issuance of 650,000 shares of common stock for the full repayment of the interest portion of the loan. Further, in May 2002, the Company negotiated for the full repayment of the remaining balance of the principal, $77,778, subsequent to the March and April principal payments as agreed to on December 21, 2001, with the issuance of 1,400,000 shares of common stock.
REMEDENT USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes payable are summarized as follows:
March 31, 2003 March 31, 2002
-------------- --------------
Promissory Note at 7.25% (Prime +
2.5%), due on demand, principal and
interest payable in monthly
installments of $1,099, final
maturity April 2005 $ 22,971 $ 32,862
Convertible debentures at 10%, due on
demand 78,576 80,000
Working capital loan, due on demand -- 20,000
Working capital loan, final maturity
December 2001 -- 100,000
-------- --------
Notes payable $101,547 $232,862
======== ========
|
12. Income Taxes
A reconciliation of the provision (benefit) for income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income before income taxes is as follows:
2003 2002
Computed tax at the federal
statutory rate of 34% $(342,167) $(667,694)
Valuation allowance $ 342,167 $ 667,694
--------- ---------
Provision (benefit) for income taxes $ 800 $ 800
========= =========
Change in Valuation Allowance $ 229,970 $ 633,014
========= =========
|
For the period ended March 31, 2003, the Company had available approximately $3.1 million of unused net operating loss carry-forwards for federal tax and approximately $1.5 million for the State of California. These loss carry-forwards begin to expire in the year 2013 if not previously utilized. The tax laws related to the utilization of loss carryforwards are complex and the amount of the Company's loss carryforward that will ultimately be available to offset future taxable income may be subject to annual limitations resulting from changes in the ownership of the Company's common stock.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets at March 31, 2003 are substantially composed of the Company's net operating loss carryforwards, for which the Company has made a full valuation allowance.
In assessing the realizability of deferred tax assets, management 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. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
13. Shareholders' Deficit
Capital Transactions
On December 31, 2002, The Company's Remedent NV subsidiary entered into an agreement with Lausha NV, a Belgium based company owned by Guy De Vreese, the Company's President and Chairman and also with Robin List, the Company's Chief Operating Officer. Under the agreement, Remedent NV issued the following shares of common stock:
a) 7,171 shares of Remedent NV common stock to Lausha NV in exchange for extinguishment of a (euro)285,000 note payable;
REMEDENT USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
b) 2,145 shares of Remedent NV common stock to Robin List in exchange for extinguishment of a (euro)25,000 note payable.
After this transaction, the Company owned 21.45% of Remedent NV. Up to June 30, 2003, the Company had a unilateral right to repurchase the shares issued to Lausha NV and Robin List at the same price that the shares were sold to these parties. If the Company exercised the option to repurchase the shares, the Company will pay interest to Lausha and List, at a rate of 7% per annum based upon outstanding value of the shares. In addition, the Company would have been required to issue 919,355 shares of common stock of the Company's Remedent Professional Holdings Inc. subsidiary to Lausha NV and 80,645 shares of the same subsidiary to Robin List. The Company's unilateral right expired on June 30, 2003.
On January 24, 2002, the Company entered into an agreement with Kenneth J. Hegemann, an officer, for the repayment of various related party debts, including accrued payroll, interest and advances, with the issuance of common stock. $472,550 of indebtedness was fully satisfied with the issuance of 945,100 shares of common stock.
On January 15, 2002, the Company acquired a dental employee outsourcing firm for 6,000,000 shares of the Company's common stock.
On January 11, 2002, the Company completed a $270,000 private placement, selling an aggregate of 3,375,000 shares of common stock at $0.08 a share, and warrants to purchase 675,000 shares of common stock at an exercise price of $0.50 per share for 5 years.
On December 21, 2001, the Company renegotiated the repayment terms on the $100,000 short-term working capital loan. The revised payment terms include monthly principal payments, commencing on April 1, 2002, of $11,111, and the issuance of 650,000 shares of common stock as repayment of the interest on the loan.
On September 14, 2001, the Company completed a $110,500 private placement, selling an aggregate of 442,000 shares of common stock at $0.25 a share, and warrants to purchase 442,000 shares of common stock at an exercise price of $0.25 per share for 5 years.
On September 13, 2001, the Company entered into an Investment Banking Agreement with a firm to provide investment banking services including, but not limited to, providing ongoing research coverage, identifying and introducing the Company to potential investors and preparing and maintaining research reports on the Company. The terms of the agreement included non-refundable consideration of 100,000 shares of common stock and 200,000 stock options for the execution of the agreement, with a monthly retainer of $2,500.
On August 24, 2001, the Company agreed to a repayment plan for its indebtedness to Southwest Multimedia, an advertising placement agent retained by the Company in August 1999. The indebtedness of $35,675 was to be repaid with $4,025 paid in cash on October 15, 2001 with the remainder paid with 126,600 shares of common stock.
On June 20, 2001, the Company entered into a Business Consulting Agreement with a business acquisition advisory firm to provide consulting services including, but not limited to, the identification and completion of acquisition targets and general consulting needs as expressed by the Company. The terms of the agreement included non-refundable consideration of 300,000 shares of common stock for the execution of the agreement, with future fees calculated as a percentage of the value of each acquisition completed by the Company. These fees are payable in the same ratio of cash to stock as the transaction.
On May 21, 2001, the Company issued 148,642 shares of common stock upon the conversion of a debenture for full settlement of the $10,000 face amount and $589 in accrued interest.
REMEDENT USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On April 25, 2001, the Company completed a $313,000 private placement, selling an aggregate of 1,252,000 shares of common stock at $0.25 a share, and warrants to purchase 1,252,000 shares of common stock at an exercise price of $0.25 per share for five years.
On April 1, 2001, the Company entered into a Retainer Agreement with its former legal counsel for legal services including the review of SEC documents, preparation of other documents as needed, and general advisory services on any matters which arise in the ordinary course of business. In connection with this agreement, the Company issued 250,000 shares of common stock for the initial $20,000 in legal services.
Stock Options
On May 29, 2001, the Board of Directors adopted an Incentive and Nonstatutory Stock Option Plan (the "Plan"), reserving 5,000,000 shares underlying options for issuance under this plan. There is a restriction that no more than 1,000,000 options may be granted to any one individual or entity in any one calendar year under the plan. As of March 31, 2003, 4,620,900 options were outstanding under the Plan.
The Plan provides for the issuance of incentive stock options to employees of the Company and non-qualified options to employees, directors and consultants of the Company with exercise prices greater than or equal to the fair market value of the Company's common stock on the date of grant. The options have vesting periods ranging from issuance date to five years, have maximum terms of five years and are subject to cancellation in the event of termination of employment.
The following table summarizes stock option activity:
Options Weighted Avg.
Outstanding Exercise Price
----------- --------------
Balance at March 31, 2002 4,595,900 0.07
Granted 25,000 $ 0.06
Canceled or expired -- --
Exercised -- --
Balance at March 31, 2003 4,620,900 $ 0.07
========= ===========
Options Exercisable at March 31, 2003 4,523,633 $ 0.06
========= ===========
|
The following table summarizes significant option groups outstanding as of March 31, 2003 and related weighted average exercise price and remaining contractual life information as follows:
Options Outstanding Options Exercisable
--------------------------------------------------------------------- ----------------------------
Range of Weighted Avg. Weighted Avg.
Exercise Remaining Exercise Number Weighted Avg.
Prices Shares Contractual Life Price Exercisable Exercise Price
------ ------ ---------------- ----- ----------- --------------
$0.05-$0.09 3,825,000 10.00 $ 0.05 3,825,000 $ 0.05
$0.10-$0.19 550,000 9.50 $ 0.12 550,000 $ 0.12
$0.20-$0.26 245,900 9.35 $ 0.24 148,633 $ 0.20
|
Compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the exercise price. Had compensation cost for these plans been determined based on the fair value of the grant dates, as prescribed by SFAS No. 123, net loss and net loss per share would have been as follows:
REMEDENT USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net Loss:
As reported $ (1,006,374)
Pro forma $ (1,008,466)
Loss per share:
As reported $ (0.03)
Pro forma $ (0.03)
|
The fair value of each option granted during the periods reported was estimated on the date of grant using the Black-Scholes option pricing model based upon the weighted average assumptions of: risk-free interest rate of 4.00%; expected volatility of 50.0%; expected life of 10 years; and an expected dividend yield of zero.
14. Common Stock Subscribed
On October 1, 2002, the Company completed a $27,500 private placement, selling an aggregate of 343,750 shares of common stock at $0.08 a share, and warrants to purchase 68,750 shares of common stock at an exercise price of $0.50 per share for 5 years.
On July 25, 2002, the Company completed a $230,000 private placement, selling an aggregate of 2,875,000 shares of common stock at $0.08 a share, and warrants to purchase 575,000 shares of common stock at an exercise price of $0.50 per share for 5 years.
On June 30, 2002, the Company negotiated for the partial repayment of unpaid wages to two current employees, $19,959, with the issuance of 39,918 shares of common stock.
On June 30, 2002, the Company negotiated for the full repayment of unpaid wages to a former employee, $19,497, with the issuance of 243,000 shares of common stock.
On May 13, 2002, the Company negotiated for the full repayment of unpaid wages and expenses to three former employees, $31,202, with the issuance of 205,000 shares of common stock and payments totaling $15,202.
On May 1, 2002, the Company completed a $30,000 private placement, selling an aggregate of 375,000 shares of common stock at $0.08 a share, and warrants to purchase 75,000 shares of common stock at an exercise price of $0.50 per share for 5 years.
On May 1, 2002, the Company negotiated for the full repayment of the remaining balance of the $100,000 working capital loan, $77,778, subsequent to the April and May principal payments as agreed to on December 21, 2001, with the issuance of 1,400,000 shares of common stock. On December 21, 2001, the Company agreed to the full repayment of the interest portion of the loan with the issuance of 650,000 shares of common stock.
On May 1, 2002, the Company negotiated for the full repayment of the
principal and interest of the $20,000 working capital loan, with the issuance of
410,000 shares of common stock.
On May 1, 2002, the Company negotiated for the full repayment of the
balance owed to its predecessor auditors, $32,650, with the issuance of 150,000
shares of common stock.
On April 26, 2002, the Company entered into an agreement with its investment bankers for the repayment of $10,000 of indebtedness, representing the monthly retainers for November and December of 2001 and January and February of 2002, with the issuance of 125,000 shares of common stock.
On March 20, 2002, the Company entered into an Agreement with New BitSnap, N.V., a firm providing the Company with consulting services, for the repayment of indebtedness with the issuance of common stock. The services, which include consulting services by Guy De Vreese and Robin List, are repaid with 3,000,000, 60,000 and 712,500 shares of common stock, issuable to New BitSnap N.V., Guy DeVreese and Robin List, respectively. New BitSnap, N.V. is controlled by Guy De Vreese, the President of New BitSnap N.V. and the Chairman of the Company.
REMEDENT USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Segment Information
The Company's reportable operating segments consist of professional dental products and oral hygiene products. The "Other" segment column below includes centralized services including corporate consulting, legal, accounting, investor relations and unallocated corporate payroll and interest. The chief operating decision making group for the Company's reportable operating segments is comprised of the Company's Chief Executive Officer, Chief Financial Officer, and the lead executives of each of the Company's two primary operating segments. The operating segments are managed separately as each operating segment represents a business unit with a distinctive marketing strategy, distribution method and target customer. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.
The following are segment information for the fiscal years ended March 31:
2003 2002
----------- -----------
Revenues:
Professional Dental
Products $ 1,964,503 $ 683,583
Dental Employee
Outsourcing 4,641 --
Oral Hygiene Products -- 50,270
----------- -----------
Total $ 1,969,144 $ 733,853
=========== ===========
Net Loss:
Professional Dental
Products $ (523,704) $ (655,754)
Dental Employee
Outsourcing (359,429) (18,890
Oral Hygiene Products -- (125,010)
Other $ (123,241) (1,164,152)
----------- -----------
Total $(1,006,374) $(1,963,806)
=========== ===========
|
The Company ships products from its operations in the US and Europe. The following are sales by its US and European locations for the fiscal years ended March 31:
2003 2002
---------- ----------
Revenues--United States:
Professional Dental
Products $ -- $ --
Dental Employee
Outsourcing -- --
Oral Hygiene
Products -- 50,270
---------- ----------
Subtotal -- 50,270
---------- ----------
Revenues--Europe:
Professional Dental
Products 1,964,503 683,583
Dental Employee
Outsourcing 4,641 --
Oral Hygiene
Products -- --
---------- ----------
Subtotal 1,969,144 --
---------- ----------
Total $1,969,144 $ 733,853
========== ==========
|
The following is long-lived asset information by geographic area as of March 31, 2003:
United States $ 33,188
Europe 10,858
--------------
$ 44,046
==============
|
16. Going Concern
The Company has incurred substantial net losses since inception, and as of March 31, 2003 and 2002 maintained a working capital and shareholders' deficit of ($870,307) and ($1,121,304), respectively, raising substantial doubt about the Company's ability to continue as a going concern. The Company has reassessed its operations and business structure and has implemented a complete corporate reorganization plan.
The plan includes the acquisition of and expansion into diversified
business ventures.
On July 1, 2001, the Company began developing, manufacturing, marketing
and distributing high-technology dental equipment. The Company retained 9
additional personnel, 2 engineers and 7 operations and finance, with strong
backgrounds in the business of high-technology dental equipment, and will market
dental curing and whitening lamps, interoral cameras and digital X-ray systems.
The Company previewed its first offering within this market at dental shows
around the world in October 2001, and initiated shipments of initial units
during the first quarter of 2002.
In connection with the Company's shift in focus to high technology professional dental equipment, the Company discontinued the operations of the Toothbrush Business on December 31, 2001, and on March 14, 2002, the Company entered into an agreement to sell the business to a third party distributor. The Company felt continued dedication to this business would not be in its shareholders' best interest. Additionally, with the business generating recurring net losses and raising deficits, Company resources can be more effectively utilized within these new markets. Throughout the fiscal year ended March 31, 2002, as the Company had been experiencing significant working capital shortages, the Company had been downsizing this business in anticipation of a sale or license of these operations. As such, the volume of the business, revenues and expenses, had been significantly reduced from previous fiscal years. For the fiscal year ended March 31, 2003, as a result of the implementation of this reorganization plan, gross profits have increased significantly and operating expenses, and the resulting operating losses, have decreased substantially.
Upon the completion of its reorganization plan, the Company's objective is to become a leading developer and manufacturer of high-technology dental equipment and operator of employee leasing firms, capitalizing on the synergies and marketing inroads each division provides Management believes that if the Company can complete its restructuring plan, the Company can generate sufficient revenues and cash flows to sustain operations. There can be no assurance that the Company will be successful in its efforts and if unsuccessful in its efforts, it may be necessary to undertake other actions to preserve asset value. The financial statements do not include adjustments that might result from the outcome of this uncertainty.
17. Subsequent Events (Unaudited)
In May 2003, the Company initiated a $900,000 private placement, seeking an aggregate of 900,000 shares of convertible preferred shares at $1.00 a share.
Exhibit 10.22
REMEDENT USA, INC.
CODE OF ETHICS
PREAMBLE
This Code of Ethics was designed by Remedent USA, Inc. to govern they way in
which we work every day. This Code of Ethics applies to each and every one of
our employees, officers, and directors.
DEFINITIONS
The "Commission" means the United States Securities and Exchange Commission.
The "Company" means Remedent USA, Inc.
"We" means all of our employees, officers, and directors.
BASICPRINCIPLES 1. We will conduct ourselves honestly and ethically, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships.
2. We will avoid conflicts of interest, including disclosure to the appropriate persons of any material transaction or relationship that reasonably could be expected to give rise to such a conflict.
3. We will provide full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with the Commission and in all other public communications we make.
4. We will comply with all applicable governmental laws, rules and regulations.
5. We will promptly report violations of this Code of Ethics to the
appropriate person within the Company as described specifically below.
6. We accept accountability for adherence to this Code of Ethics.
SPECIFIC SITUATIONS
CONFLICTS OF INTEREST. A "conflict of interest" occurs when an individual's private interest interferes in any way - or even appears to interfere - with the interests of the Company as a whole. A conflict situation can arise when an employee, officer or director takes actions or has interests that may make it difficult to perform his or her Company work objectively and effectively. Conflicts of interest also arise when an employee, officer or director, or a member of his or her family, receives improper personal benefits as a result of his or her position in the Company. Loans to, or guarantees of obligations of, such persons are of special concern. Additionally, you may not work for or receive payments of any kind from
any competitor, customer, distributor or supplier of the Company without prior approval of Company management.
We will be alert and sensitive to any interest that might be considered to conflict with the best interests of the Company. If you or one of your family members, directly or indirectly, has a financial or personal interest in a contract or transaction to which the Company is a party, or you are contemplating entering into a transaction that involves use of Company assets or could compete with the Company, you must disclose this situation AS SOON AS YOU BECOME AWARE OF IT to your immediate supervisor. Please disclose your interest and describe all material facts concerning the matter known to you, including the estimated time frame for the transaction if known. If appropriate, supervisors will report any such situations to the President of the Company. If necessary, the President of the Company will report any such situation to the Board of Directors who will, in conjunction with the Company's legal counsel, make a determination of whether or not the situation is a conflict of interest. You should not take any actions until you are advised of the decision. The Company will be sensitive to the time frames you disclose to us.
The Company promotes disclosure of any questionable situations. The Company will not retaliate and will not permit any of its employees, directors, or officers to retaliate against you for such disclosure.
CORPORATE OPPORTUNITIES. We are prohibited from (a) taking for ourselves personally opportunities that are discovered through the use of Company property, information or position; (b) using Company property, information, or position for personal gain; and (c) competing with the Company. We owe a duty to the Company to advance its legitimate interests when the opportunity to do so arises. If you believe that a contemplated transaction might be found to be a corporate opportunity, you should make full disclosure to your supervisor or manager and seek Company authorization to pursue the opportunity BEFORE pursuing the opportunity.
CONFIDENTIALITY. We must maintain the confidentiality of information entrusted to us by the Company or its customers, except when disclosure is authorized or legally mandated. Confidential information includes all non-public information that might be of use to competitors, or harmful to the Company or its customers, if disclosed.
FAIR DEALING. We will endeavor to deal fairly with the Company's customers, suppliers, competitors and employees. We will not take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or use any other unfair-dealing practice.
PROTECTION AND PROPER USE OF COMPANY ASSETS. We will protect the Company's assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the Company's profitability. All Company assets must be used for legitimate business purposes.
COMPLIANCE WITH LAWS, RULES AND REGULATIONS (INCLUDING INSIDER TRADING LAWS). The Company promotes compliance with laws, rules and regulations, including insider trading laws. Insider trading is trading or tipping others to trade in securities of our Company or any
other Company based on information which is not available to the public. Insider trading is both unethical and illegal and will be dealt with firmly. We are required to comply with all applicable laws and regulations wherever we do business. Perceived pressures from supervisors or demands due to business conditions are not excuses for violating the law. If you have any questions or concerns about the legality of an action, you should bring such questions or concerns to your supervisor. If you feel you cannot discuss your concerns with your supervisor, please bring them to the President of the Company.
ACCURACY OF COMPANY RECORDS AND REPORTS. The Company requires honest and
accurate recording and reporting of information. This includes such data as
quality, safety, and personnel records, as well as all business and financial
records and reports filed with the Commission. All financial books, records and
accounts must accurately reflect transactions and events, and conform both to
required accounting principles and to the Company's system of internal controls.
No false or artificial entries may be made. ENCOURAGING THE REPORTING OF ANY
ILLEGAL OR UNETHICAL BEHAVIOR. The Company promotes ethical behavior. The
Company encourages you to talk to supervisors, managers or other appropriate
personnel when in doubt about the best course of action in a particular
situation. Additionally, you should report violations of laws, rules,
regulations or the code of business conduct to appropriate personnel. The
Company will not allow retaliation for reports made in good faith.
CONCLUSION
No Code of Conduct or Code of Ethics can cover every situation that might arise in a company. This Code is designed to let you know our basic guiding principles and provide explanation on how to handle various situations. If you have questions on any situation, whether or not described in this document, please ask. The first place to turn is your immediate supervisor or manager. If you are uncomfortable discussing a situation with your immediate supervisor or manager, you may go to anyone in management whom you feel comfortable with, including the President of the Company. We cannot stress our final point enough: "When in doubt, ask."
Adopted by the Board of Directors on March 25, 2003.
Exhibit 23
CONSENT OF
FARBER & HASS, LLP
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Remedent USA, Inc.
Los Angeles, California
We hereby consent to the inclusion in this Annual Report on Form 10-KSB, of our report dated July 13, 2003 relating to the financial statements of Remedent USA, Inc. as of March 31, 2003 and March 31, 2002.
FARBER & HASS LLP
/s/ FARBER & HASS, LLP ----------------------- Dated: July 14, 2003 |
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934,
RULES 13a-14 AND 15d-14
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Remedent USA, Inc. (the "Company") on Form 10-KSB for the period ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robin List, Chief Executive Officer of the Company, certify, pursuant to Rules 13a-14 and 15-d14 of the Securities Exchange Act of 1934, as adopted pursuant to ss.302 of the Sarbanes-Oxley Act of 2002, that:
1. I have reviewed the Report;
2. Based upon my knowledge, the Report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading;
3. Based upon my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition and results of operations of the Company, as of, and for, the periods presented in the Report;
4. I and the other certifying officers of the Company:
o are responsible for establishing and maintaining disclosure controls and procedures for the Company;
o have designed such disclosure controls and procedures to ensure that material information is made known to us, particularly during the period in which the Report is being prepared;
o have evaluated the effectiveness of the Company's disclosure controls and procedures within 90 days of the date of the Report; and
o have presented in the Report our conclusions about the effectiveness of the disclosure controls and procedures based on the required evaluation.
5. I and the other certifying officers have disclosed to the Company's auditors and to the audit committee of the board of directors (or persons fulfilling the equivalent function):
o all significant deficiencies in the design or operation of internal controls (a pre-existing term relating to internal controls regarding financial reporting) which could adversely affect the Company's ability to record, process, summarize and report financial data and have identified for the Company's auditors any material weaknesses in internal controls; and
o any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls.
6. I and the other certifying officers have indicated in the Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
/s/ ROBIN LIST ------------------------ Robin List, Chief Executive Officer July 14, 2003 |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934,
RULES 13a-14 AND 15d-14
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Remedent USA, Inc. (the "Company") on Form 10-KSB for the period ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Stephen F. Ross, Chief Financial Officer of the Company, certify, pursuant to Rules 13a-14 and 15-d14 of the Securities Exchange Act of 1934, as adopted pursuant to ss.302 of the Sarbanes-Oxley Act of 2002, that:
1. I have reviewed the Report;
2. Based upon my knowledge, the Report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading;
3. Based upon my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition and results of operations of the Company, as of, and for, the periods presented in the Report;
4. I and the other certifying officers of the Company:
o are responsible for establishing and maintaining disclosure controls and procedures for the Company;
o have designed such disclosure controls and procedures to ensure that material information is made known to us, particularly during the period in which the Report is being prepared;
o have evaluated the effectiveness of the Company's disclosure controls and procedures within 90 days of the date of the Report; and
o have presented in the Report our conclusions about the effectiveness of the disclosure controls and procedures based on the required evaluation.
5. I and the other certifying officers have disclosed to the Company's auditors and to the audit committee of the board of directors (or persons fulfilling the equivalent function):
o all significant deficiencies in the design or operation of internal controls (a pre-existing term relating to internal controls regarding financial reporting) which could adversely affect the Company's ability to record, process, summarize and report financial data and have identified for the Company's auditors any material weaknesses in internal controls; and o any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls.
6. I and the other certifying officers have indicated in the Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
/s/ STEPHEN F. ROSS ------------------------ Stephen F. Ross Chief Financial Officer July 14, 2003 |
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Remedent USA, Inc. (the "Company") on Form 10-KSB for the period ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Robin List, Chief Executive Officer of the Company, and Stephen F. Ross, Chief Financial Officer of the Company, respectively certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ ROBIN LIST /s/ STEPHEN F. ROSS -------------------------------- ---------------------------------- Robin List, Stephen F. Ross, Chief Executive Officer Chief Financial Officer July 14, 2003 July 14, 2003 |