UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended December 31, 2016

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____ to _____.

 

Commission File No. 001-15975

 

REMEDENT, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Nevada		86-0837251
(State or Other Jurisdiction Of Incorporation or Organization)		(I.R.S. Employer Identification Number)
Zuiderlaan 1-3 bus 8, 9000 Ghent, Belgium		N/A
(Address of Principal Executive Offices)		(Zip Code)

 

Registrant’s telephone number, including area code 011 32 9 241 58 80

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.

Yes x                                 No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x                                   No ¨

 

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨                                 No x

 

The number of common shares of registrant’s stock outstanding as of February 14, 2017 was 19,995,969.

 

 

REMEDENT, INC.

 

FORM 10-Q INDEX

 

		Page Number
PART I – FINANCIAL INFORMATION
Item 1.  Financial Statements
Consolidated Balance Sheets as of December 31December 31, 2016 (Unaudited) and March 31, 2016		3
Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2016 and December 31, 2015 (Unaudited)		4
Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine months Ended December 31, 2016 and December 31, 2015 (Unaudited)		5
Consolidated Statements of Cash Flows for the Nine months Ended December 31, 2016 and December 31, 2015 (Unaudited)		6
Notes to Consolidated Financial Statements (Unaudited)		7
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3.  Quantitative and Qualitative Disclosures About Market Risk		19
Item 4.  Controls and Procedures		19
PART II – OTHER INFORMATION
Item 1.     Legal Proceedings		20
Item 1A.  Risk Factors		20
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds		20
Item 3.     Defaults Upon Senior Securities		20
Item 4.     [Removed and Reserved.]		20
Item 5.     Other Information		20
Item 6.     Exhibits		21
Signature Page		22

 

 

PART I – FINANCIAL INFORMATION

Item 1.

REMEDENT, INC. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

		December 31, 2016				March 31, 2016
		(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	86,364			$	94,434
Accounts receivable, net of allowance for doubtful accounts of $78,385 at December 31, 2016 and $85,938 at March 31, 2016			924,286				977,802
Other receivable			1,150,000				1,150,000
Inventories, net			361,748				410,748
Prepaid expense			176,353				225,550
Total current assets			2,698,751				2,858,534
PROPERTY AND EQUIPMENT, NET			315,641				410,944
OTHER ASSETS
Investment in GlamSmile Asia Ltd			1,976,640				1,632,210
Investment in MFI (Note 3)			801,104				801,104
Total assets		$	5,792,136			$	5,702,792
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current portion, long term debt		$	2,247,537			$	2,222,468
Accounts payable			847,898				789,270
Accrued liabilities			228,050				347,857
Deferred revenue			38,200				73,431
Total current liabilities			3,361,685				3,433,026
EQUITY:
Preferred Stock $0.001 par value (10,000,000 shares authorized, none issued and outstanding)			—				—
Common stock, $0.001 par value; (50,000,000 shares authorized, 19,995,969 shares issued and outstanding at December 31, 2016 and March 31, 2016 respectively)			19,996				19,996
Treasury stock, at cost; 723,000 shares outstanding at December 31, 2016 and March 31, 2016 respectively			(831,450	)			(831,450	)
Additional paid-in capital			24,906,269				24,906,269
Accumulated deficit			(20,571,319	)			(20,814,102	)
Accumulated other comprehensive (loss) (foreign currency translation adjustment)			(1,261,639	)			(1,195,181	)
Obligation to issue shares (Note 3)			97,500				97,500
Total Remedent, Inc. stockholders’ equity			2,359,357				2,183,032
Non-controlling interest			71,094				86,734
Total stockholders’ equity			2,430,451				2,269,766
Total liabilities and equity		$	5,792,136			$	5,702,792

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

REMEDENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the three months ended December 31,								For the nine months ended December 31,
		2016				2015				2016				2015
Net sales		$	592,952			$	662,438			$	1,818,865			$	2,182,021
Cost of sales			165,086				194,652				561,912				660,796
Gross profit			427,866				467,786				1,256,953				1,521,225
Operating Expenses
Research and development			733				3,523				8,424				8,753
Sales and marketing			160,602				161,521				430,318				343,361
General and administrative			257,822				288,021				785,622				819,845
Depreciation and amortization			39,874				38,874				121,313				118,754
TOTAL OPERATING EXPENSES			459,031				491,939				1,345,677				1,290,713
(LOSS) INCOME FROM OPERATIONS			(31,165	)			(24,153	)			(88,724	)			230,512
OTHER INCOME (EXPENSES)
Equity income from investments			133,267				65,534				344,430				214,756
Interest expense			(2,517	)			(15,453	)			(34,114	)			(47,918	)
Interest / Other income			2,790				980				3,527				8,731
Other deductions			(80	)			(312	)			(1,976	)			(2,082	)
TOTAL OTHER INCOME			133,460				50,749				311,867				173,487
NET INCOME BEFORE TAXES AND NON-CONTROLLING INTEREST			102,295				26,596				223,143				403,999
PROVISION FOR INCOME TAXES			1,558				(1,321	)			3,998				(105,013	)
INCOME FROM CONTINUING OPERATIONS BEFORE NON-CONTROLLING INTEREST, NET OF TAX			103,853				25,275				227,141				298,986
NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST			(8,022	)			1,614				(15,642	)			24,038
NET INCOME ATTRIBUTABLE TO REMEDENT INC. COMMON SHAREHOLDERS		$	111,875			$	23,661			$	242,783			$	274,948
INCOME PER SHARE
Basic		$	0.00			$	0.00			$	0.01			$	0.01
Fully diluted		$	0.00			$	0.00			$	0.01			$	0.01
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic			19,995,969				19,995,969				19,995,969				19,995,969
Fully diluted			19,995,969				19,995,969				19,995,969				19,995,969

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

REMEDENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

		For the three months ended December 31,								For the nine months ended December 31,
		2016				2015				2016				2015
Net Income		$	111,875			$	23,661			$	242,783			$	274,948
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment			(46,657	)			6,537				(66,458	)			(4,544	)
COMPREHENSIVE INCOME		$	65,218			$	30,198			$	176,325			$	270,404

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

REMEDENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		For the nine months ended December 31,
		2016				2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	242,783			$	274,948
Adjustments to reconcile net income to net cash used by operating activities
Depreciation and amortization			121,313				118,754
Inventory reserve			(31,010	)			(62,656	)
Allowance for doubtful accounts			(7,553	)			462
Equity investment			(344,430	)			(214,756	)
Changes in operating assets and liabilities:
Accounts receivable			53,516				(162,153	)
Inventories			49,000				12,174
Prepaid expenses			49,197				(77,315	)
Accounts payable			52,469				(81,185	)
Accrued liabilities			(119,807	)			(47,329	)
Deferred revenue			(35,231	)			1,756
Net cash used by operating activities			30,247				(237,300	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment			(28,910	)			(23,962	)
Net cash used by investing activities			(28,910	)			(23,962	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayments of) capital leases and notes payable			—				37,672
Net cash provided by financing activities			—				37,672
NET INCREASE (DECREASE) IN CASH			1,337				(223,590	)
Effect of exchange rate changes on cash and cash equivalents			(9,407	)			(8,611	)
CASH AND CASH EQUIVALENTS, BEGINNING			94,434				399,149
CASH AND CASH EQUIVALENTS, ENDING		$	86,364			$	166,948
Supplemental Information:
Interest paid		$	9,046			$	10,245
Income taxes paid		$	—			$	—

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

REMEDENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1.

DESCRIPTION OF THE COMPANY AND BASIS OF PRESENTATION

 

The Company is a manufacturer and distributor of cosmetic dentistry products, including a full line of professional dental tooth whitening products which are distributed in Europe, Asia and the United States. The Company manufactures many of its products in Ghent, Belgium as well as outsourced manufacturing in its facility in Beijing, China.  The Company distributes its products using both its own internal sales force and through the use of third party distributors.

 

In these notes, the terms “Remedent”, “Company”, “we”, “us” or “our” mean Remedent, Inc. and all of its subsidiaries, whose operations are included in these consolidated financial statements.

 

The Company’s financial statements have been prepared on an accrual basis of accounting, in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein.

 

These financial statements of the Company are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Despite the net profit for the accounting years ending March 31, 2016 and March 31, 2015, the accumulated losses of the past affect the financial situation of the Company. The continuation of the Company as a going concern is dependent upon the Company’s ability to continue to generate profitable operations. As of December 31, 2016 the Company had a working capital deficit of $662,934, and an accumulated deficit of $20,571,319. Additional funding may be required in order to support the Company’s operations and the execution of its business plan.

 

There can be no assurance that the Company will be successful in raising the required capital or that it will ultimately attain a successful level of operations. These risks, among others, are also discussed in ITEM 1A – Risk Factors in the Company’s annual report on Form 10-K filed on June 29, 2016 with the SEC.

 

The Company has conducted a subsequent events review through the date the financial statements were issued, and has concluded that there were no subsequent events requiring adjustments or additional disclosures to the Company's financial statements at December 31, 2016.

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accounting policies of the Company, as applied in the interim consolidated financial statements presented herein are substantially the same as presented in the Company’s Form 10-K for the year ended March 31, 2016, except as may be indicated below:

 

The accompanying consolidated financial statements include the accounts of: Remedent N.V. (incorporated in Belgium) located in Ghent, Belgium, Remedent Professional, Inc. and Remedent Professional Holdings, Inc. (both incorporated in California and inactive), Glamtech-USA, Inc. (a Delaware corporation acquired effective August 24, 2008), Remedent N.V.’s 50 % owned subsidiary, Biotech Dental Benelux N.V., a Belgium private company located in Ghent, Remedent N.V.’s 51% owned subsidiary, GlamSmile Deutschland GmbH, a German private company located in Munich (effective March 31, 2014 this subsidiary is inactive) and Remedent N.V.’s 80 % owned subsidiary, GlamSmile Rome, an Italian private company located in Rome (effective March 31, 2014 this subsidiary is inactive).

 

Remedent N.V. owns 21.51 % of Glamsmile Dental Technology Ltd., a Cayman Islands company (“Glamsmile Dental”). The subsidiaries of Glamsmile Dental include: Glamsmile (Asia) Limited, a company organized and existing under the laws of Hong Kong, Beijing Glamsmile Technology Development Ltd., a 100% owned subsidiary or GlamSmile Asia, its 80% owned subsidiary Beijing Glamsmile Trading Co., Ltd. and its 98% owned subsidiary Beijing Glamsmile Dental Clinic Co., Ltd., including its 100% owned Shanghai Glamsmile Dental Clinic Co., Ltd., its 100% owned Guangzhou Dental Clinic Co., Ltd. and its 50% owned Whenzhou GlamSmile Dental Clinic Ltd., which are accounted for using the equity method after January 31, 2012 (see Note 3 – Long-term Investment)

 

Remedent, Inc. is a holding company with headquarters in Ghent, Belgium. Remedent Professional, Inc. and Remedent Professional Holdings, Inc. have been dormant since inception.

 

For all periods presented, all significant inter-company accounts and transactions have been eliminated in the consolidated financial statements and corporate administrative costs are not allocated to subsidiaries.

 

Interim Financial Information

 

 

The interim consolidated financial statements of Remedent, Inc. and Subsidiaries (the “Company”) are condensed and do not include some of the information necessary to obtain a complete understanding of the financial data. Management believes that all adjustments necessary for a fair presentation of results have been included in the unaudited consolidated financial statements for the interim periods presented. Operating results for the nine monthsthree and nine months ended December 31, 2016, are not necessarily indicative of the results that may be expected for the year ended March 31, 2016. Accordingly, your attention is directed to footnote disclosures found in the Annual Report on Form 10-K for the year ending March 31, 2016, and particularly to Note 2, which includes a summary of significant accounting policies.

 

Warranties

 

The Company typically warrants its products against defects in material and workmanship for a period of 24 months from shipment.

 

A tabular reconciliation of the Company’s aggregate product warranty liability for the reporting periods is as follows:

 

		Nine months ended December 31, 2016				Year ended March 31, 2016
Product warranty liability:
Opening balance		$	5,695			$	5,421
Accruals for product warranties issued in the period			—				274
Adjustments to liabilities for pre-existing warranties			(500	)			—
Ending liability		$	5,195			$	5,695

 

Based upon historical trends and warranties provided by the Company’s suppliers and sub-contractors, the Company has made a provision for warranty costs of $5,195 and $5,695 as of December 31, 2016 and March 31, 2016, respectively.

 

Computation of Earnings (Loss) per Share

 

Basic net income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Net income (loss) per common share attributable to common stockholders assuming dilution is computed by dividing net income by the weighted average number of shares of common stock outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued.

  

On April 1, 2009, the Company adopted changes issued by the FASB to the calculation of earnings per share. These changes state that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method for all periods presented. The adoption of this change had no impact on the Company’s basic or diluted net loss per share because the Company has never issued any share-based awards that contain non-forfeitable rights.

 

At each of December 31, 2016 and March 31, 2016, the Company had 19,995,969, shares of common stock issued and outstanding.  At December 31, 2016 and March 31, 2016, the Company did not have any warrants outstanding but had 1,357,500 and 1,507,500 options outstanding respectively.  

 

Further, pursuant to ASC 260-10-50-1(c), if a fully diluted share calculation was computed for the three and nine month periods ended December 31, 2016 and December 31, 2015 respectively, it would have excluded all options respectively since the Company’s average share trading price during the three month and nine month periods ended December 31, 2016 and December 31, 2015 were less than the exercise price of all options.

 

Conversion of Foreign Currencies

 

The reporting and functional currency for the consolidated financial statements of the Company is the U.S. dollar. The home currency for the Company’s European subsidiaries, Remedent N.V., Biotech Dental Benelux N.V.,GlamSmile Rome and GlamSmile Deutschland GmbH, is the Euro, for Glamsmile Asia Ltd., and its subsidiaries, the Hong Kong dollar and the Chinese Renmimbi (“RMB”) for Mainland China. The assets and liabilities of companies whose functional currency is other that the U.S. dollar are included in the consolidation by translating the assets and liabilities at the exchange rates applicable at the end of the reporting period. The statements of income of such companies are translated at the average exchange rates during the applicable period. Translation gains or losses are accumulated as a separate component of stockholders’ equity.

 

 

Comprehensive Income (Loss)

 

The Company’s only component of other comprehensive income is the accumulated foreign currency translation consisting of (losses) of $(66,459) and $(4,544) for the nine months ended December 31, 2016 and 2015, respectively. These amounts have been recorded as a separate component of stockholders’ equity (deficit).

 

New Accounting Pronouncements

 

Recent Accounting Pronouncements Not Yet Adopted

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016 and May 2016 within ASU 2015-04, ASU 2016-08, ASU 2016-10 and ASU 2016-12, respectively.

 

This ASU supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605),” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB deferred the effective date of this pronouncement by one year to December 15, 2017 for interim and annual reporting periods beginning after that date. Early adoption is permitted, but not before the original effective date, which for annual periods was December 15, 2016. We are evaluating the impact of adopting this pronouncement.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The guidance in ASU No. 2016-02 supersedes the lease recognition requirements in ASC Topic 840, Leases (FAS 13). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its consolidated financial statements.

 

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

3.

LONG-TERM INVESTMENTS

 

GLAMSMILE ASIA LTD.

 

Acquisition

 

Effective January 1, 2010 the Company acquired 50.98% of the issued and outstanding shares of Glamsmile Asia Ltd. (“Glamsmile Asia” or “Glamsmile”), a private Hong Kong company, with subsidiaries in Hong Kong and Mainland China, in exchange for the following consideration:

 

	1.	325,000 Euro (US$466,725).  As of March 31, 2011 the full amount was paid.
	2.	250,000 shares of common stock to be issued during the fiscal year ended March 31, 2011 ($97,500 was recorded as an obligation to issue shares as at March 31, 2010).  The parties have agreed that the shares will be issued during fiscal year ended March 31, 2015.
	3.	100,000 options on closing (issued);
	4.	100,000 options per opened store at closing (issued);
	5.	100,000 options for each additional store opened before the end of 2011 at the price of the opening date of the store;
	6.	Assumption of Glamsmile’s January 1, 2010 deficit of $73,302; and
	7.	Repayment of the founding shareholder’s original advances in the amount of $196,599.  The balance of $196,599, recorded as due to related parties at March 31, 2010, is unsecured, non-interest bearing and has no specific terms of repayment other than it will be paid out of revenues from Glamsmile, as working capital allows.  During the year ended March 31, 2011 a total of $101,245 was paid to the founding shareholder, leaving a balance due of $95,354 on June 27, 2011. As at March 31, 2012 the full amount was paid.

 

All options reside under the Company’s option plan and are five year options.

 

Also pursuant to the agreement, the Company granted irrevocable right to Glamsmile Asia to use the Glamsmile trademark in Greater China.

 

 

The Company acquired a 50.98% interest in GlamSmile Asia Ltd. (“GlamSmile Asia”) in order to obtain a platform in the Chinese Market to expand and introduce our GlamSmile Asia concept into the Chinese Market. In order to sell into the Chinese Market, an approval by Chinese Authorities is required, in the form of licenses. As GlamSmile Asia was already the owner of such licenses prior to the acquisition, this was an important advantage. We obtained control of GlamSmile Asia through the acquisition of the 50.98% interest and the appointment of our CEO as a Board member of GlamSmile Asia.

 

On January 30, 2014, the Company has sold a total of 2,500,000 ordinary shares of its investment in GlamSmile Dental Technology Ltd for $3,000,000 and recognized a gain on the sale in the amount of $1,582,597. As of March 31, 2014 the Company has received $1,850,000 and has recorded the balance of $1,150,000 as an amount receivable.

 

Effective March 31, 2014 the Company has retained a 21.51% ownership in GlamSmile Asia Ltd. 

 

Deconsolidation

 

On January 28, 2012, the Company entered into a Preference A Shares and Preference A-1 Shares Purchase Agreement (“Share Purchase Agreement”) with Glamsmile Dental Technology Ltd., a Cayman Islands company and a subsidiary of the Company (“Glamsmile Dental”), Glamsmile (Asia) Limited, a company organized and existing under the laws of Hong Kong and a substantially owned subsidiary of Glamsmile Dental, Beijing Glamsmile Technology Development Ltd., Beijing Glamsmile Trading Co., Ltd., Beijing Glamsmile Dental Clinic Co., Ltd., and Shanghai Glamsmile Dental Clinic Co., Ltd., Gallant Network Limited, a shareholder of Glamsmile Dental (“Gallant”), and IDG-Accel China Growth Fund III L.P. (“IDG Growth”), IDG-Accel China III Investors L.P.(“IDG Investors”) and Crown Link Group Limited (“Crown”)(“IDG Growth, IDG Investors and Crown collectively referred to as the “Investors”), pursuant to which the Investors agreed to (i) purchase from the Company an aggregate of 2,857,143 shares of Preference A-1 Shares of Glamsmile Dental, which represents all of the issued and outstanding Preference A-1 Shares of Glamsmile Dental, for an aggregate purchase price of $2,000,000, and (ii) purchase from Glamsmile Dental an aggregate of 5,000,000 shares of Preference A Shares for an aggregate purchase price of $5,000,000.

 

Under the terms of the Share Purchase Agreement, the Company agreed (a) to indemnify the Investors and their respective affiliates for losses arising out of a breach, or inaccuracy or misrepresentation in any representation or warranty made by the Company or a breach or violation of a covenant or agreement made by the Company for up to $1,500,000, and (b) to transfer 500,000 shares of Glamsmile Dental owned by the Company to the Investors in the event of breach of certain covenants by the Company. In connection with the Share Purchase Agreement, the Company also agreed to enter into an Investor’s Rights Agreement, Right of First Refusal and Co-Sale Agreement, and Voting Agreement with the parties.

 

In addition, in connection with the contemplated transactions in the Share Purchase Agreement on January 20, 2012, the Company entered into a Distribution, License and Manufacturing Agreement with Glamsmile Dental pursuant to which the Company appointed Glamsmile Dental as the exclusive distributor and licensee of Glamsmile Veneer Products bearing the “Glamsmile” name and mark in the B2C Market in the People’s Republic of China (including Hong Kong and Macau) and Republic of China (Taiwan) and granted related manufacturing rights and licenses in exchange for the original issuance of 2,857,143 shares of Preference A-1 Shares of Glamsmile Dental and $250,000 (the receipt of which was acknowledged as an offset to payment of certain invoices of Glamsmile (Asia) Limited).

 

On February 10, 2012, the sale of the Preference A-1 Shares and the Preference A Shares was completed. As a result of the closing, the equity ownership of Glamsmile Dental, on an as converted basis, is as follows: 31.4% by the Investors, 39.2 % by Gallant, and 29.4% by the Company. Mr. De Vreese, our chairman, will remain as a director of Glamsmile Dental along with Mr. David Lok, who is the Chief Executive Officer and director of Glamsmile Dental and principal of Gallant. The Investors have a right to appoint one director of Glamsmile Dental, and accordingly the Board of Directors of Glamsmile Dental will consist of Mr. De Vreese, Mr. Lok and a director appointed by the Investors.

 

In conjunction with the transaction and resulting deconsolidation of Glamsmile Dental, the Company recorded a gain of $1,470,776, calculated as follows:

 

Consideration received		$	2,000,000
Fair value of 29.4% interest			2,055,884
Carrying value of non-controlling interest			1,117,938
Less: carrying value of former subsidiary’s net assets			(2,002,329	)
Goodwill			(699,635	)
Investment China & Hong Kong			(1,082	)
Rescission agreement  Excelsior  (Note 11)			(1,000,000	)
		$	1,470,776

 

For the nine month periods ended December 31, 2016 and December 31, 2015 the Company recorded equity income of $344,430 and $214,756 respectively as “Other income” for its portion of the net income recorded by GlamSmile Dental Technology Ltd.

 

 

The following tables represent the summary financial information of GlamSmile Asia as derived from its financial statements and prepared under US GAAP:

 

Operating data:		Nine months ended December 31, 2016				Nine months ended December 31, 2015
Revenues		$	5,561,925			$	5,360,301
Gross profit			5,055,836				4,728,435
Income (loss) from operations			5,093,790				4,643,886
Net income		$	1,601,254			$	968,928

 

MEDICAL FRANCHISES & INVESTMENTS

 

Effective March 31, 2013, the Company acquired 6.12 % of the issued and outstanding shares of Medical Franchises & Investments N.V., a Belgium corporation ("MFI NV") in exchange for a cash prepayment of $314,778 that was made during the fiscal year ended March 31, 2012. The Company’s investment in 70,334 shares of MFI NV has been recorded at the fair value of $787,339 which is the quoted market price of approximately USD $11.19 (€8.70) per share. Future unrealized gains and losses on the investment in MFI will also be recognized in other comprehensive income until realized.

 

Per ASC-320-10-25-1, investments in debt and equity securities that have readily determinable fair values and are not classified as trading or held-to-maturity securities, are classified as available-for-sale securities.

 

MFI NV has been founded to market an advance in dental technology which has the potential to replace the process of making mechanical impressions of teeth and bite structures with a digital/optical scan.

 

4.

CONCENTRATION OF RISK

 

Financial Instruments — Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade accounts receivable.

 

Concentrations of credit risk with respect to trade receivables are normally limited due to the number of customers comprising the Company’s customer base and their dispersion across different geographic areas.  At December 31, 2016, five customers accounted for 78.51% of the Company’s trade accounts receivables, and two customers accounted for 60.10%.  At December 31, 2015, five customers accounted for 52.13% of the Company’s trade accounts receivables, and two customers accounted for 34.41%.   The Company performs ongoing credit evaluations of its customers and normally does not require collateral to support accounts receivable.

 

Purchases — The Company has diversified its sources for product components and finished goods and, as a result, the loss of a supplier would not have a material impact on the Company’s operations.  For the nine months ended December 31, 2016 the Company had five suppliers who accounted for 68.55% of accounts payable. For the nine months ended December 31, 2015 the Company had five suppliers who accounted for 28.89% of accounts payable.

 

Revenues —  For the nine months ended December 31, 2016 the Company had five customers that accounted for 63.59% of total revenues. One of the five customers accounted for 41.12% of total revenues. For the nine months ended December 31, 2015 the Company had five customers that accounted for 70.12% of total revenues. One of the five customers accounted for 40.70% of total revenues.

 

5.

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

 

The Company’s accounts receivable at period end were as follows:

 

		December 31, 2016				March 31,  2016
Accounts receivable, gross		$	1,002,671			$	1,063,740
Less: allowance for doubtful accounts			(78,385	)			(85,938	)
Accounts receivable, net		$	924,286			$	977,802

 

 

6.

INVENTORIES

 

Inventories at period end are stated at the lower of cost (first-in, first-out) or net realizable value and consisted of the following:

 

		December 31, 2016				March 31,  2016
Raw materials		$	12,077			$	12,365
Components			131,061				144,278
Finished goods			540,441				606,946
			683,579				763,589
Less: reserve for obsolescence			(321,831	)			(352,841	)
Net inventory		$	361,748			$	410,748

 

7.

PREPAID EXPENSES

 

Prepaid expenses are summarized as follows:

 

		December 31, 2016				March 31,  2016
Prepaid materials and components		$	116,576			$	140,097
VAT payments in excess of VAT receipts			—				42,203
Prepaid consulting			43,677				7,951
Prepaid rent			—				26,927
Other			16,100				8,372
		$	176,353			$	225,550

 

8.

PROPERTY AND EQUIPMENT

 

Property and equipment are summarized as follows:

 

		December 31, 2016				March 31,  2016
Furniture and Fixtures		$	469,573			$	468,211
Machinery and Equipment			2,104,720				2,071,435
			2,574,293				2,539,646
Accumulated depreciation			(2,258,652	)			(2,128,702	)
Property & equipment, net		$	315,641			$	410,944

 

9.

LINE OF CREDIT

 

The Company has a mixed-use line of credit facility with BNP Paribas Fortis Bank, a Belgian bank (the “Facility”). The Facility was secured by a first lien on the assets of Remedent N.V. and by personal guarantee of the Company’s CEO. Effective September 3, 2013 we agreed to repay our line of credit of € 495.000 (US $589,050) in 10 installments of € 49.500 (US $58,905) and interest of 3.6 % per year commencing November 1, 2013, with the last payment due on July 31, 2014. The loan was completely repaid in July 2014 and all securities were released by the bank in January 2015.

 

 

10.

LONG TERM DEBT

 

Secured Debt Agreements (1)

 

On June 3, 2011, the Company obtained a loan in the principal amount of $1,000,000 (the “Loan”) from an unrelated private company, Excelsior Medical (HK) (“EM”). In connection with the Loan, the Company issued a promissory note, with a simple interest rate of 5% per annum, secured by certain assets of the Company (the “Note”). The maturity date of the Loan is June 3, 2014. Interest of $50,000 per annum is payable in cash on an annual basis. The Company is currently in the process of renegotiating the terms of repayment.

 

Effective as of January 11, 2012, the Company entered into a Rescission Agreement with EM and Asia Best Healthcare Co., Ltd. Under the Rescission Agreement, the Company agreed to repay a total of $1,000,000 received under the Distribution Agreement, plus a simple interest rate of 5%, beginning on June 30, 2012, according to the following payment schedule: (i) $250,000 to be paid no later than June 30, 2012, (ii) $250,000 plus interest on June 30, 2012, (iii) $250,000 plus interest on December 31, 2012, and (iv) $250,000 plus interest on June 30, 2013. The Company also agreed to secure such obligations owed to EM with certain collateral of the Company. During the period ended December 31, 2012 a partial payment of $20,000 in interest has been made. The Company is currently in the process of re-negotiating the terms of repayment.

 

11.

DUE TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS

 

Transactions with related parties not disclosed elsewhere in these financial statements consisted of the following:

 

Compensation:

 

During the nine month periods ended December 31, 2016 and 2015 respectively, the Company incurred $129,096 and $116,167 respectively, as compensation for all directors and officers.

 

All related party transactions involving provision of services or tangible assets were recorded at the exchange amount, which is the value established and agreed to by the related parties and reflects arms’ length consideration payable for similar services or transfers.

 

12.

ACCRUED LIABILITIES

 

Accrued liabilities are summarized as follows:

 

		December 31, 2016				March 31,  2016
Accrued employee benefit taxes and payroll		$	162,800			$	264,803
Accrued travel			5,636				5,695
Accrued VAT			10,733				1,261
Accrued audit and tax preparation fees			9,554				18,940
Reserve for warranty costs			5,195				5,695
Tax reserve			16,884				23,070
Accrued consulting fees			4,500				5,000
Other accrued expenses			12,748				23,393
		$	228,050			$	347,857

 

13.

EQUITY COMPENSATION PLANS

 

As of December 31, 2016, the Company had two equity compensation plans approved by its stockholders (1) the 2004 Incentive and Non-statutory Stock Option Plan (the “2004 Plan”); and (2) the 2007 Equity Incentive Plan (the “2007 Plan”). The Company’s approved the 2004 Plan reserving 800,000 shares of common stock of the Company pursuant to an Information Statement on Schedule 14C filed with the Commission on May 9, 2005.  Finally, the Company’s stockholders approved the 2007 Plan reserving 1,000,000 shares of common stock of the Company pursuant to a Definitive Proxy Statement on Schedule 14A filed with the Commission on October 2, 2007.

 

 

In addition to the equity compensation plans approved by the Company’s stockholders, the Company has issued options and warrants to individuals pursuant to individual compensation plans not approved by our stockholders.  These options and warrants have been issued in exchange for services or goods received by the Company.

 

The following table provides aggregate information as of December 31, 2016 with respect to all compensation plans (including individual compensation arrangements) under which equity securities are authorized for issuance.

 

 

		2004 Plan								2007 Plan								Other
		Outstanding Options				Weighted Average Exercise Price				Outstanding Options				Weighted Average Exercise Price				Outstanding Options				Weighted Average Exercise Price
Options outstanding and exercisable March 31, 2016 and December 31, 2016			357,500				0.50				1,000,000				1.21				150,000				.97
Exercise price range		$	0.50							$	1.21							$	1.75
Weighted average remaining life			1.25  years								1.36 years								0.00 years

 

A summary of the Company’s equity compensation plans approved and not approved by shareholders is as follows:

 

Plan Category		Number of securities to be issued upon exercise of of outstanding options, warrants and rights				Weighted-average exercise price of outstanding options warrants and rights				Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity Compensation Plans approved by security holders			1,445,000			$	1.17				605,000
Equity Compensation Plans not approved by security holders			820,000			$	.97				NA
Total			2,265,000			$	1.10				605,000

 

For the nine month periods ended December 31, 2016 and December 31, 2015 the Company recognized $Nil and $Nil in stock based compensation expense in the consolidated statement of operations.  No stock options were granted or cancelled/expired in the nine month periods ended December 31, 2016 and December 31, 2015.

 

14.

SEGMENT INFORMATION

 

The Company’s only operating segment consists of dental products and oral hygiene products sold by Remedent Inc., Remedent N.V., and Biotech Dental Benelux N.V. Our operations are primarily in Europe and Asia and 100% of our sales for the nine month periods ended December 31, 2016 and 2015 were generated from customers outside of the United States.

 

 

15.

COMMITMENTS

 

Real Estate Lease:

 

The Company leases an office facility of 5,187 square feet in Ghent, Belgium from an unrelated party pursuant to a nine year lease commencing September 1, 2008 at a base rent of €5,712 per month for the total location ($5,934 per month at December 31, 2016).

 

Secondly, the Company leases an office facility of 635 square feet in Brussels, Belgium from an unrelated party pursuant to a nine year lease commencing July 1, 2012 at a base rent of €969 per month for the total location ($1,007 per month at December 31, 2016).

 

Real Estate Lease and All Other Leased Equipment:

 

Minimum monthly lease payments for real estate, and all other leased equipment are as follows based upon the conversion rate for the (Euro) at December 31, 2016:

 

March 31, 2017		$	25,275
March 31, 2018			57,940
March 31, 2019			27,110
March 31, 2020			27,110
March 31, 2021			27,110
Balance			8,030
Total:		$	172,575

 

16.	FINANCIAL INSTRUMENTS

 

The FASB ASC topic 820 on fair value measurement and disclosures establishes three levels of inputs that may be used to measure fair value: quoted prices in active markets for identical assets or liabilities (referred to as Level 1), observable inputs other than Level 1 that are observable for the asset or liability either directly or indirectly (referred to as Level 2), and unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities (referred to as Level 3).

 

The carrying values and fair values of our financial instruments are as follows:

 

						December 31, 2016								March 31, 2016
						Carrying				Fair				Carrying				Fair
		Level				Value				Value				value				value
Cash			1			$	86,364			$	86,364			$	94,434			$	94,434
Accounts receivable			2			$	924,286			$	924,286			$	977,802			$	977,802
Long Term investment and advance - GlamSmile Dental Technology Asia			2			$	1,976,640			$	1,976,640			$	1,632,210			$	1,632,210
Long term investments and advances MFI			1			$	801,104			$	801,104			$	801,104			$	801,104
Deferred revenue			2			$	38,200			$	38,200			$	73,431			$	73,431
Accounts payable			2			$	847,898			$	847,898			$	789,270			$	789,270
Accrued liabilities			2			$	228,050			$	228,050			$	347,857			$	347,857

 

The following method was used to estimate the fair values of our financial instruments:

 

The carrying amount of level 1 and level 2 financial instruments approximates fair value because of the short maturity of the instruments.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable. Level 3 financial assets also include certain investment securities for which there is limited market activity such that the determination of fair value requires significant judgment or estimation.

 

 

The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The Company’s policy is to recognize transfers into and out of levels within the fair value hierarchy at the end of the fiscal quarter in which the actual event or change in circumstances that caused the transfer occurs. There were no significant transfers between Level 1, Level 2, or Level 3 during the six month period ended December 31, 2016. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement. The following table provides a reconciliation of the beginning and ending balances of the item measured at fair value on a recurring basis in the table above that used significant unobservable inputs (Level 3):

 

		Nine month period ended December 31, 2016
Long term investments and advances:
Beginning balance		$	1,632,210
Gains (losses) included in net loss			344,430
Transfers in (out of level 3)			—
Ending balance		$	1,976,640

 

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward Looking Statements

 

The discussion contained herein is for the three and nine months ended December 31, 2016 and December 31, 2015. The following discussion should be read in conjunction with the Company’s consolidated financial statements and the notes to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2016.  In addition to historical information, this section contains “forward-looking” statements, including statements regarding the growth of product lines, optimism regarding the business, expanding sales and other statements. Words such as expects, anticipates, intends, plans, believes, sees, estimates and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. Actual results could vary materially from the description contained herein due to many factors including continued market acceptance of our products. In addition, actual results could vary materially based on changes or slower growth in the oral care and cosmetic dentistry products market; the potential inability to realize expected benefits and synergies; domestic and international business and economic conditions; changes in the dental industry; unexpected difficulties in penetrating the oral care and cosmetic dentistry products market; changes in customer demand or ordering patterns; changes in the competitive environment including pricing pressures or technological changes; technological advances; shortages of manufacturing capacity; future production variables impacting excess inventory and other risk factors.  Factors that could cause or contribute to any differences are discussed in “Risk Factors” and elsewhere in the Company’s annual report on Form 10-K filed on June 29, 2015 with the Securities and Exchange Commission.  Except as required by applicable law or regulation, the Company undertakes no obligation to revise or update any forward-looking statements contained in this Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2016. The information contained in this Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2016 is not a complete description of the Company’s business or the risks associated with an investment in the Company’s common stock. Each reader should carefully review and consider the various disclosures made by the Company in this Quarterly Report on Form 10-Q and in the Company’s other filings with the Securities and Exchange Commission.

 

Overview

 

We specialize in the research, development, and manufacturing of oral care and cosmetic dentistry products.  We are one of the leading manufacturers of cosmetic dentistry products in Europe.  Leveraging our knowledge of regulatory requirements regarding dental products and management’s experience in the needs of the professional dental community, we design, develop, manufacture and distribute our cosmetic dentistry products, including a full line of professional dental products that are distributed in Europe, Asia and the United States.  We distribute our products using both our own internal sales force and through the use of third party distributors.

  

Results of Operations

 

Comparative detail of results as a percentage of sales is as follows:

 

		For the three months ended December 31,								For the nine months ended December 31,
		2016				2015				2016				2015
NET SALES			100.00	%			100.00	%			100.00	%			100.00	%
COST OF SALES			27.84	%			29.38	%			30.89	%			30.28	%
GROSS PROFIT			72.16	%			70.62	%			69.11	%			69.72	%
OPERATING EXPENSES
Research and development			0.12	%			0.53	%			0.46	%			0.40	%
Sales and marketing			27.09	%			24.38	%			23.66	%			15.74	%
General and administrative			43.48	%			43.48	%			43.19	%			37.57	%
Depreciation and amortization			6.72	%			5.87	%			6.67	%			5.44	%
TOTAL OPERATING EXPENSES			77.41	%			74.26	%			73.98	%			59.15	%
INCOME (LOSS) FROM OPERATIONS			(5.25	)%			(3.64	)%			(4.87	)%			10.57	%
Other income			22.51	%			7.66	%			17.15	%			7.95	%
INCOME (LOSS) BEFORE INCOME TAXES			17.26	%			4.02	%			12.28	%			18.52	%
Income taxes			0.26	%			(0.20	)%			0.22	%			(4.81	)%
NET INCOME			17.52	%			3.82	%			12.50	%			13.71	%
NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST			(1.35	)%			0.24	%			(0.86	)%			1.10	%
NET INCOME (LOSS) ATTRIBUTABLE TO REMEDENT INC. COMMON SHAREHOLDERS			18.87	%			3.58	%			13.36	%			12.61	%

 

 

Net Sales

 

Net sales decreased by approximately 10.5% to $592,952 for the three months ended December 31, 2016 as compared to $662,438 for the three months ended December 31, 2015.  The decrease in sales is primarily due to the impact of the exchange rate USD versus EURO. As 100 % of our sales are generated outside of the USA, all our sales are invoiced in Euros. Comparing the total Euro amounts of sales indicated a sales decrease of 11,85%, or € 537,739 for the total sales generated during the quarter ended December 31, 2016 as compared to € 604,478 for the total sales generated during the quarter ended December 31, 2015.

 

Net sales decreased by approximately 16.6% to $1,818,865 for the nine months ended December 31, 2016 as compared to $2,182,021 for the nine months ended December 31, 2015. In comparing our results in Euros, total sales decreased by 28.06% to € 1,636,172 for the nine months ended December 31, 2016, as compared to € 2,095,353 for the nine months ended December 31, 2015.

 

Additionally, the decrease in sales should also be seen in light of the uncertain European situation due to ‘Brexit’, which was still in the media, slowing down temporally the European economic activities.

 

Cost of Sales

 

Cost of sales decreased approximately 15.2% to $165,086 for the three months ended December 31, 2016 as compared to $194,652 for the three months ended December 31, 2015. Cost of sales, as a percentage of net sales, has decreased to 27.84% in the quarter ended December 31, 2016 as compared to 29.38% in the quarter ended December 31 2015. The decrease in cost of sales is primarily due to the decrease in sales.

 

Cost of sales decreased approximately 15.0% to $561,912 for the nine months ended December 31, 2016 as compared to $660,796 for the nine months ended December 31, 2015. In comparing our results in Euros, cost of sales decreased by 14.09% to €450,905 for nine month period ended December 31, 2016 as compared to € 514,435 for the nine months period ended December 31, 2015. The decrease in cost of sales is mainly due to our reduced sales for the nine months period ended December 31, 2016 as compared to last year’s nine months period ended December 31, 2015.

 

Gross Profit

 

Our gross profit decreased by $39,920 or 8.5% to $427,866 for the three months ended December 31, 2016 as compared to $467,786 for the three months ended December 31, 2015. Our gross profit as a percentage of sales increased to 72.16% in the three months ended December 31, 2016 as compared to 70.62% for the three months ended December 31, 2015.

 

Our gross profit decreased by $264,272 or 17.4%, to $1,256,953 for the nine months ended December 31, 2016 as compared to $1,521,225 for the nine months ended December 31, 2015 primarily because of the decrease in sales for the nine months period ended December 31, 2016 as compared to the nine months period ended December 31, 2015. 

 

Operating Expenses

 

Research and Development.  Our research and development expenses decreased to $733 for the three months ended December 31, 2016 as compared to $3,523 for the three months ended December 31, 2015 a decrease of 79.2%. The decrease in our research and development costs was primarily because of the finalization of our Software program the ‘Smile Me Mirror’.

 

Our research and development costs decreased by $329 or 3.8% to $8,424 for the nine months ended December 31, 2016 as compared to $8,753 for the nine months ended December 31, 2015.

 

Sales and marketing costs. Our sales and marketing costs for the three months ended December 31, 2016 and 2015 were $160,602 and $161,521 respectively, representing a decrease of $919 or 0.6%.  

 

Our sales and marketing costs increased by $86,957 or 25.3% to $430,318 for the nine months ended December 31, 2016 as compared to $343,361 for the nine months ended December 31, 2015 because of hiring new people for our sales force and our attendance during the current year at trade shows which we didn’t attend last year.

 

General and administrative costs. Our general and administrative costs for the three months ended December 31, 2016 and 2015 were $257,822 and $288,021 respectively, representing a decrease of $30,199, or 10.5%. Our general and administrative costs for the nine months ended December 31, 2016 and 2015 were $785,622 and $819,845 respectively, representing a decrease of $34,223 or 4.2%.  The decrease in general and administration costs is largely due to increased synergy between our internal divisions as a result of ongoing internal reorganization.

 

Depreciation and amortization.   Our depreciation and amortization was $39,874 for the three months ended December 31, 2016 as compared to $38,875 for the three months ended December 31, 2015.   Our depreciation and amortization was $121,313 for the nine months ended December 31, 2016 versus $118,754 for the nine months ended December 31, 2015.  The slight variation in depreciation and amortization is not material.

 

Other income.   Our net other income was $133,460 for the three months ended December 31, 2016 as compared to $50,749 for the three months ended December 31, 2015, an increase in other income of $82,711.    The increase in other income was primarily because of increased equity income from our investments. Our net other income increased by $138,380 to $311,867 for the nine months ended December 31, 2016 as compared to $173,487 for the nine months ended December 31, 2015, for the same reason as the three month variance.

 

 

Internal and External Sources of Liquidity

 

As of December 31, 2016, we had current assets of $2,698,751 compared to $2,858,534 at March 31, 2016. The decrease of $159,783 was due to a decrease of accounts receivable of $53,516, decrease in inventories of $49,000, decrease in prepaid expenses of $49,197, and a decrease in cash of $8,070.

 

As of December 31, 2016, we had cash of $86,364. We anticipate that we will need to raise additional funds to satisfy our working capital requirements and implement our business strategy to expand our direct to consumer business model. We intend to continue to look for opportunities to expand the number of GlamSmile Studios in Europe.  We will continue to review our expected cash requirements, make all efforts to collect any aged receivables, and take appropriate cost reduction measures to ensure that we have sufficient working capital to fund our operations. In the event additional needs for cash arise, we may seek to raise additional funds from a combination of sources including issuance of debt or equity securities. Additional financing may not be available on terms favorable to us, or at all. Any additional financing activity could be dilutive to our current stockholders. If adequate funds are not available or are not available on acceptable terms, our ability to take advantage of unanticipated opportunities or respond to competitive pressures could be limited.

 

Cash and Cash equivalents

 

Our balance sheet at December 31, 2016 reflects cash of $86,864 as compared to $94,434 as of March 31, 2016, a decrease of $8,070.

 

Operations

 

Net cash provided by operations was $30,247 for the nine months ended December 31, 2016 as compared to net cash used by operations of $237,300 for the nine months ended December 31, 2015. The decrease of $267,547 in net cash used by operations for the nine months ended December 31, 2016 as compared to the nine months ended December 31, 2015 is primarily because of decreased income of $32,165, increased accrued liabilities of $72,478, increased equity income of $129,674, decreased deferred revenue of $36,987, decreased prepaid expenses of $126,512, and a decrease in accounts payable of $133,654.

 

Investing activities

 

Net cash used in investing activities totaled $28,910 for the nine months ended December 31, 2016 as compared to net cash used by investing activities of $23,962 for the nine months ended December 31, 2015. Cash used in the nine months ended December 31, 2016 and 2015 was primarily for investing in equipment.

 

Financing activities

 

Net cash (used)/provided by financing activities totaled $Nil for the nine months ended December 31, 2016, as compared to $37,672 for the nine months ended December 31, 2015. 

 

During the nine months ended December 31, 2016 and December 31, 2015, we recognized an increase/ (decrease) in cash and cash equivalents of $(9,307) and $(8,611), respectively, from the effect of exchange rates between the Euro and the US Dollar.

 

Off-Balance Sheet Arrangements

 

At December 31, 2016, we did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

 

Not Applicable.

 

Item 4.  Controls and Procedures 

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the required time periods and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objective, and management is required to exercise its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

 

Management conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2016.  Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2016.

 

Changes in Internal Control Over Financial Reporting

 

There have been no material changes in our  internal controls over financial reporting identified in connection with the evaluation of disclosure controls and procedures discussed above that occurred during the quarter ended December 31, 2016 or subsequent to that date that have materially affected, or are reasonably likely to materially affect, our  internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

To the best knowledge of management, there are no material legal proceedings pending against the Company.

 

Item 1A.  Risk Factors

 

Not Applicable.

 

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

 

None. 

 

Item 3.  Defaults Upon Senior Securities

 

None.

 

Item 4.  [Removed and Reserved]

 

Item 5.  Other Information

 

None.

 

 

Item 6.  Exhibits

 

EXHIBIT INDEX

 

Exhibit No		Description
31.1*		Certifications of the Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act
31.2*		Certifications of the Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act
32.1*		Certifications of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act
32.2*		Certifications of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase
101.DEF*		XBRL Taxonomy Extension Definition Linkbase
101.LAB*		XBRL Taxonomy Extension Label Linkbase
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase

 

 

* Filed herewith

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	REMEDENT, INC.
Date:    February 14, 2017	By:	/s/ Guy De Vreese
		Name:	Guy De Vreese
		Title:	Chief Executive Officer
			(Principal Executive Officer)
Date:    February 14, 2017	By:	/s/ Philippe Van Acker
		Name:	Philippe Van Acker
		Title:	Chief Financial Officer
			(Principal Financial and Accounting Officer)