The accompanying notes are an integral part
of these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 its facility in Ghent, Belgium as well as
outsourced manufacturing 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.
The continuation of the Company as a going concern is dependent upon the Company’s ability to achieve profitable operations,
continued financial support from its shareholders, and the ability of management to raise additional debt financing and/or equity
capital through private and public offerings of its common stock. As of March 31, 2014 the Company had working capital deficit
of $451,360 and an accumulated deficit of $20,573,865. 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. Despite these matters of emphasis, the financial statements have
been prepared on a going concern basis.
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 March 31, 2014.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Principles of Consolidation
The accompanying consolidated financial
statements include the accounts of: Remedent N.V. (incorporated in Belgium) located in 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 and Remedent N.V.’s 80 % owned subsidiary, GlamSmile Rome, an Italian private company located in Rome.
Remedent N.V.’s 21,54 % investment
in Glamsmile Dental Technology Ltd., a Cayman Islands company (“Glamsmile Dental”) and its subsidiaries, Glamsmile
(Asia) Limited, a company organized and existing under the laws of Hong Kong and a substantially 100 % owned subsidiary of Glamsmile
Dental, 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.
Pervasiveness of Estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States requires the Company to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, the Company
evaluates estimates and judgments, including those related to revenue, bad debts, inventories, fixed assets, intangible assets,
stock based compensation, income taxes, and contingencies. Estimates are based on historical experience and on various other assumptions
that the Company believes reasonable in the circumstances. The results form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue from product
sales when persuasive evidence of a sale exists: that is, a product is shipped under an agreement with a customer; risk of loss
and title has passed to the customer; the fee is fixed or determinable; and collection of the resulting receivable is reasonably
assured. Sales allowances are estimated based upon historical experience of sales returns.
Revenues from product sales are recognized
when the product is shipped and title and risk of loss has passed to the customer, typically upon delivery and when the quantity
and price is fixed and determinable, and when collectability is reasonable assured.
Upfront fees are recognized upon the date
of the agreement (i.e. point of sale) because they relate solely to the sale of territories (that are sold in perpetuity), are
non-refundable, and are not contingent upon additional deliverables.
We have evaluated all deliverables in our
contracts (per ASC 605-25-5) ((a) territory & (b) manufacturing/marketing training & development fees) and determined that
they are separate, as follows:
|
|
·
|
Both (a) & (b) have value to our customers on a standalone basis and can be sold by our customers separately.
|
|
|
·
|
Delivery or performance of the undelivered item or items is considered probable and substantially in our control.
|
Our development fees/milestone payments
are recognized in accordance with the Milestone Method pursuant to FASB ASC 605. Revenues from milestones related to
an arrangement under which we have continuing performance obligations i.e. specifically scheduled training and development activities,
if deemed substantive, are recognized as revenue upon achievement of the milestone. Milestones are considered substantive if all
of the following conditions are met: (a) the milestone is non-refundable; (b) achievement of the milestone was not reasonably assured
at the inception of the arrangement; (c) substantive effort is involved to achieve the milestone; and (d) the amount of the milestone
appears reasonable in relation to the effort expended. If any of these conditions is not met, the milestone payment is deferred
and recognized as revenue as we complete our performance obligations.
We receive royalty revenues under license
agreements with third parties that sell products based on technology developed by us or to which we have rights. The license agreements
provide for the payment of royalties to us based on sales of the licensed product. We record these revenues as earned monthly,
based on reports from our licensees.
Shipping and Handling
Shipping and handling costs are included
as a component of cost of sales. Shipping and handling costs billed to customers are included in sales.
Impairment of Long-Lived Assets
Long-lived assets consist primarily of
patents and property and equipment. The recoverability of long-lived assets is evaluated by an analysis of operating results and
consideration of other significant events or changes in the business environment. If impairment exists, the carrying amount of
the long-lived assets is reduced to its estimated fair value, less any costs associated with the final settlement. To
date, management has not identified any impairment of property and equipment. There can be no assurance, however, that
market conditions or demands for the Company’s services will not change which could result in future long-lived asset impairment.
Business Combinations
On April 1, 2010, the Company adopted the
new accounting guidance for business combinations according to FASB Codification ASC 805,
Business Combinations
. This guidance
establishes principles and requirements for the reporting entity in a business combination, including recognition and measurement
in the financial statements of the identifiable assets acquired, the liabilities assumed, goodwill, and any non-controlling interest
in the acquire, as well as disclosure requirements to enable financial statement users to evaluate the nature and financial effects
of the business combination. Additionally, it provides guidance for identifying a business combination, measuring the acquisition
date, and defining the measurement period for adjusting provisional amounts recorded. The implementation of this standard did not
have an impact on the Company’s consolidated financial statements.
Cash and Cash Equivalents
The Company considers all highly liquid
investments with maturities of three months or less at the time of purchase to be cash or cash equivalents.
Non-Controlling Interest
The Company adopted ASC Topic 810
Non-controlling
Interests in Consolidated Financial Statements
— an Amendment of Accounting Research Bulletin No. 51
as of
April 1, 2009. SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties
other than the parent, the amount of consolidated net income attributable to the parent and to the non-controlling interest, changes
in a parent’s ownership interest and the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated.
ASC Topic 810 also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish
between the interest of the parent and the interests of the non-controlling owner. The adoption of ASC Topic 810 impacted the presentation
of our consolidated financial position, results of operations and cash flows.
Fair Value of Financial Instruments
The Company’s financial instruments
consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, line of credit, short term and
long-term debt. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities
approximate their respective fair values because of the short maturities of those instruments. The Company’s investment in
MFI is classified as an available for sale investment with all subsequent gains and losses recorded in other comprehensive income
until realized. The Company’s long-term debt consists of its revolving credit facility and long-term capital lease obligations.
The carrying value of the revolving credit facility approximates fair value because of its variable short-term interest rates. The
fair value of the Company’s long-term capital lease obligations is based on current rates for similar financing.
Accounts Receivable
and Allowance for Doubtful Accounts
The Company sells professional dental equipment
to various companies, primarily to distributors located in Western Europe, Middle East, the United States of America, Asia and
China. The terms of sales vary by customer, however, generally are 2% 10 days, net 30 days. Accounts receivable is reported at
net realizable value and net of allowance for doubtful accounts. The Company uses the allowance method to account for uncollectible
accounts receivable. The Company’s estimate is based on historical collection experience and a review of the current status
of trade accounts receivable.
Inventories
The Company purchases certain of its products
in components that require assembly prior to shipment to customers. All other products are purchased as finished goods ready to
ship to customers.
The Company writes down inventories for
estimated obsolescence to estimated market value based upon assumptions about future demand and market conditions. If actual market
conditions are less favorable than those projected, then additional inventory write-downs may be required. Inventory reserves for
obsolescence totaled $477,502 at March 31, 2014 and $88,724 at March 31, 2013.
Prepaid Expense
The Company’s prepaid expense consists
of prepayments to suppliers for inventory purchases and to the Belgium customs department, to obtain an exemption of direct VAT
payments for imported goods out of the European Union (“EU”). This prepayment serves as a guarantee to obtain the facility
to pay VAT at the moment of sale and not at the moment of importing goods at the border. Prepaid expenses also include VAT payments
made for goods and services in excess of VAT payments received from the sale of products as well as amounts for other prepaid operating
expenses.
Property and Equipment
Property and equipment are stated at cost.
Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs, which do not improve
or extend the lives of the respective assets, are expensed. At the time property and equipment are retired or otherwise disposed
of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements
or sales are credited or charged to income.
The Company depreciates its property and
equipment for financial reporting purposes using the straight-line method based upon the following useful lives of the assets:
|
Tooling
|
3 Years
|
|
Furniture and fixtures
|
4 Years
|
|
Machinery and Equipment
|
4 Years
|
Patents
Patents consist of the costs incurred to
purchase patent rights and are reported net of accumulated amortization. Patents are amortized using the straight-line method over
a period based on their contractual lives.
Research and Development Costs
The Company expenses research and development
costs as incurred.
Advertising
Costs incurred for producing and communicating
advertising are expensed when incurred and included in sales and marketing and general and administrative expenses. For the years
ended March 31, 2014 and March 31, 2013, advertising expense was $309,076 and $283,690, respectively.
Income taxes
Income taxes are accounted for under the
asset and liability method as stipulated by Accounting Standards Codification (“ASC”) 740 formerly Statement of Financial
Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes”. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences
are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities or a change in tax rate
is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced to estimated amounts to
be realized by the use of a valuation allowance. A valuation allowance is applied when in management’s view it is more likely
than not (50%) that such deferred tax will not be utilized.
Effective February 1, 2008, the Company
adopted certain provisions under ASC Topic 740, Income Taxes, (“ASC 740”), which provide interpretative guidance for
the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Effective
with the Company’s adoption of these provisions, interest related to the unrecognized tax benefits is recognized in the financial
statements as a component of income taxes. The adoption of ASC 740 did not have an impact on the Company’s financial position
and results of operations.
In the unlikely event that an uncertain
tax position exists in which the Company could incur income taxes, the Company would evaluate whether there is a probability that
the uncertain tax position taken would be sustained upon examination by the taxing authorities. Reserves for uncertain tax position
would then be recorded if the Company determined it is probable that a position would not be sustained upon examination or if a
payment would have to be made to a taxing authority and the amount is reasonably estimable. As of March 31, 2014, the Company does
not believe it has any uncertain tax positions that would result in the Company having a liability to the taxing authorities.
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 period is as follows:
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|
|
Year ended
March 31, 2014
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|
|
Year ended
March 31, 2013
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Product warranty liability:
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|
|
|
|
|
|
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|
|
Opening balance
|
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$
|
19,301
|
|
|
$
|
20,019
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|
|
Accruals for product warranties issued in the period
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|
|
(12,402
|
)
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|
|
(973
|
)
|
|
Adjustments to liabilities for pre-existing warranties
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—
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|
|
|
255
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|
Ending liability
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$
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6,899
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$
|
19,301
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|
Based upon historical trends and warranties
provided by the Company’s suppliers and sub-contractors, the Company has made a provision for warranty costs of $6,899 and
$19,301 as of March 31, 2014 and March 31, 2013, respectively.
Segment Reporting
“Disclosure About Segments of an
Enterprise and Related Information” requires use of the “management approach” model for segment reporting. The
management approach model is based on the way a company’s management organizes segments within the company for making operating
decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management
structure, or any other manner in which management disaggregates a company. The Company’s management considers its business
to comprise one segment for reporting purposes.
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 March 31, 2014 and 2013, the
Company had 19,995,969, shares of common stock issued and outstanding. At March 31, 2014 and 2013, the Company had
Nil and 3,378,379 warrants outstanding, respectively and 1,795,000 and 1,795,000 options outstanding, respectively. All
outstanding warrants and options were excluded from the computation of earnings per share for the year ended March 31, 2014 because
their effect would have been anti-dilutive.
Further, pursuant to ASC 260-10-50-1(c),
if a fully diluted share calculation was computed for the years ended March 31, 2014 and 2013 respectively, it would have excluded
all warrants and all options since the Company’s average share trading price during the last two year period was less than
the exercise price of all warrants and 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., 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)
Comprehensive income (loss) includes all
changes in equity except those resulting from investments by owners and distributions to owners, including accumulated foreign
currency translation, and unrealized gains or losses on ‘Available For Sale (AFS)’ securities.
The Company’s other comprehensive
income for the year ended March 31, 2014 consisted of a gain on foreign currency translation of $153,567 and a fair value adjustment
on AFS security in the amount of $171,313. For the year ended March 31, 2013 the Company’s other comprehensive income consisted
of a gain on foreign currency translation of $91,006 and a fair value adjustment on AFS security in the amount of $472,561.
These amounts have been recorded as a separate
component of stockholders’ equity (deficit).
Stock Based Compensation
The Company has a stock-based compensation
plan which is described more fully in Note 15. The Company measures the compensation cost of stock options and other stock-based
awards to employees and directors at fair value at the grant date and recognizes compensation expense over the requisite service
period for awards expected to vest.
Except for transactions with employees
and directors, all transactions in which goods or services are the consideration received for the issuance of equity instruments
are accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever
is more reliably measurable. Additionally, the Company has determined that the dates used to value the transaction are either:
(1) The date at which a commitment for
performance by the counter party to earn the equity instruments is established; or
(2) The date at which the counter party’s
performance is complete.
New Accounting Pronouncements
Recently Adopted
The below described
accounting guidance has all been adopted by the Company effective April 1, 2013 and has not had a material impact upon the Company’s
financial condition or results of operations.
In September 2011, the FASB issued new
accounting guidance on testing goodwill for impairment. The primary objective of this accounting guidance is to reduce complexity
and costs by allowing an entity to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether
it should calculate the fair value of a reporting unit. If, after assessing qualitative factors, an entity determines that it is
not more likely than not (a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying
amount, then the two-step goodwill impairment test is unnecessary.
In December 2011, the FASB issued new accounting
guidance on disclosures about offsetting assets and liabilities. The requirements for offsetting are different under U.S. GAAP
and IFRS. Therefore, the objective of this accounting guidance is to facilitate comparison between financial statements prepared
under U.S. GAAP and IFRS by enhancing disclosures of the effect or potential effect of netting arrangements on an entity’s
financial position, including the effect or potential effect of rights of setoff associated with certain assets and liabilities.
In July 2012, the FASB issued guidance
that simplifies how entities test indefinite-lived intangible assets for impairment, which improves consistency in impairment testing
requirements among long-lived asset categories. ASU 2012-02 permits an assessment of qualitative factors to determine whether it
is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. For assets
in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, ASU 2012-02
eliminates the requirement to perform quantitative impairment testing as outlined in the previously issued standards.
In February 2013, the FASB issued guidance
that requires reporting of the effect of significant reclassifications out of accumulated other comprehensive income on the respective
line items in net income if the amount being reclassified is required to be reclassified in its entirety to net income. For other
amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required
to cross-reference other disclosures that provide additional detail about these amounts. The amendments do not change the current
requirements for reporting net income or other comprehensive income in the financial statements.
In January 2013, the FASB issued ASU No.
2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies
which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11.
The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed
unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope
of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while
still giving financial statement users sufficient information to analyze the most significant presentation differences between
financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs
Recent Accounting Pronouncements
Not Yet Adopted
In April 2013,
the Financial Accounting Standards Board (“FASB”) issued ASU No. 2013-07, Presentation of Financial Statements (Topic
205): Liquidation Basis of Accounting. Under the new standard, an organization will be required to prepare its financial statements
using the liquidation basis of accounting when liquidation is “imminent.” Liquidation is considered imminent when the
likelihood is remote that the organization will return from liquidation and either (a) a plan for liquidation is approved by the
person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan
will be blocked by other parties or (b) a plan for liquidation is being imposed by other forces (for example, involuntary bankruptcy).
In addition, the new standard provides principles for the recognition and measurement of assets and liabilities and requirements
for financial statements prepared using the liquidation method of accounting. The new standard is effective for entities that determine
liquidation is imminent during annual periods beginning after December 15, 2013, and interim reporting periods therein. Entities
are to apply the requirements prospectively from the day that liquidation becomes imminent, and early adoption is permitted. We
are currently unable to determine the impact on our financial statements of the new standard should we be required to adopt it
in the future.
3
.
LONG-TERM INVESTMENTS
REMEDENT OTC BV
In connection with the restructuring of
the Company’s OTC business in December 2008, the Company controlled Remedent OTC BV until September 30, 2011 through its
board representations. As agreed upon in the Voting Agreement, after September 30, 2011, the Company had one board representation
and consequently no longer controlled its investment in Remedent OTC BV. As such, the financials of Remedent OTC BV are no longer
included in the consolidated Financial Statements but accounted for through the equity method. No gain or loss was recorded on
the deconsolidation. After September 30, 2011, the Company still owned 50% of Remedent OTC BV.
For the year ended March 31, 2014, the
Company recorded an equity loss of $Nil (2013 – ($149,064)) in “Other (expenses) income” for its portion of the
net loss recorded by Remedent OTC B.V.
Effective July 13, 2012, and as amended
February 7, 2013 the Company sold 100% of its interest in the share capital of Remedent OTC B.V., to an arm’s length party
for the total sales price of €950,000 ( $667,300 (€ 500,000), (received during July 2012) and $600,570 (€450,000)
was received in February 2013.
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:
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|
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.
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|
|
3.
|
100,000 options on closing (issued);
|
|
|
4.
|
100,000 options per opened store at closing (issued);
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|
|
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 21.5% 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 14)
|
|
|
(1,000,000
|
)
|
|
|
|
$
|
1,470,776
|
|
For the year ended March 31, 2014, the
Company recorded equity income of $156,620 (2013 - $349,054) in “Equity income from investments ” for its portion of
the net income recorded by GlamSmile Dental Technology Ltd.
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. Because the investment is being recognized as an available-for-sale investment, an unrecognized
gain of $171,313 (2013 - $472,561) has been recorded in accumulated other comprehensive income. 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. SHORT TERM LOAN
Effective December 3, 2012, the Company
entered into a Loan Agreement (the “Loan Agreement”) with BNP Paribas Fortis Bank, a Belgian Bank, pursuant to which
the Company borrowed $132,820 (€100.000). The loan bears interest of 3.68% per annum and is repayable in 24 equal monthly
installments of € 4,331 ($5,976 at the closing rate of March 31, 2014). No additional guaranties (see note 13- secured debt
agreements (2)) were required. As of March 31, 2014, the Company has recorded $52,951 as a current liability.
5. CONCENTRATION OF RISK
Financial Instruments — Financial
instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade accounts receivable.
Concentrations of credit risk with respect
to trade receivables are normally limited due to the number of customers comprising the Company’s customer base and their
dispersion across different geographic areas. At March 31, 2014 five customers accounted for a total of 82.08% of the Company’s
trade accounts receivable and one of those customers accounted for 40.8% of total accounts receivable. At March 31, 2013 five customers
accounted for a total of 72.9% of the Company’s trade accounts receivable and one of those customers accounted for 42.17%
of total accounts receivable. The Company performs ongoing credit evaluations of its customers and normally does not
require collateral to support accounts receivable.
Purchases — The Company has diversified
its sources for product components and finished goods and, as a result, the loss of a supplier would not have a material impact
on the Company’s operations. As at March 31, 2014, the Company had five suppliers who accounted for 39.78% of unpaid accounts
payable. As at March 31, 2013, the Company had five suppliers who accounted for 28.5% of unpaid accounts payable.
Revenues — For the year ended March
31, 2014 the Company had five customers that accounted for 81.07 % of total revenues .For the year ended March 31, 2013 the Company
had five customers that accounted for 71.31% of total revenues.
6. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR
DOUBTFUL ACCOUNTS
The Company’s accounts receivable
at year end were as follows:
|
|
|
March 31, 2014
|
|
|
March 31, 2013
|
|
|
Accounts receivable, gross
|
|
$
|
835,047
|
|
|
$
|
952,804
|
|
|
Less: allowance for doubtful accounts
|
|
|
(47,469
|
)
|
|
|
(4,833
|
)
|
|
Accounts receivable, net
|
|
$
|
787,578
|
|
|
$
|
947,971
|
|
7. INVENTORIES
Inventories at year end are stated at the
lower of cost (first-in, first-out) or net realizable value and consisted of the following:
|
|
|
March 31, 2014
|
|
|
March 31, 2013
|
|
|
Raw materials
|
|
$
|
23,760
|
|
|
$
|
38,452
|
|
|
Components
|
|
|
228,884
|
|
|
|
214,723
|
|
|
Finished goods
|
|
|
824,109
|
|
|
|
827,356
|
|
|
|
|
|
1,076,753
|
|
|
|
1,080,531
|
|
|
Less: reserve for obsolescence
|
|
|
(477,502
|
)
|
|
|
(88,724
|
)
|
|
Net inventory
|
|
$
|
599,251
|
|
|
$
|
991,807
|
|
8. PREPAID EXPENSES
Prepaid expenses are summarized as follows:
|
|
|
March 31, 2014
|
|
|
March 31, 2013
|
|
|
Prepaid materials and components
|
|
$
|
45,546
|
|
|
$
|
196,876
|
|
|
Prepaid consulting
|
|
|
—
|
|
|
|
73,854
|
|
|
VAT payments in excess of VAT receipts
|
|
|
11,430
|
|
|
|
41,241
|
|
|
Prepaid trade show expenses
|
|
|
—
|
|
|
|
4,632
|
|
|
Prepaid rent
|
|
|
48,293
|
|
|
|
129,957
|
|
|
Other
|
|
|
23,309
|
|
|
|
119,940
|
|
|
|
|
$
|
128,578
|
|
|
$
|
566,500
|
|
9. PROPERTY AND EQUIPMENT
Property and equipment are summarized as
follows:
|
|
|
March 31, 2014
|
|
|
March 31, 2013
|
|
|
Furniture and Fixtures
|
|
$
|
461,260
|
|
|
$
|
596,471
|
|
|
Machinery and Equipment
|
|
|
1,706,248
|
|
|
|
1,619,770
|
|
|
|
|
|
2,167,508
|
|
|
|
2,216,241
|
|
|
Accumulated depreciation
|
|
|
(1,678,088
|
)
|
|
|
(1,521,157
|
)
|
|
Property & equipment, net
|
|
$
|
489,420
|
|
|
$
|
695,084
|
|
10. 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 is 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 have agreed to repay our line of credit of € 495.000 (US $683,001) in 10 installments of € 49.500 (US $68,300) + an
interest of 3,6 % per year commencing November 1, 2013, with the last payment due on August 1, 2014.
11. LONG TERM DEBT
Capital Lease Agreements:
On January 15, 2010, the Company
entered into a capital lease agreement over a 5 year period for veneer manufacturing equipment totaling €251,903 (US $347,576).
The lease requires a monthly
payment of principal and interest at 9.72% and provide for a buyout at the conclusion of the lease terms of 4% of the original
value of the contract.
The net book value as of March
31, 2014 and March 31, 2013 of the equipment subject to the foregoing lease was $77,943 and $160,056 respectively.
The following is a schedule
by years of future minimum lease payments under capital lease together with the present value of the net minimum lease payments
as of March 31, 2014:
|
Year ending March 31:
|
|
|
|
|
2015
|
|
$
|
83,517
|
|
|
Total minimum lease payments
|
|
|
83,517
|
|
|
Less: Amount representing estimated executory costs (such as taxes, maintenance, and insurance), including profit thereon, included in total minimum lease payments
|
|
|
—
|
|
|
Net minimum lease payments
|
|
|
83,517
|
|
|
Less: Amount representing interest (*)
|
|
|
1,531
|
|
|
Present value of minimum lease payments (**)
|
|
$
|
81,986
|
|
* Amount necessary to reduce net minimum lease payments
to present value calculated at the Company’s incremental borrowing rate at the inception of the leases.
** Reflected in the balance sheet as current obligations under
capital leases of $81,986 respectively.
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.
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.
Secured Debt Agreements (2)
On December 3, 2012, the Company obtained a loan in the principal
amount of € 100,000 (the “Loan”) from BNP Paribas Fortis bank, to be repaid over the next 24 months. The loan
is secured by a lien on the assets of Remedent N.V. as already granted for the use of our existing Credit Line Facility. The maturity
date of the Loan is January 2, 2015 at an interest rate of 3,68% to be repaid in monthly installments of € 4.331 ($5,976).
12. 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 years ended March 31, 2014 and
2013 respectively, the Company incurred $185,666 and $545,475 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 reflecting arm’s length consideration payable for similar services or transfers.
13. ACCRUED LIABILITIES
Accrued liabilities are summarized as follows:
|
|
|
March 31, 2014
|
|
|
March 31, 2013
|
|
|
Accrued employee benefit taxes and payroll
|
|
$
|
358,567
|
|
|
$
|
397,666
|
|
|
Accrued travel
|
|
|
7,212
|
|
|
|
9,650
|
|
|
Commissions
|
|
|
23,110
|
|
|
|
—
|
|
|
Accrued audit and tax preparation fees
|
|
|
17,938
|
|
|
|
14,264
|
|
|
Reserve for warranty costs
|
|
|
6,899
|
|
|
|
19,301
|
|
|
Advances received on account
|
|
|
—
|
|
|
|
11,823
|
|
|
Accrued advertising
|
|
|
10,153
|
|
|
|
9,864
|
|
|
Accrued interest
|
|
|
381
|
|
|
|
12,578
|
|
|
Accrued consulting fees
|
|
|
1,500
|
|
|
|
2,500
|
|
|
Other accrued expenses
|
|
|
24,543
|
|
|
|
259,418
|
|
|
|
|
$
|
450,303
|
|
|
$
|
737,064
|
|
14. INCOME TAXES
The domestic and foreign (“Belgium”,
“German”, “Italian”, Hong Kong and China) components of income (loss) before income taxes and minority
interest were comprised of the following:
|
|
|
March 31, 2014
|
|
|
March 31, 2013
|
|
|
Domestic
|
|
$
|
(97,114
|
)
|
|
$
|
(169,271
|
)
|
|
Foreign
|
|
|
621,622
|
|
|
|
(812,512
|
)
|
|
|
|
$
|
524,508
|
|
|
$
|
(981,783
|
)
|
The Company’s domestic and foreign
components of deferred income taxes are as follows:
|
|
|
March 31, 2014
|
|
|
March 31, 2013
|
|
|
Domestic — Net operating loss carryforward
|
|
$
|
7,898,368
|
|
|
$
|
7,864,378
|
|
|
Foreign — Net operating loss carryforward
|
|
|
311,586
|
|
|
|
529,153
|
|
|
Total
|
|
|
8,209,954
|
|
|
|
8,393,531
|
|
|
Valuation allowance
|
|
|
(8,209,954
|
)
|
|
|
(8,393,531
|
)
|
|
Net deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
Because of the uncertainty surrounding
the timing of realizing the benefits of favorable tax attributes in future income tax returns, the Company has placed a valuation
allowance against its deferred income tax assets.
The principal reasons for the difference
between the income tax (benefit) and the amounts computed by applying the statutory income tax rates to the income (loss) for the
year ended March 31, 2014 and March 31, 2013 are as follows:
|
|
|
March 31, 2014
|
|
|
March 31, 2013
|
|
|
Domestic
|
|
|
|
|
|
|
|
|
|
Pre tax income (loss)
|
|
$
|
(97,114
|
)
|
|
$
|
(169,271
|
)
|
|
Statutory tax rate
|
|
|
35
|
%
|
|
|
35
|
%
|
|
Tax benefit based upon statutory rate
|
|
|
(33,990
|
)
|
|
|
(59,245
|
)
|
|
Valuation allowance
|
|
|
33,990
|
|
|
|
59,245
|
|
|
Net domestic income tax (benefit)
|
|
|
—
|
|
|
|
—
|
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
Pre tax income (loss)
|
|
|
621,622
|
|
|
|
(812,512
|
)
|
|
Statutory tax rate
|
|
|
35
|
%
|
|
|
35
|
%
|
|
Tax expense (benefit) based upon statutory rate
|
|
|
217,567
|
|
|
|
(284,379
|
)
|
|
Permanent differences
|
|
|
(217,567
|
)
|
|
|
284,379
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
Net foreign income tax expense (benefit)
|
|
|
—
|
|
|
|
153
|
|
|
Total Income tax (benefit )
|
|
$
|
—
|
|
|
$
|
153
|
|
15. EQUITY COMPENSATION PLANS
As of March 31, 2013, the Company had three
equity compensation plans approved by its stockholders (1) the 2001 Incentive and Non-statutory Stock Option Plan (the “2001
Plan”), (2) the 2004 Incentive and Non-statutory Stock Option Plan (the “2004 Plan”); and (3) the 2007 Equity
Incentive Plan (the “2007 Plan”). The Company’s stockholders approved the 2001 Plan reserving 250,000 shares
of common stock of the Company pursuant to an Information Statement on Schedule 14C filed with the Commission on August 15, 2001.
In addition, the Company’s stockholders approved the 2004 Plan reserving 800,000 shares of common stock of the Company pursuant
to an Information Statement on Schedule 14C filed with the Commission on May 9, 2005. Finally, the Company’s stockholders
approved the 2007 Plan reserving 1,000,000 shares of common stock of the Company pursuant to a Definitive Proxy Statement on Schedule
14A filed with the Commission on October 2, 2007.
In addition to the equity compensation
plans approved by the Company’s stockholders, the Company has issued options and warrants to individuals pursuant to individual
compensation plans not approved by our stockholders. These options and warrants have been issued in exchange for services
or goods received by the Company.
The following table provides aggregate
information as of March 31, 2014 and March 31, 2013 with respect to all compensation plans (including individual compensation arrangements)
under which equity securities are authorized for issuance.
|
|
|
2001 Plan
|
|
|
2004
Plan
|
|
|
2007
Plan
|
|
|
Other
|
|
|
|
|
Outstanding
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Outstanding
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Outstanding
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Outstanding
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Options outstanding,March 31, 2012
|
|
|
12,500
|
|
|
|
2.00
|
|
|
532,500
|
|
|
0.96
|
|
|
1,000,000
|
|
|
1.21
|
|
|
350,000
|
|
|
0.97
|
|
|
Options expired
|
|
|
—
|
|
|
|
—
|
|
|
|
(100,000
|
)
|
|
|
1.50
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Options outstanding, March 31, 2013
|
|
|
12,500
|
|
|
|
2.00
|
|
|
|
432,500
|
|
|
|
0.96
|
|
|
|
1,000,000
|
|
|
|
1.21
|
|
|
|
350,000
|
|
|
|
0.97
|
|
|
Options outstanding and exercisable March 31, 2014
|
|
|
12,500
|
|
|
|
1.20
|
|
|
|
432,500
|
|
|
|
0.84
|
|
|
|
1,000,000
|
|
|
|
1.21
|
|
|
|
350,000
|
|
|
|
0.97
|
|
|
Options exercisable March 31, 2014
|
|
|
12,500
|
|
|
|
1.20
|
|
|
|
432,500
|
|
|
|
0.96
|
|
|
|
1,000,000
|
|
|
|
1.21
|
|
|
|
350,000
|
|
|
|
0.97
|
|
|
Exercise price range
|
|
$
|
2.00
|
|
|
|
|
|
|
$
|
0.50 - $2.46
|
|
|
|
|
|
|
$
|
1.21
|
|
|
|
|
|
|
$
|
.39 - 1.75
|
|
|
|
|
|
|
Weighted average remaining life
|
|
|
0.02 years
|
|
|
|
|
|
|
|
4.00 years
|
|
|
|
|
|
|
|
4.12 years
|
|
|
|
|
|
|
|
2.56 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
|
|
|
$
|
0.97
|
|
|
|
NA
|
|
|
Total
|
|
|
2,265,000
|
|
|
$
|
1.10
|
|
|
|
605,000
|
|
For the years ended March 31, 2014 and
March 31, 2013 the Company has not recognized any stock based compensation expense in the consolidated statement of operations.
16. COMMON STOCK WARRANTS AND OTHER OPTIONS
As of March 31, 2014 and March 31, 2013,
the Company had warrants to purchase the Company’s common stock outstanding that were not granted under shareholder approved
equity compensation plans as follows:
|
|
|
Outstanding
Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Warrants and options outstanding, March 31, 2012 and March 31, 2013
|
|
|
3,738,379
|
|
|
$
|
1.50
|
|
|
Expired
|
|
|
(3,738,379
|
)
|
|
|
|
|
|
Warrants outstanding March 31, 2014
|
|
|
—
|
|
|
|
|
|
17. SEGMENT INFORMATION
The Company’s only operating segment
consists of dental products and oral hygiene products sold by Remedent Inc., Remedent N.V., GlamSmile Deutschland GmbH and GlamSmile
Rome SRL. Our operations are primarily in Europe and Asia and 100% of our sales for the fiscal years ended March 31, 2014 and March
31, 2013 were generated from customers outside of the United States.
18. COMMITMENTS
Real Estate Lease:
The Company leases an office facility of
5,187 square feet in Gent, 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 ($8,189 per month at March 31, 2014).
Secondly, the Company leases an office
facility of 1,991 square feet in Rome, Italy to support the sales and marketing division of our veneer business, from an unrelated
party pursuant a six year lease commencing July 1, 2011, at a base rent of € 6,500 per month for the total location ($8,969
per month at March 31, 2014) Due to an internal re-organization and in mutual agreement with the unrelated party, the rent agreement
was stopped at March 31, 2014.
Thirdly, 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 ($1,337 per month at March 31, 2014).
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 March 31, 2014:
|
March 31, 2015
|
|
|
281,311
|
|
|
March 31, 2016
|
|
|
185,361
|
|
|
March 31, 2017
|
|
|
144,780
|
|
|
March 31, 2018
|
|
|
65,879
|
|
|
After five years
|
|
|
52,167
|
|
|
Total:
|
|
$
|
729,498
|
|
19. 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:
|
|
|
|
|
|
March 31, 2014
|
|
|
March 31, 2013
|
|
|
|
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
|
Level
|
|
|
value
|
|
|
Value
|
|
|
value
|
|
|
value
|
|
|
Cash
|
|
|
1
|
|
|
$
|
775,286
|
|
|
$
|
775,286
|
|
|
$
|
64,504
|
|
|
$
|
64,504
|
|
|
Accounts receivable
|
|
|
2
|
|
|
$
|
787,578
|
|
|
$
|
787,578
|
|
|
$
|
947,971
|
|
|
$
|
947,971
|
|
|
Long term investments and advances OTC Division
|
|
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Long Term investment and advance - GlamSmile Dental Technology Asia
|
|
|
2
|
|
|
$
|
1,260,150
|
|
|
$
|
1,260,150
|
|
|
$
|
2,441,572
|
|
|
$
|
2,441,572
|
|
|
Long term investments and advances MFI
|
|
|
1
|
|
|
$
|
958,652
|
|
|
$
|
958,652
|
|
|
$
|
787,339
|
|
|
$
|
787,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Line of credit
|
|
|
2
|
|
|
$
|
273,200
|
|
|
$
|
273,200
|
|
|
$
|
836,355
|
|
|
$
|
836,355
|
|
|
Short term debt
|
|
|
2
|
|
|
$
|
2,257,403
|
|
|
$
|
2,257,403
|
|
|
$
|
1,214,266
|
|
|
$
|
1,214,266
|
|
|
Deferred revenue
|
|
|
2
|
|
|
$
|
124,251
|
|
|
$
|
124,251
|
|
|
$
|
149,129
|
|
|
$
|
149,129
|
|
|
Accounts payable
|
|
|
2
|
|
|
$
|
598,558
|
|
|
$
|
598,558
|
|
|
$
|
971,813
|
|
|
$
|
971,813
|
|
|
Accrued liabilities
|
|
|
2
|
|
|
$
|
450,303
|
|
|
$
|
450,303
|
|
|
$
|
737,064
|
|
|
$
|
737,064
|
|
|
Long term debt
|
|
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,131,364
|
|
|
$
|
1,131,364
|
|
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 fiscal years ended March
31, 2014 or March 31, 2013. 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):
|
|
|
Year ended March 31,
2014
|
|
|
Year ended March 31,
2013
|
|
|
Long term investments and advances:
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
2,441,572
|
|
|
$
|
2,092,518
|
|
|
Gains (losses) included in net loss
|
|
|
(1,338,042
|
)
|
|
|
—
|
|
|
Transfers in (out of level 3)
|
|
|
156,620
|
|
|
|
349,054
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
1,260,150
|
|
|
$
|
2,441,572
|
|