REMEDENT USA, INC.- REGISTRATION STATEMENT
DATE FILED: 11/6/2000
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SBA-A2
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) OR (g) of the Securities Exchange Act of 1934
REMEDENT USA, INC.
(Name of Small Business Issuer in its charter)
Nevada 86-0837251
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1220 Birch Way
Escondido, California, 92027
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (760)781-3333
Securities to be registered pursuant to Section 12(b) of the Act:
None
(Title of Class)
Securities to be registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which
to be registered each class of stock is to be
registered
Common Stock, par value $.001 per share OTC:BB Symbol: REMM
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
Remedent USA, Inc. was incorporated under the laws of Arizona
in September 1996. We were formed for the purposes of developing,
marketing and distributing the Remedent Toothbrush, a new single-handle
toothbrush, gumbrush and tongue cleaner designed to improve oral care
at an affordable price. Remedent USA, Inc. is the successor entity
resulting from an October 2, 1998 reorganization with Resort World
Enterprises, Inc., a Nevada corporation, whereby all of the issued and
outstanding shares of Remedent were exchanged for approximately 79% of
the issued and outstanding shares of common stock of Resort World
Enterprises. This was accomplished by filing articles of merger with
the states of Nevada and Arizona. Resort World Enterprises was a non
operating public company whose stock was traded on the over-the-counter
bulletin board ("OTC") market. The terms of the Stock Exchange
Agreement required: (i) that all of the officers and directors of
Resort World Enterprises resign and that the officers and directors of
Remedent prior to the merger be appointed as the officers and directors
of the surviving company; and (ii) that the name of Resort World
Enterprises be changed, through the filing of an Amendment to the
Articles of Incorporation, to Remedent USA, Inc. Consequently, we, as
the surviving company, are now known as and conduct business under the
name of Remedent USA, Inc. Since our inception, neither our predecessor
nor us have been a party to any bankruptcy, receivership or similar
proceeding.
OUR BUSINESS
(a) Remedent USA, Inc.
Our primary product, the Remedent Tooth and Gumbrush combines
a toothbrush, gumbrush and tongue cleaner into a single instrument
("Remedent Toothbrush"). It was invented and developed in Europe under
the direction of Jean Louis Vrignaud over a four year period beginning
in 1992. All rights, title and interest in the Remedent Toothbrush were
assigned to Remedent USA, Inc. by Mr. Vrignaud, for the purposes of
developing, producing and marketing the Remedent Toothbrush. Since that
time we have devoted our efforts to marketing the Remedent Toothbrush.
These efforts have included direct marketing to dental professionals,
formulated marketing campaign through Double Eagle Market Development
Company in the Northwestern states and a promotional mail out
consisting of the Remedent Toothbrush on educational video, coupons and
brochures. In addition, we have redesigned our packaging based upon the
results of marketing studies. In February 2000, we opened our new
fulfillment center in Phoenix, Arizona. This provides sufficient
capacity for warehousing, order fulfillment and shipping of our product
to final destinations, and has eliminated the need to use outside
fulfillment centers.
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The Remedent Toothbrush consists of a twin-headed gumbrush at
one end of the handle and a toothbrush with an underside tongue cleaner
at the other end. Its retail price point is within the premium
toothbrush segment, approximately $3.29 to $5.00. The triple action of
Remedent Toothbrush targets the gums, teeth and tongue, thus improving
the odds for better overall oral hygiene.
We consider the toothbrush portion of the Remedent Toothbrush
to be equal to or better than other high premium toothbrushes because
it incorporates what we believe to be the best features of all other
high quality brushes. The wide design embodies a greater number of
bristles designed to provide effective plaque removal in less time.
Unlike other toothbrushes on the market, the Remedent Toothbrush
features a tongue cleaner and gumbrush. The tongue cleaner is designed
to draw the plaque off the tongue which has been loosened by brushing.
The gumbrush portion of the Remedent Toothbrush consists of facing twin
brushes with bristle configuration designed to provide simultaneous and
thorough cleaning of the gums.
In addition to the Remedent Toothbrush, we are currently
working on the development of eight (8) additional products that fall
within the oral hygiene category. In general, we plan to develop three
new manual brushes with new cosmetic and ergonomic features, an
electronic toothbrush for adults and one designed for kids, and floss
dispensers. We plan to release one new product into the market
approximately every 9 months, the first of which is planned for
October, 2001.
Our objective is to become a leading manufacturer of
toothbrushes and oral hygiene products. To achieve this objective, we
are focusing our market strategy on enhancing the reputation of our
product, increasing the market penetration of our products, continuing
the development of other oral hygiene products, and the refinement and
improvement of our existing technology. An integral part of this
strategy is the expansion of our marketing efforts to target both
domestic and international sales. Our domestic strategy is to create
product awareness through the market expansion program now in progress
in addition to free sampling to consumers and dental professionals. We
also intend to expand our line of products beyond the Remedent
Toothbrush into floss dispensers and powered toothbrushes.
(b) Industry Background
According to Supermarket Research, the toothbrush market has
increased 8% to 10% per year, since 1996. The premium toothbrush market
segment, (those priced above $3.00) accounted for 42% of this increase.
Based on an increased attention towards dental hygiene and increased
public awareness regarding the need to replace toothbrushes, we expect
year-to-year increases will continue at or above this rate.
<PAGE>
Total toothbrush sales for 1995, 1996, and 1997 were $700
million, $757 million, and $832 million, respectively. The increase in
sales reflected 8% and 10% for 1996 and 1997, respectively. According
to Information Resources, Inc., the premium toothbrush segment totaled
24% or $168 million; 34% or $257 million; and 42% or $349 million; for
1995, 1996, and 1997 respectively, for the total sales mentioned above.
This reflects an increase of 53% for premium sales from 1995 to 1996
and 35% increase from 1996 to 1997.
Over 90% of adults in the United States use toothbrushes.
Simmons Market Research Bureau ("Simmons") has reported that slightly
more than 90% of U.S. adults -(over 169 million individuals) - used
manual toothbrushes in 1994. Women accounted for nearly 53% of users
and men for approximately 47%.
Some strong toothbrush brand loyalty exists. Many of the 18
toothbrush brands studied by Simmons enjoy strong brand loyalty.
According to this study, overall, 63% of adults stay with one label and
the more popular the brand, the more loyal its users. Remedent was not
included in this study. Remedent has no relation to Simmons or
Supermarket Research, nor has Remedent paid any consideration to these
companies.
(c) Competition
Currently, there are more than 200 competitors sharing the
oral hygiene market. Broader ranges of companies are active in the
toothbrush category than in other categories of the oral hygiene
market. The top two marketers responsible for 41% of toothbrush retail
sales in 1996 were Colgate-Palmolive's Colgate (19%) and Gillette's
Oral B (22%). Johnson & Johnson's Reach (15%) and Procter & Gamble's
Crest (10%) occupy the middle echelon. SmithKline Beecham and its
Aquafresh Toothbrush maintained 5%. Mentadent, a product of the
Unilever Group had 6% of sales. Private label marketers are relatively
strong in the toothbrush category. They reached a combined share of 7%
of toothbrush retail dollar sales. We operate in the oral care industry
in which leading marketers have done an outstanding job of creating
public awareness of the need for better gum care. The primary advantage
many competitors have over us is capital and the ability to make
consumers aware of their products. In order to adequately compete, we
plan to raise $5 million through a variety of different funding
vehicles including equity and debt financing. (See "Liquidity and
Capital Resources").
In the United States, only one other company has emerged with
a product similar to the Remedent Toothbrush. They launched their
product in the early 1990's. However, we believe that due to several
design flaws, they have had a difficult time retaining customers. We
believe that this product is of virtually no threat to Remedent
Toothbrush, as evidenced by the fact that many stores are replacing the
competitor product with Remedent Toothbrush. This information has been
given to us by our brokers after they successfully placed the Remedent
Toothbrush into many retailers that formerly carried the other product.
<PAGE>
We believe that the larger handle of the Remedent Toothbrush
may be a functional disadvantage as it does not fit into a normal
toothbrush holders. To alleviate this problem, we provide a special
hang tab with each Remedent Toothbrush which allows the consumer to
store the brush in the shower or within a cabinet.
(d) Business Strategy
We compete in the premium quality segment of the
toothbrush/oral hygiene industry, a growing and highly competitive
area. To compete in this market, our business strategy is to:
o Strengthen and broaden core brands through marketing and
advertising, product development and manufacturing;
o Expand our presence in all markets in which we compete and
enter new markets where there are opportunities for growth;
and
o Continue to reduce costs and improve operating efficiencies,
customer service, product quality, and carefully manage
working capital;
(e) Marketing Strategies
We intend to focus our marketing on package design, direct
contact with dental professionals, and the employment of marketing
specialists who will concentrate their efforts on our product's
significant point of difference. Much of our marketing focuses on the
package design. Initially, the brush was marketed in a tubular package.
The test marketing began in August of 1996 in Phoenix, Arizona at Fry's
Food and Drug with 46 stores. The product achieved a 7% market share
without benefit of either promotions or advertising. However, the
package needed improvement, considering that many shoppers were
tampering with the package in the store in an effort to examine the
toothbrush. In February of 1997, the new blister package was designed
and additional test marketing followed. As a result we achieved a 14%
market share without advertising or promotions. We believe that based
upon our achievement of 14% of the premium toothbrush market sales in a
test market, we will be able to duplicate this success by obtaining
approximately 10% of the premium toothbrush market sales in a
significantly large number of additional stores that sell toothbrushes.
The support of a large advertising and marketing plan should assist in
accomplishing this objective. In addition, we have and will continue to
target dentists and hygienists directly. From April 1996 to the
present, we have distributed several thousand brushes to dentists and
hygienists throughout the country. This was done through dental
conventions and direct mail promotions. Many of those dental
professionals have become regular customers. They purchase Remedent
Toothbrushes from us and give them away free to most of their patients.
<PAGE>
Getting toothbrushes into retail stores requires broker
representation. In March 1996, we entered into a sales broker agreement
with B & R Marketing Company. This agreement expired in February of
1999. Since sales over the three-year period were not increasing,
management felt it was necessary at that time to engage another firm
that could better meet our marketing needs. Therefore, on March 10,
1999 we entered into an exclusive marketing representation agreement
with Double Eagle Market Development Company. The agreement with Double
Eagle contemplates a six month term with automatic renewal, unless
terminated by either party no later than sixty days prior to the end of
any specific six month period. An initial consultant fee of $10,000 was
paid upon signing of the contract, and each month thereafter Double
Eagle receives a minimum guarantee of $4,000, which is offset partially
or entirely by a 6% fee commission earned on net invoiced wholesale
orders placed with the Company by Double Eagle.
Double Eagle has hired outside brokers to solicit and serve
the customers in the territory in a manner that maximizes our sales.
Those outside brokers are compensated with an additional and separate
5% fee commission for all net invoiced sales generated directly by
their firm. Double Eagle and Remedent share the services of Stephen
Grassbaugh who serves as the chief financial officer for both
companies.
At the suggestion of Double Eagle, the company once again
re-designed the package, reverting from the blisterpack to the original
tube with extensive modifications. The goal was to present the
toothbrush in an attractive, eye catching package that would provide
visibility above and beyond any other toothbrush package on the shelf.
A tube-type package was re-developed, this time with tamper-proof
features. Both the old blister pack and the new tube package, which
also serves as a travel tube, are sold in US stores. The blister pack
will eventually be eliminated.
(1) National Marketing Plan
In conjunction with Double Eagle Market Development Company,
we have developed a national marketing plan to be implemented on an
expanding regional basis over a four-year period. The main objective of
this plan is to gain 10-15% of the premium toothbrush market share and
$45.6 million in net sales by mid 2003. The strategy and tactics of the
integrated marketing plan include:
o Positioning Remedent Tooth & Gumbrush as the only complete
oral care system available today.
o Securing a 70% all commodity volume (ACV) in the initial
year in controlled expansion markets.
o Initially selecting markets with high sales of toothbrushes
based upon Info Scan Indices (accumulated information
compiled by cash register scan data).
o Incorporating a dental hygiene program targeted at securing
broad professional product endorsement.
<PAGE>
By following the strategies listed above, as well as using
trade programs such as scan downs, promotions, prepared displays, point
of sale materials, coupons, clip strips and other marketing tools, we
believe that we can increase distribution to 70% ACV (All Commodity
Volume) which means selling our product in 70% (based on sales volume)
of stores that distribute toothbrushes.
The company is currently beginning a test market in the
northwestern states and expects it to last approximately 12 months,
providing information and feedback on both the Remedent Toothbrush and
the effectiveness of various promotional and advertising programs.
Subsequent to the test market, knowledge accumulated will be used to
amend, if necessary, relevant aspects of the marketing strategies and
tactics, so that a national introduction can occur in the second year.
We believe that the quality of the product and the previously stated
focus on the importance of dental care indicate that the Remedent Tooth
& Gumbrush should achieve and sustain a 10% share of the premium
toothbrush market. The states included in this test market are: Oregon,
Washington, Utah, Idaho, Montana and Wyoming. All of these markets have
IRI Index higher than 100 and a total sales of $15 million. The IRI
Index represents information and analysis designed to provide enhanced
understanding of the habits of consumers in relation to products
purchased, and indicates where the highest number of these products are
purchased in various regions of the country. The index for toothbrush
buyers runs from 50 to 115, and the index for the targeted Northwestern
states is greater than 100.
Our achievement of a 10% share of the premium market would be
not have a material impact on our operations. Volume growth will have a
minimal affect on our operations since both manufacturing and marketing
are provided outside by outside firms. Our current fulfillment facility
has sufficient capacity to handle such growth. In addition, the
manufacturer has assured us that it will be able to expand to meet such
a need. Increased revenues would be used primarily for increased
production, marketing and research and development.
(2) Targeted Direct Mail Dental Program
In conjunction with the integrated marketing plan described above,
another important factor is securing dental professional endorsements.
This plan includes a direct marketing program to send a Jiffy Pack
Mailer, which includes a video, samples, printed information and
coupons to all dental hygienists in the Northwest which totals 7,024.
<PAGE>
We also plan to increase our attendance at regional dental hygiene
conventions and continue to provide direct professional sales. The
support of dental professionals is an important element in creating
demand for our product. We intend to continually promote to the dental
professionals by:
o Offering professional discounted prices;
o Providing substantial advertising in dental publications
highlighting the unique features and positive health
benefits of the Remedent Tooth & Gumbrush;
o Providing direct mail and free samples to dental
professionals;
o Participating in major dental conventions;
o Visiting dental students to promote Remedent Tooth &
Gumbrush with samples, lectures and conducting additional
clinical tests at major dental schools; and
o Creating links to our website from other dental related
websites.
(3) Results of Expansion Market
As of March 2000, our product has been approved for placement
in 60% of the stores selling toothbrushes in the expansion market (60%
ACV). The advertising commenced on April 1, 2000. However, it has been
scaled back from twelve airings per week to six until the full 70% ACV
is reached. We expect sales to increase as advertising continues and
consumer awareness grows. We have presented the product to 2,777
stores. A total of 1,653 stores have accepted the product while 1,124
have rejected the product. Rejections are normally a result of a store
not having a space available for the product. A majority of the stores
have expressed interest and have requested re-presentation at a later
date.
As of February 2000, the product is sold in approximately
12,000 stores in the United States. The average retail price for the
blister-packed brush is approximately $2.90 while the average retail
price for the new tube packaged brushes is approximately $3.79.
(4) International Market
We have not actively approached the international market.
However, several interested international distributors have approached
us for the purpose of purchasing and distributing the Remedent
toothbrush in their markets. The blister-packed brushes are currently
selling primarily in four foreign countries, with Japan as the largest
selling country. The other countries in which we currently have
negotiated distribution agreements are: Morocco, Israel and Thailand.
The percentage of revenue for foreign customers represents
approximately 9% of our total revenue.
<PAGE>
The following chart shows the revenue from each country and the
respective percentage of our international sales.
International Sales for Fiscal Year End 2000
(in thousands) Revenue Percentage
Received of Revenue
-------- ----------
Japan $27,212 69%
Thailand 4,979 13%
Israel 4,965 12%
Morocco 2,000 5%
Others 272 1%
------- ----
TOTAL $39,428 100%
We plan an aggressive international marketing effort in the near
future, with the largest anticipated increases in England and Israel.
(f) Distribution Methods
Our product is sold to retailers (consisting primarily of
grocery stores, club stores, and super drug discount stores),
wholesalers, dental professionals, distributors, multi-level marketers
and private individuals.
All products are shipped from Hong Kong to Long Beach, CA and
then directly on to the "bonded" warehouse of Charles Schayer Company
in Phoenix, Arizona. Bonded refers to a special warehouse company that
holds goods until they are officially released by US Customs. Once the
product clears Customs in Phoenix, the import tax is paid, and Schayer
may warehouse the product for a nominal fee until needed by the Company
or release it directly to our warehouse in Phoenix.
Up until January 2000, the company leased approximately
fifteen hundred (1,500) square feet of office and warehouse space in
Scottsdale, Arizona. That facility has now been vacated. The company
has entered into a three (3) year lease on a new facility in Phoenix,
Arizona from DEK Enterprises. The new location has a total of 3,330
square feet of office and warehouse space with a base rent of $2,065.00
per month. This Phoenix facility is used as the fulfillment center for
all Remedent product dispatching. We believe that it will provide
adequate space to warehouse our products, thus eliminating the need for
warehousing fees at Schayer Company. Schayer Company is now only used
as our customs clearing broker.
<PAGE>
(g) Principal Suppliers
We do not manufacture, nor do we have the capability to
manufacture, nor do we anticipate establishing the capacity to
manufacture our products. We currently out-source equipment and
inventory from multiple vendors, but there is no assurance that we will
be able to continue. Although multiple manufacturers currently produce
or are developing equipment which we believe will enable us to meet our
current and anticipated operational requirements, no assurance can be
given that such equipment will always be readily available on
commercially reasonable terms.
Our existing production facilities are located at the
Shummi-Asia production plant in Shen Zhen, China. Existing production
tooling is capable of processing and packaging 35,000 Remedent
Toothbrushes per day or 1,000,000 units per month, with the ability to
double that capacity with a 3-month advance notice. This production
plant acts as our major subcontractor. There are approximately 15
additional subcontractors throughout the world that have the same
production capacity as the current vendor. We are working to establish
contingency manufacturing capacity in the event that a problem arises
with the current vendor. Our tooling can be moved on very short notice
to another subcontractor. This would assure that any break in
production needs would be minimal.
All raw materials for our product are of USA origin.
Shummi-Asia orders all raw materials directly from Eastman Chemical
Company for the plastic injection process of the handles. The bristles
are made of Dupont Tynex and ordered directly from Dupont. All product
delivered from China is packaged and store ready. All shipping and
display units are purchased from Tharco in Phoenix, AZ. All raw
materials are readily available and we do not anticipate any
significant setbacks in the event that Dupont, or Eastman, or Tharco,
are unable to provide the raw materials.
We contract quality control services with Hong Kong based Oral
2000, Ltd. They also provide a number of additional services including
making shipping arrangements and processing all shipping documents. We
compensate Oral 2000 at a rate of $0.078 per toothbrush for all
services provided.
(h) Major Customers
Our top three customers are CVS Drug (4,400 stores),
Consolidated Wholesalers, and Bergen Brunswig Drug Company. These three
customers represent approximately 55% of our sales and revenue. As we
expand our distribution and implement the full marketing plan, the
dependency on major customers will continue to decrease.
<PAGE>
The chart below identifies major customers and the percentage
of our revenue from each customer. CVS is the largest, with revenues
representing 41.68% of total company sales. Should we lose CVS, this
would have an adverse effect on our cash flow until Double Eagle Market
Development Company can fully implement the market expansion program in
the Pacific Northwest and increase customer base and sales to recoup
sales lost by CVS' departure.
Percentage of Sales From April 1, 1999 through March 31, 2000
Name % of Revenue
---- ------------
CVS 41.68
Consolidated Stores 7.22
Bergen Brunswig Drug Co. 5.73
Nutrition For Life 4.18
Target 3.63
McKesson Distributors 3.34
Minyards 2.40
Fred Meyer 2.06
Fleming Companies 1.21
Longs Drug Stores 1.19
Newman Grove Family Dentistry 1.95
All Others (dentists, individuals) 15.62
-----
Subtotal 90.21
International:
---------------
Sun Dental Corp., Ltd. 6.06
KWH International 1.16
Trendy Corporation 0.95
Weinstein Daniels Ltd. 1.15
Co. Ma. Im. 0.47
Feed Corporation 0.67
----
Subtotal 9.79
TOTAL 100.00
Consolidated Distributors is our second largest customer with 7.22% of
sales and revenue. The large gap between CVS and Consolidated shows the
significance of CVS' sales and revenue. The loss of CVS as a customer,
this could be very detrimental to Remedent's survival. The importance
of advertising and supporting our primary customers with in-store
flyers, coupons and a variety of promotional programs is crucial to
keeping this business and other future major stores of this caliber as
long time customers. Only our success in raising capital can generate
these types of promotional programs with regularity to create consumer
awareness and increase sales.
(i) Intellectual Property
Our ability to compete effectively within the toothbrush and
oral hygiene market depends, to a large degree, upon the proprietary
nature of our product designs. We rely upon a combination of patents,
proprietary technology and know-how, trademarks, trade secrets, and
other contractual covenants to establish and protect our technology and
other intellectual property rights. There can be no assurance the steps
taken by the Company to protect its intellectual property will be
adequate to prevent misappropriation of that intellectual property, or
that our competitors will not independently develop products
substantially equivalent or superior to our products. We believe our
business as currently conducted does not infringe upon the valid
proprietary rights of others, but there can be no assurance third
parties will not assert infringement claims against us. Defending such
claims can be both expensive and time-consuming, and there can be no
assurance that we will be able to successfully defend against or
similarly prosecute an infringement claim. The loss of such rights (or
our failure to obtain similar licenses or agreements) would have a
material adverse effect on our business, financial condition, and
results of operations.
<PAGE>
Eight (8) United States Patents have been issued for the
Remedent Toothbrush (collectively, the "Patents"). See Exhibit 99.2 for
a complete list of these patents and their expiration dates (ranging
from 2012 to 2016). In addition, we have been granted design
registrations in Japan and Korea, which expire in 2013 and 2007,
respectively. Our patents relate to manual toothbrushes. Patent
#5,758,380 relates to a toothbrush having brushes on both ends of the
handle. Patent #5,934,762 relates to a method of manufacturing our
toothbrush. The patents remaining are design patents covering a number
of different variations of our toothbrush concept.
These patents were assigned to us from Mr. Vrignaud pursuant
to the terms of the Marketing Agreement. We are obligated to pay to Mr.
Vrignaud a royalty equal to four and one-half percent (4 1/2%) of our
sales based upon the wholesale price. Total royalties payable under the
Royalty Agreement is limited to a maximum of $2,000,000. The assignment
of the patents has been filed with the United States Patent and
Trademark Office. We have also filed trademark applications for the
names "Remedent" and "Remedent Jr." (Collectively, the "Trademarks").
On November 1, 1999, Trademarks were also applied for "The only
toothbrush officially endorsed by the tooth fairy" and "Three heads are
definitely better than one". See Exhibit 99.3 for a complete list of
our trademarks.
(j) Governmental Approval
There are no governmental approval requirements for
toothbrushes. The FDA, however, requires that we file a registration of
exemption. We are registered as an Initial Distribution and
Specification Developer under the registration number 2030888. The FDA
has also assigned to the Company an Owner/Operator number 9028776. We
are required to file an exemption from FDA review solely based upon the
fact that our toothbrushes are imported. The reference number notes the
exemption and facilitates clearance at customs and simplifies the FDA's
process. The registration for exemption expires December 31, 2001 and
is renewable at no charge by completing a simple form that is
automatically generated by the FDA. We do not anticipate any further
requirements or any future government regulations concerning our
product.
<PAGE>
(k) Costs and Effects of Compliance with Environmental Laws
We anticipate that we will have no material costs associated
with compliance with federal, state or local environmental law because
such regulations are inapplicable to our products and their
manufacture.
(l) Employees
We currently have four employees in addition to our executive officers
who are compensated for their time contributed to the Company.
Management expects to use consultants, attorneys, and accountants as
necessary. The need for employees and their availability will be
addressed in connection with a decision whether or not to expand into
various markets.
We are therefore dependent on the efforts and abilities of our
senior management. Senior management is composed of Ms. Rebecca
Inzunza, President, Chief Executive Officer, and Director; Robert E.
Hegemann, Treasurer, Director and Senior Vice President; J. Stephen
Grassbaugh, Chief Financial Officer; and Kenneth J. Hegemann, Research
and Development. The loss of any of these key employees would have a
material adverse effect on our business. The members of our Board of
Directors believe that all commercially reasonable efforts have been
made to minimize the risks attendant with the departure of any key
personnel. There can be no assurance, however, that upon the departure
of any key personnel that replacement personnel would cause the Company
to operate profitably. We currently carry a life insurance policy on
Kenneth Hegemann. Other than Mr. Hegemann's policy, we currently have
no other key-man life insurance with respect to any of its executive
employees.
The only employment agreement that has been entered into with
a key employee is with Steve Grassbaugh, who serves as our chief
financial officer and the chief financial officer of Double Eagle
Market Development concurrently. The terms of this contract are
discussed in the Section "Executive Compensation". We anticipate
negotiating additional employment contracts with executive officers and
key personnel in the near future.
(m) Research and Development
Research and Development (R&D) costs have been minimal. For
the fiscal year ending March 1999, we had no expenses for R&D and for
the fiscal year ending March 2000, the total was $60,586. The dramatic
increase for fiscal year 2000 reflects expenses for design and
development of the new tube-style packaging and the intensified efforts
to develop new products. Because the patented design of the Remedent
Toothbrush was developed under the direction of Mr. Vrignaud, we have
not incurred substantial research and development costs for the
Remedent Toothbrush. Therefore, any research and development costs
which have been passed on to the customers have been minimal. We have,
however, established a research and development team that will work
along with outside consultants to develop and adopt new products,
whereupon we anticipate allocating three percent (3%) of our gross
revenues to research and development in the next five years.
<PAGE>
REPORTS TO SECURITY HOLDERS
Prior to filing this Form 10-SB, we have not been required to
deliver annual reports. We were deemed a reporting company sixty (60)
days after our initial filing of this Form 10-SB. To the extent that we
are required in the future to deliver annual reports to security
holders through our status as a reporting company, we intend to deliver
annual reports. Also, to the extent we are required in the future to
deliver annual reports by the rules or regulations of any exchange upon
which our shares are traded, we intend to deliver annual reports. If we
are not required to deliver annual reports in the future for any
reason, we do not intend to go to the expense of producing and
delivering such reports. If we are required to deliver annual reports,
they will contain audited financial statements as required.
Prior to the filing of this Form 10-SB, we have not filed
reports with the Securities and Exchange Commission. As a reporting
company, we will file Forms 3, 4, 5, 10-KSB, 10-QSB, 8-K and Schedules
13D along with appropriate proxy materials as they come due. If we
issue additional shares, we may file additional registration statements
for those shares.
The public may read and copy materials contained in our files
with the Securities and Exchange Commission at the Commission's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The
public may obtain information on the operation of the Public Reference
Room by calling the Commission at 1-800-SEC-0330. The Commission
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file
electronically with the Commission. The Internet address of the
Commission's site is (http://www.sec.gov).
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
OVERVIEW
The "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for the years ending March 31,
1999 and 2000 included herein should be read in conjunction with the
financial statements and the related notes appearing in part F/S
hereafter. In addition to historical information, the following
discussion and other parts of this Form 10-SB contain forward-looking
information that involves risks and uncertainties. Our future could
differ materially from that discussed here. Factors that could cause or
contribute to such differences include, but are not specifically
limited to, failure to satisfy performance obligations, timely product
manufacturing, changes in various markets in which we participate, as
well as the other risks detailed in this section.
<PAGE>
There can be no assurances as to when we will commence
generating substantial revenues, or that we will be profitable once
substantial revenues are generated. Our prospects must be considered
keeping in mind the risks, expenses, and difficulties frequently
encountered in the establishment of a new business in an ever-changing
industry and the research, development, manufacture, commercialization,
distribution, procedures, products, and related technologies. There can
be no assurance that unanticipated technical or other problems will not
occur which would result in material delays in product
commercialization or that our efforts will result in successful product
commercialization. There can be no assurance that we will be able to
achieve profitable operations.
Remedent was incorporated in the state of Arizona on September
30, 1996, as Remedent USA, Inc. On October 5, 1996, we obtained the
worldwide rights to distribute the Remedent Tooth & Gumbrush in an
agreement with Mr. Vrignaud. On October 2, 1998, Remedent USA merged
with Resort World Enterprises, a Nevada Corporation. The surviving
company was Resort World Enterprises which, by way of an Amendment to
its Articles of Incorporation, immediately changed the name of the
Corporation to Remedent USA, Inc. For accounting purposes, the exchange
was treated as a stock purchase in which the shareholders of Remedent
USA, Inc. exchanged all their outstanding stock for approximately 79%
of Resort World Enterprises stock. The audited financial statements for
the fiscal years ending March 31, 1999 and March 31, 2000 included in
this filing are those of Remedent USA, Inc.
Year ended March 31, 2000 compared to March 31, 1999
RESULTS OF OPERATIONS
Comparative details of results of operations for the years ending March
31, 1999 and 2000.
Year Ending Year Ending
March 31, 2000 March 31, 1999
-------------- --------------
NET SALES $448,459 323,267
COST OF SALES 161,375 129,921
-------- -------
GROSS PROFIT 287,084 193,346
RESEARCH AND DEVELOPMENT 60,586 -0-
OPERATING EXPENSES
Sales and marketing 322,454 248,846
General and administrative 769,232 525,159
Depreciation and amortization 13,314 10,723
--------- --------
TOTAL OPERATING EXPENSES 1,165,586 784,728
--------- -------
(LOSS) FROM OPERATIONS (878,502) (591,382)
OTHER INCOME (EXPENSES)
Interest income 343 4,709
Interest expense (23,438) (3,668)
-------- -------
TOTAL OTHER INCOME (EXPENSES) (23,095) 1,041
-------- ------
(LOSS) BEFORE INCOME TAXES (901,597) (590,341)
Income tax benefit (expense) (1,100) (800)
------- -----
NET (LOSS) $ (902,697) $(591,141)
----------- ----------
<PAGE>
For the fiscal year ending March 31, 2000, net sales increased by
$125,192 from $323,267 in 1999 to $448,459 in 2000, which represents an
increase in sales volume of approximately 60,000 brushes. This
represents a 39% increase over the comparable period ending March 31,
1999. This change was due to volume increases as a result of obtaining
new customers. From May, 1999 through March 31, 2000, CVS Stores, a
large drug store chain with 4,400 outlets, placed orders for a total of
$178,161 which represents 45% of total sales. International sales
accounted for $39,428 of the $448,459, or 9% of the total sales as of
March 31, 2000. This represents an increase of $18,821 or 92% over the
prior comparable period. We anticipate sales will continue to increase
in both domestic and international markets.
An additional reason for the low rate of increase in revenues
was the learning period during the initial activity of Double Eagle
Marketing beginning March 1999, which contributed to the low rate of
increase in revenues during the fiscal year ended March 31, 2000.
Cost of goods sold increased by $31,454 or 24% for the year
ending March 31, 2000 over the comparable period ended March 31, 1999.
This was due, in part, to a decrease in expenses in labor costs,
packaging, shipping supplies, freighting, and the reduction in
inventory adjustments. This is also a result of sales volume increase,
partially offset by improved efficiencies, such as: lowered insurance
expenses, reduced employee compensation due to loss of certain
employees, absence of warehousing fees paid to Charles Schayer and
reduced accounting expenses
Gross profit for the year ended on March 31, 2000 also
increased by $93,738 or 48% over the comparable period ended March 31,
1999. This increase was a result of increase on revenues. With the
current marketing plans and recent customers additions, we expect to
realize similar if not improved profit margins in the future.
<PAGE>
Research and development expenses as of March 31, 2000 have
increased by $60,586 over the prior fiscal year. Since the patented
design of the Remedent Toothbrush was developed under the direction of
Mr. Vrignaud, we did not incur substantial research and development
costs during the fiscal year 1999. The increase for fiscal year 2000
reflects expenses for design and development of the new tube-style
package for the product and the intensified efforts to develop new
products. We expect we will continue to invest in research and
development. We plan to allocate three percent (3%) of sales to the R
& D budget, and are currently working on the development of eight
additional products.
Sales and marketing costs as of March 31, 2000 and 1999 were $322,454
and $248,846 respectively, which represents an increase of $73,608 or
30%. This is the result of increased sales and marketing commissions
and other expenses including the package redesign, promotional
material, and the implementation of strategic plans for the upcoming
test market.
In August of 1999, Double Eagle believed it necessary to redesign the
package and product identity to successfully reintroduce the product
in the Northwest region. The costs incurred from concept design to
delivery of all new marketing materials were approximately $150,000.
This decision was made taking into consideration product presentation
on the shelf, enhancement of the product's point of difference,
colors, logo, and marketing slogan.
General and administrative costs for 2000 and 1999 were
$769,232 and $525,159 respectively, an increase of $244,073 or 24%. In
part, the increases were due to increases in advertising of $46,792 or
61.4%, interest expense of $19,770 or 539%, royalties of $5,245 or 44%,
and promotion/capital raising efforts. Investor relations expenses
increased by $216,328. In the first quarter of 2000, additional
investor relations activities were required in order to raise the
capital necessary to fully implement the marketing plan. Therefore, the
companies: Merryvale, Charterbridge and First Canadian Capital were
hired to present the Company to potential investors. Contracts with
these companies are described in section "Transactions with Promoters."
These added expenses were offset by expense reductions in the areas of
accounting of $13,697 or 35%, officer and employee compensation of
$36,184 or 13.6%, insurance of $7,785 or 49%, legal of $9,130 or 28%,
rent of $5,634 or 13.7%, payroll tax expense of $3,699 or 13.3%, and
other less significant cutbacks in all areas of general and
administrative expenditures.
Net interest expense increased by $19,770 during the year
ended March 31, 2000 over the comparable period ending March 31, 1999.
The increase in interest expense was largely due to the conversion
feature of a convertible debenture signed with Dr. Ed Quincy recorded
as expense in the amount of $10,000. Interest paid on the note payable
to Union Bank of Arizona and interest accrued on the compensation owed
to employees are also part of this amount.
<PAGE>
Inflation has not had a material effect on Remedent's revenue
and income from continuing operations in the past three years. We do
not expect inflation to have a material future effect.
Because our contract with Shummi and others have been
contemplated in US dollars, the cost of products will not be affected
by exchange rate fluctuations.
LIQUIDITY AND CAPITAL RESOURCES
On March 31, 2000, our current liabilities exceeded our
current assets by $554,067. Our business operations will require
substantial capital financing on a continuing basis. The availability
of that financing will be essential to our continued operation and
expansion. The availability of that financing will be essential to our
continued operation and expansion. In addition, cash flow and liquidity
is contingent upon the increase of new customers in the current year
and beyond. Any future decline in the rate of growth of new customers
will force us to raise additional capital to support operations by
selling equity securities or incurring additional debt.
Since our inception in 1996, we have sustained net losses and
negative cash flow, due largely to start-up costs, general and
administration expenses, inventory, marketing and other expenses
related to market development and new product launch. As a result, we
have financed our working capital requirements principally through
loans and the private placement of our common stock.
In January of 1999, Ms. Inzunza loaned the Company $50,000 at
7% interest which has been paid back throughout the year, and as of
March 31, 2000 the amount was paid in full. On December 11, 1998,
Remedent received a $50,000 line of credit from the Union Bank of
Arizona. We have drawn upon the full amount. The interest rate was
10.250% with a maturity date of 12-11-1999. To date we have paid
$7,448.20 in interest. On April 26, 2000, the loan balance of
$49,970.55 was converted to a five-year loan with an interest rate of
11.50%, monthly payments of $1,098.39, and a maturity date of April 26,
2005.
On March 2, 1999, $200,000 was attained through a 504 private
placement.
On July 14, 1999 we borrowed $10,000 from Edward Quincy, a
shareholder, in the form of a convertible debenture. The debenture is
unsecured and bears interest at 10% per annum. The note is due April
15, 2001 and can be converted to stock at 37.5% of the average trading
price 30 days prior to maturity. We have recorded interest expense of
$10,000 as part of the conversion feature of the debenture.
Additionally, there is $802 of accrued and unpaid interest as of March
31, 2000.
During the year ended March 31, 2000 we have borrowed from
Kenneth Yanika, a shareholder, a total of $15,000 as a working capital
loan. This loan is unsecured, due on demand without a maturity date and
bears no interest.
<PAGE>
Kenneth Hegemann operates CRA Labs, Inc., a related business that has
advanced a total of $21,563 to Remedent. We have repaid $14,000 of
theses advances leaving a balance of $7,563 at March 31, 2000. Similar
to the other working capital loans, this is an unsecured debt and does
not bear interest.
We expect to continue to experience negative cash flow through
at least fiscal 2001, and may continue to do so thereafter while we
develop and expand our distribution of products. Unless we are able to
generate sufficient revenue or acquire additional debt or equity
financing to cover our present and ongoing operation costs and
liabilities, we may not be able to continue as a going concern.
For the year ending March 31, 2000, liabilities totaled
$774,256 and $ 192,959 for the year ending March 31, 1999, which
represents an increase of $581,297. This was largely due to a drastic
change on the balances of current assets and current liabilities.
Account receivables increased by 15% due to an increase in sales. Net
inventory decreased by $17,424 due to reductions in prior package
inventory levels and pending production of new packaged product. Total
assets decreased by $75,446 or 21% over fiscal year ended March 31,
1999.
Frequently we have been unable to make timely payments to our
trade and service vendors. As of March 31, 2000, we had past due
payables in the amount of $396,208, representing a 589% increase from
the prior fiscal year. Deferred payment terms have been negotiated with
most of the vendors, which has allowed us to continue to make shipments
on time and no orders have been cancelled to date. Notes payable
increased by $37,096 due to several working capital loans from
shareholders. Details for these loans are included in the footnotes of
the financial statements. Accrued liabilities increased by $203,491.
This amount represents accrued salaries for officers and employees in
the amount of $164,036, $20,000 for accrued audit fees to our
independent accountants and $18,657 for amounts owed Rubicon Capital
Partners Inc., and First Canadian Capital for services provided for
Investor Relations. These services included making introductions to
potential investors to raise the necessary capital needed to implement
the expansion market, developing an investor package, sending mailers,
contacting investors, and setting up meetings with potential investors
for our business and marketing presentation.
For years ending March 31, 2000 and 1999, net cash used for
operating activities was $67,780 and $537,102 respectively. As of March
31, 2000 we had a working capital deficiency of $554,067, as compared
to working capital of $111,144 at March 31, 1999. Our business
operations will require substantial capital financing on a continuing
basis.
On February 1, 2000, we entered into a three-year lease on a
3,300 square foot warehouse and office facility in Phoenix, Arizona.
All product fulfillment and distribution is handled from this facility.
The base lease amount if $2,065 per month. The company also leases a
1,000 foot office facility in Escondido, California from Rebecca
Inzunza, an officer and shareholder of Remedent. The monthly lease is
$655 per month.
<PAGE>
We have taken several actions, which we believe will improve
our short-term and long-term liquidity and cash flow. For the short
term, we have improved liquidity and cash flow by obtaining short term
loans, reducing expenses, reducing employee compensation, eliminating
warehousing fees and reducing insurance expenses. For the long term, we
have been discussing substantial investments with two individuals.
These equity investments would total approximately $5,000,000 over
three years. We also plan to seek debt financing in the form of bank
loans in the amounts of $2 million in 2002 and $1.2 million in 2003. We
do not anticipate a need for additional capital beyond the $8,200,000.
In addition we plan to establish policies designed to conserve cash and
control costs.
Our business operations will require substantial capital
financing on a continuing basis. Based upon our cash flow projections,
a capital infusion of $8,200,000 over the next three (3) years is
necessary to pay existing delinquent payables, fully implement our
expansion market in the Northwestern States, finance further growth
into new market areas, and research and develop new products. We plan
to finance such through loans, equity investments and other
transactions. We reasonably believe that the net proceeds from our
efforts, assuming the maximum amount is raised and loans are obtained,
plus revenues generated from operations which are estimated to total
$45.6 million for the years 2001 through mid 2003, will be sufficient
to fund our operations through the year 2003. However, there can be no
assurance that we will be able secure the necessary financing. In the
event that we are unsuccessful in completing financing arrangements, we
would have difficulty meeting our operation expenses, satisfying our
existing or future debt obligations, or succeeding in developing new
products. Without sufficient cash flow we are unable to satisfy our
debt obligations, our ongoing growth and operations are, and will
continue to be, restricted and there is substantial doubt as to our
ability to continue as a going concern. If this were to happen our
contingency plan would be to work with existing oral care companies who
do not have a premium toothbrush. We would attempt to secure an
agreement with them to be their premium toothbrush provider.
Quarter ended June 30, 2000 compared to quarter ended June 30, 1999
RESULTS OF OPERATIONS
For the quarter ending June 30, 2000, the Company's sales increased by
$11,193 or 6% over the comparable three-month period in 1999. Sales
increased from $188,860 in 1999 to 200,053 in 2000. This low amount of
increase was due to our temporarily not shipping to our largest
domestic customer, CVS, while they are clearing their shelves of our
old blister-packed brushes before replacing it with our new tube style
packaging. A good part of the CVS cut back was replaced with brisk
international sales for the quarter ending June 30, 2000, totaling
$145,169 which represents 73% of total sales for that period.
<PAGE>
Cost of goods decreased by $7,519 or 6% for the quarter ending June 30,
2000 as compared to the same three-month period for 1999. Cost of goods
decreased from 77,384 in 1999 to 69,865 in 2000. This decrease was due
to the reduced costs related to assembly of product displays at our
Scottsdale, Arizona fulfillment facility.
Operating expenses increased $117,320 or 59% from 174,393 in June 1999
to $291,713 in June 2000. These increases were due to sales and
marketing commissions of $7,865 or 114%; advertising increased $25,160
or 142%; promotion discounts increased $78,816 or 375%; new advertising
literature $3746 or 375%; supplies $1,199 or 278%; freight $2,101 or
$59%; and new marketing mailers increased $18,940 or 737%. These
increases (except for promotional discounts) are due to the expansion
plan.
Net losses increased by 156% from $64,083 in June 1999 to $164,134 in
June 2000 due to the factors mentioned above which include decreased
sales, increased costs with sales and marketing consulting fees, and
investors relations fees, and advertising.
The total current assets decreased by $78,147 or 27% from $292,589 in
June 1999 to $214,442 in June 2000. Accounts receivable decreased by
54% from $117,535 to $54,422 primarily due to successful collection
activities, and the fact that international sales are conducted on a
cash basis only. Inventory decreased $41,257 or 27% from $150,900 in
June 30, 1999 to $109,643 in June 30, 2000, due to the desire to
decrease existing inventory to make room for our new tube-style
packaged brushes.
Liabilities increased $682,547 or 288% when comparing June 30, 2000 to
June 30, 1999. Liabilities totaled $919,332 for the period ended June
30, 2000 as compared to $236,785 for the period ended June 30, 1999.
Notes payable to related parties increased by $98,462 and includes
loans from investors, the purchase of computer equipment, and a loan
from an officer. By June 30, 2000, accounts payable increased by
$356,231 due to advertising, sales and marketing expenditures, investor
relation fees, and general and administrative cost. Accrued liabilities
increased by $216,821 due to accrued officer's salaries.
LIQUIDITY AND CAPITAL RESOURCES
On June 30, 2000, our current liabilities exceeded our current
assets by $_____. Our business operations will require substantial
capital financing on a continuing basis. We are currently trying to
secure $5,000,000 in equity financing. The availability of that
financing will be essential to our continued operation and expansion.
The availability of that financing will be essential to our continued
operation and expansion. In addition, cash flow and liquidity is
contingent upon the increase of new customers in the current year and
beyond. Any future decline in the rate of growth of new customers will
force us to raise additional capital to support operations by selling
equity securities or incurring additional debt.
<PAGE>
The Company's primary goal in raising capital is to fund the increase
in sales, which includes advertising support and consumer awareness.
The first phase of the marketing plan implementation is still in
progress and moving forward. We are currently advertising on a top
rated radio show and professional packets have been sent to all dental
hygienists in the Pacific Northwest. This mailing has substantially
increased sales to dental professionals.
As of June 30, 2000, the negative working capital totals $705,000 vs. a
positive working capital of $55,804 with the increase of $151,000 from
fiscal year-end. Net cash comparison from each period stayed the same
at $14,500. This flat amount was due to the decrease in sales and
increase in liabilities. Net cash used mainly in reducing liabilities
where necessary while advertising in the Pacific Northwest to increase
sales for the first phase of the marketing plan.
Because of the Company's emphasis on new packaging, a decrease in old
inventory is expected, while increasing the new package inventory.
International sales in the first quarter of our fiscal year 2000 have
been successful with 73% of all sales realized within that quarter.
QUARTERLY TRENDS
We do not anticipate significant "seasonal" changes in our
operation. Our product is a toothbrush that people use on a daily basis
for oral hygiene and as such, we predict that although sales may
increase over the year, sales will not be affected by quarterly trends.
RISK FACTORS
(a) We have a history of losses, accumulated deficit, and working capital
deficiency, and, as a result, our business and results of operations
may be adversely impacted and the price of our common stock may be
negatively affected.
We have incurred losses of $909,341 and $591,141 for the years
ended March 31, 1998, 1999, and 2000, respectively. The likelihood of
our success must be considered in light of the problems, expenses,
difficulties, complications, and delays frequently encountered in
connection with the expansion of our business and the competitive
environment in which we operate. There are no assurances that we will
be able to achieve the market acceptance required to sustain our
operations. Any shortfalls will have an immediate adverse impact on our
business, operations and financial condition.
<PAGE>
(b) We have significant working capital requirements. The failure to obtain
financing to meet these requirements will have a significant effect
upon our ability to continue as a growing concern.
The working capital requirements associated with the
manufacture, marketing and sale of the Remedent Toothbrush have been
and will continue to be significant. We are not currently generating
sufficient cash flow to fund our operations and our ability to continue
our operations and implement our sales and marketing strategy is
dependent on our ability to continue to generate proceeds from the sale
of our shares. Although the data we have been able to secure the needed
financing, there can be no assurance that any additional financing will
be available to us on a timely basis, on acceptable terms, or at all.
Any such financing may involve substantial dilution of the interests of
our then existing shareholders. If we are not successful in raising the
additional financing necessary to fund future working capital needs, we
might be forced to curtail some of our operations, the exact nature of
which cannot be predicted at this time.
(c) Our industry is highly competitive and we may not have the resources to
compete effectively.
The market for premium toothbrushes is intensely competitive.
We face strong existing competition for similar products and expect to
face significant competition from new companies or existing companies
with new products. Many of these companies may be better financed, have
better name recognition and consumer goodwill, have more marketing
expertise and capabilities, have a large and loyal customer base, along
with other attributes that may enable them to compete more effectively.
The premium toothbrush industry is currently dominated by four
companies, Colgate-Palmolive, Oral B, Johnson & Johnson, and Procter &
Gamble, which in the aggregate, account for approximately sixty-six
percent of the toothbrushes sold in the United States.
Additionally, purchases are often made based upon highly
subjective decisions that may be influenced by numerous factors, many
of which are out of our control. Consumers' subjective preferences are
subject to rapid and unanticipated changes. As a result, we expect to
face substantial competition from existing and new companies that
market toothbrushes, which are perceived to enhance oral hygiene, are
visually appealing or appeal to other consumer preferences. Further,
the toothbrush industry is subject to rapid and widespread imitation of
toothbrush designs which, notwithstanding the existence of any
proprietary rights, could further hamper our ability to compete. We
currently face competition on the basis of price, reputation and
qualitative distinctions among available products. There can be no
assurances as to the market acceptance of the Remedent Toothbrush in
relation to our competition. See "Business of the Company -
Competition."
<PAGE>
(d) The market is currently dominated by several large competitors, and it
is uncertain that we will be able to obtain sufficient brand
recognition and market penetration.
The oral hygiene and toothbrush industry is currently
dominated by several companies which have strong brand name
recognition. As a result, the market demand for new products from new
companies is subject to a high level of uncertainty. As evidenced in
one Northwester states test market, achieving significant market
penetration and consumer recognition for our products will require
significant efforts and expenditures by us to inform potential
customers about our products. Although we intend to use a substantial
portion of our working capital for marketing and advertising, there can
be no assurance that we will be able to penetrate existing markets for
toothbrushes and related accessories on a broad basis, position our
products to appeal to a broad base of customers, or that any marketing
efforts undertaken by us will result in any increased demand for or
greater market acceptance of our products. See "Our Business."
(e) Our dependence upon a single retailing concept may affect our business.
Since our inception, we have devoted our efforts almost
entirely to the development and marketing of our toothbrush and are
currently dependent exclusively on revenues, if any, to be generated
therefrom. It is not anticipated that the revenues generated by the
sale of toothbrushes will result in meaningful revenue until a
successful retail and consumer market for our products is established.
The failure of our toothbrushes to achieve sustained commercial
viability would have an immediate material adverse effect on our
operation. This will require substantial marketing efforts and the
expenditure of significant funds by us and our strategic marketing
partners. Although our product achieved success in its test market,
there can be no assurance that our efforts or that of our strategic
partners will continue to be successful or that our toothbrush will
ever achieve acceptance of any significant level in the market. See
"Our Business."
(f) Our dependence on a limited number of suppliers could cause our cost of
sales to increase, impair our ability to meet our customer's demands
and reduce our revenues and profitability.
We do not manufacture the Remedent Toothbrush, and therefore
must rely on our suppliers. Our success will depend on maintaining our
relationships with these suppliers and developing relationships with
new suppliers. Any significant delay or disruption in the supply caused
by manufacturers' production limitations, material shortages, quality
control problems, labor interruptions, shipping problems or other
reasons could materially adversely effect our business. We purchase our
product pursuant to purchase orders placed from time to time and,
except for those purchase orders, none of our suppliers are obligated
to deliver specified quantities of components or to deliver components
for any specified period. Accordingly, we are substantially dependent
on the ability of our suppliers to provide adequate inventories on a
timely basis and on acceptable terms. Although we believe that our
relationships with our suppliers are satisfactory and that alternative
sources are currently available, the loss of the services of a supplier
or substantial price increases imposed by a supplier could result in
production delays, thereby causing cancellation of orders by customers
and/or price increases resulting in reduced revenues and margins,
respectively.
<PAGE>
(g) Our dependence on certain foreign suppliers, poses risks to our ability
to produce our products.
Companies in Asia manufacture our product. As a result, the
production of our product is subject to additional cost and risk
factors, many of which are out of our control, including political
instability, import duties, trade restrictions, work stoppages and
foreign currency fluctuations. Although we have not experienced any
effects to date, an interruption or material increase in the cost of
supplies would materially adversely effect our business, operating
results and financial condition.
(h) Our dependence on a few major customers could adversely affect our
ability to compete effectively.
Currently, we are dependent on one major customer for
approximately 45% of our business. There is the risk that should this
customer cease its relationship with us, this could have an adverse
affect on our business. Although we are attempting to broaden our
customer base, there is no assurance that this strategy will be
sufficiently successful.
(i) Our inability to protect our intellectual property may adversely affect
our ability to compete.
We seek patent protection for our proprietary products and
technologies where appropriate. We currently have eight United States
patents and two international patents relating to our Remedent
Toothbrush. However, there can be no assurance that our patents will
provide us significant protection against competitors. Litigation may
be necessary in the future to protect our patents, and there can be no
assurance that we will have the financial or managerial resources
necessary to pursue such litigation or otherwise to protect our patent
rights. In addition to pursuing patent protection in appropriate cases,
we also rely on trade secret protection for our unpatented proprietary
technology. However, trade secrets are difficult to protect. Although
we have not experienced problems in this area, there can be no
assurance that other companies will not independently develop
substantially equivalent proprietary information and techniques or
otherwise gain access to our trade secrets, that such trade secrets
will not be disclosed or that we can effectively protect our rights to
unpatented trade secrets.
<PAGE>
(j) Our lack of diversification may affect our business if demand is
reduced.
Our size makes it unlikely that we will be able to commit
funds to diversify the business until we have a proven track record,
and we may not be able to achieve the same level of diversification as
larger entities engaged in this type of business.
(k) The loss of our key management personnel could reduce our revenues and
profitability.
Our success is dependent on our key management, the loss of
whose services could significantly impede the achievement of our
planned development objectives. We currently maintain keyman life
insurance only for Mr. Hegemann. In addition, none of the officers or
directors, or any of the other key personnel, except for Mr.
Grassbaugh, our Chief Financial Officer, has any employment agreement
with the Company. Therefore, there can be no assurance that these
personnel will remain in our employ. The success of our business
objectives may require substantial additional expertise in such areas
as finance, manufacturing and marketing, among others. As experienced,
competition for qualified personnel is intense, and the loss of key
personnel, or the inability to attract and retain the additional,
highly skilled personnel required for the expansion of our activities,
could have a material adverse effect on our business and results of
operations.
In addition, the officers and directors make all decisions
with respect to our management. Investors will only have rights
associated with minority ownership interest to make decisions which
affect Remedent USA, Inc. Our success, to a large extent, will depend
on the quality of our directors and officers.
(l) Control by existing officers and directors may limit investors ability
to influence the outcome of director elections and other matters
requiring stockholder approval.
Our officers and directors beneficially own approximately 35%
of the outstanding shares of our common stock. As a result, such
persons, acting together, have the ability to exercise significant
influence over all matters requiring stockholder approval. Accordingly,
it could be difficult for the investors hereunder to effectuate control
over the affairs of Remedent USA, Inc. Therefore, it should be assumed
that the officers, directors, and principal common shareholders who
control the majority of voting rights will be able, by virtue of their
stock holdings, to control the affairs and policies of Remedent USA,
Inc.
(m) Limitations on liability, and indemnification, of directors and
officers could result in increased expenditures.
Our Articles of Incorporation include provisions to eliminate,
to the fullest extent permitted by the Nevada Revised Statutes as in
effect from time to time, the personal liability of our directors for
monetary damages arising from a breach of their fiduciary duties as
directors. The Bylaws include provisions to the effect that we may, to
the maximum extent permitted from time to time under applicable law,
indemnify any director, officer, or employee to the extent that such
indemnification and advancement of expense is permitted under such law,
as it may from time to time be in effect. Any limitation on the
liability of any director, or indemnification of directors, officer, or
employees, could result in substantial expenditures being made by
Remedent in covering any liability of such persons or in indemnifying
them.
<PAGE>
(n) Conflicts of interest of the officers and directors could adversely
affect their ability to successfully manage the Company.
The officers and directors have other interests to which they
devote time, either individually or through partnerships and
corporations in which they have an interest, hold an office, or serve
on boards of directors, and each will continue to do so notwithstanding
the fact that management time may be necessary to our business. As a
result, certain conflicts of interest may arise between Remedent USA,
Inc. and our officers and/or directors which may not be susceptible to
resolution. We have not experienced any conflict in this area, nor de
we expect to experience any conflicts in the future.
In addition, conflicts of interest may arise in the area of
corporate opportunities which cannot be resolved through arm's length
negotiations. All of the potential conflicts of interest will be
resolved only through exercise by the directors of such judgment as is
consistent with their fiduciary duties. It is the intention of
management, so as to minimize any potential conflicts of interest, to
present first to our Board of Directors, any proposed investments for
its evaluation.
(o) There is no assurance of continued public trading market. This could
result in lower priced securities.
Since October 1998, there has been only a limited public
market for our common stock. Our common stock has been quoted on the
Over the Counter Bulletin Board, however, we have been temporarily
de-listed from the OTC BB pending completion of the registration our
securities. In the event we can successfully complete the registration
process and are again accepted for trading on the OTC BB, an investor
may find it difficult to dispose of, or to obtain accurate quotations
as to the market value of our securities. In addition, the common stock
is subject to the low-priced security or so called "penny stock" rules
that impose additional sales practice requirements on broker-dealers
who sell such securities. The Securities Enforcement and Penny Stock
Reform Act of 1990 ("Reform Act") requires additional disclosure in
connection with any trades involving a stock defined as a penny stock
(generally, according to recent regulations adopted by the U.S.
Securities and Exchange Commission, any equity security that has a
market price of less than $5.00 per share, subject to certain
exceptions), including the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market
and the risks associated therewith. The regulations governing
low-priced or penny stocks sometimes limit the ability of
broker-dealers to sell our common stock and thus, ultimately, the
ability of the investors to sell their securities in the secondary
market.
<PAGE>
(p) Our failure to maintain market makers could impair the liquidity of our
common stock.
We are currently dependent upon three firms to act as market
makers for our stock. If we are unable to maintain a National
Association of Securities Dealers, Inc. member broker/dealers as market
makers, the liquidity of the common stock could be impaired, not only
in the number of shares of common stock which could be bought and sold,
but also through possible delays in the timing of transactions, and
lower prices for the common stock than might otherwise prevail.
Furthermore, the lack of market makers could result in persons being
unable to buy or sell shares of the common stock on any secondary
market. Although our ability to maintain market makers has been
successful, there can be no assurance we will be able to maintain such
market makers.
(q) It is unlikely that we will pay cash dividends.
We have never declared or paid dividends on our common stock
and currently do not anticipate or intend to pay cash dividends on our
common stock in the future. The payment of any such cash dividends in
the future will be subject to available retained earnings and will be
at the discretion of the Board of Directors.
OTC BULLETIN BOARD ELIGIBILITY RULE
In January of 1999, the SEC granted approval to the NASD OTC
Bulletin Board Eligibility Rule 6530, which requires a company, listed
on the OTC Bulletin Board to be a reporting company and remain current
in its reports filed with the SEC. As a result of this rule change, we
have filed this registration statement in order to become a fully
reporting company and list our common stock on the OTC Bulletin Board.
The SEC reporting requirements will add additional expenses to our
operations, including the expense of filing this registration statement
and preparing annual and quarterly reports. We anticipate trading on
the OTC Bulletin Board soon after this registration statement is
declared effective, and we have been cleared for trading by NASD.
ACCOUNTING CHANGES
Impact of Recently Issued Accounting Standard
In June 1998, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 133 (Accounting for Derivative Instruments and
Hedging Activities), which establishes accounting and reporting
standards for derivative instruments. This Statement requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. In June 1999, the FASB issued SFAS No. 137 (Accounting for
Derivative Instruments and Hedging Activities-Deferral of the Effective
Date of FASB Statement No. 133) which postponed the adoption date of
SFAS No. 133. As such, the Company is not required to adopt the new
Statement until the year 2001. We are currently evaluating the effect
that implementation of the new standard will have on our results of
operations and financial position.
<PAGE>
ITEM 3. DESCRIPTION OF PROPERTIES
PROPERTIES
We currently do not own any investment property or real
estate, nor have we developed an investment policy with respect to real
estate or real estate interest, real estate mortgages, or securities.
We currently lease approximately 3,300 square feet of
warehouse space in Phoenix, Arizona. This is a three-year lease,
beginning February 1, 2000. The base lease amount is $2,065 per month.
We also lease a 1,000 foot office space in Escondido, California, from
Rebecca Inzunza, an officer/shareholder of the Company. This facility
is the Company headquarters. This is a month-to-month lease in the
amount of $655 per month.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the shareholdings of those
persons who own more than five percent of our common stock as of the
date hereof with the number of outstanding shares at 12,578,637.
<TABLE>
<CAPTION>
Shares
Beneficially Percent of
Title of Class Name/Address of Owner Owned Class
------------------- ----------------------------------- -------------- ----------
<S> <C> <C> <C>
Common (Restricted) Rebecca M. Inzunza (President/ 2,679,495 21.30%
CEO, Director)
1220 Birch Way
Escondido, CA 92097
Common (Restricted) Robert E. Hegemann (SVP, Treasurer, 991,900 7.89%
Director)
6522 East Sharon Rd.
Scottsdale, AZ 85254
Common (Restricted) Jay W. Hegemann 743,925 5.91%
748 Vinewood, Suite C&D
Escondido, CA 92029
Common (Restricted) Jean Louis Vrignaud 910,000 7.23%
108 Rue Due Cherche Midi
Paris, France 75006
Common (Restricted) All Officers and Directors and 5,325,320 42.34%
owners of more than 5%
</TABLE>
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
Shares
Beneficially Percent of
Title of Class Name/Address of Owner Owned Class
------------------- --------------------------------------- ------------ -----------
<S> <C> <C> <C>
Common (Restricted) Rebecca M. Inzunza (President/ 2,679,495 21.30%
CEO, Director)
1220 Birch Way
Escondido, CA 92097
Common (Restricted) Robert E. Hegemann (SAP, Treasurer, 991,900 7.89%
Director)
6522 East Sharon Rd.
Scottsdale, AZ 85254
Common (Restricted) Edward E. Quincy, DDS (Director) 598,780 4.76%
314 N. 14th Box 87
Newman Grove, NE 68758
Common (Restricted) Earl Moore (Director) 5,460 .04%
8140 Walnut Hill Lane #201
Dallas, TX 75231
Common (Restricted) William Robbins 82,737 .66%
10 Hickory Hill Lane
Fisherville, VA 22939
Common All Directors and Officers as a group 4,358,372 34.65%
</TABLE>
All percentages are calculated based upon 12,578,637 shares of
common stock of Remedent USA, Inc. issued and outstanding as of the
date of filing this Form 10-SB.
<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
IDENTITY OF DIRECTORS AND EXECUTIVE OFFICERS
Our directors, executive officers and key employees, as of
March 31, 2000, and their respective ages and positions are set forth
below in tabular form. Biographical information on all of our directors
and executive directors is set forth following the tabular information.
The family relations are as follows: Ms. Inzunza is married to Mr. Ken
Hegemann and Mr. Robert Hegemann is the son of Mr. Ken Hegemann.
Person Age Position
------------------------ ---- ---------------------------------------
Rebecca M. Inzunza 44 President, CEO and Director
Robert E. Hegemann 32 Senior Vice President, Treasurer and Director
J. Stephen Grassbaugh 46 Chief Financial Officer
Viviana Sempertegui 31 Vice President, International Marketing,
Secretary
Earl Moore, DDS, M.S.D., 64 Director
F.A.C.D., F.I.C.D.
Edward E. Quincy, DDS 52 Director
William Robbins 56 Director
BUSINESS EXPERIENCE
(1) Officers
Rebecca M. Inzunza, President, CEO and Director -
Ms. Inzunza co-founded Remedent USA, Inc. in September 1996.
She serves as President and Chief Executive Officer. Before launching
this endeavor, Ms. Inzunza was President and CEO of Curvex Corporation
from 1990 to 1996. In a position prior to Curvex, she served as a
department manager with Sears Savings Bank where she oversaw
departmental computer system requirements and compatibility bank wide.
Ms. Inzunza graduated from Mira Costa College with honors.
<PAGE>
Robert E. Hegemann, Senior Vice President, Treasurer, Director -
Mr. Hegemann co-founded the company along with Ms. Inzunza and
Mr. Vrignaud in September of 1996. Prior to joining the company, Mr.
Hegemann gained management experience as director of operations at Pro
Care Laboratories and Curvex Corporation from 1986 to 1996. He was also
instrumental in development of the Brushrite Automatic Toothbrush and
other oral care products during his tenure with Pro Care Laboratories
and Curvex Corporation. Mr. Hegemann studied Advertising at Northern
Arizona University and Organizational Communication at University of
Nebraska. Mr. Hegemann did not receive a degree from these
institutions.
J. Stephen Grassbaugh, Chief Financial Officer
Mr. Grassbaugh currently serves as our Chief Financial Officer
where he plans to devote approximately 10 hours per week in that
capacity. Since May of 1997, Mr. Grassbaugh has been employed as Chief
Financial Officer with Double Eagle Holdings, Inc., parent company of
Double Eagle Market Development. Prior to his employment with Double
Eagle, he served as Corporate Controller for Kerr Group, Inc., a NYSE
manufacturing company, from 1979 until 1996. Mr. Grassbaugh has a
bachelor's degree from Harvard University and an MBA in Finance and
Accounting from the University of California, Irvine.
Viviana Sempertegui, Vice President, International Marketing, Secretary
Ms. Sempertegui's joined Remedent USA, Inc. in March 1998.
Prior to her employment with Remedent USA, Inc. she served as a project
manager for the Export Small Business Development Center, under the
direction of the Department of Commerce, from January 1995 to December
of 1997. Viviana graduated from Pan American School with a degree in
Agriculture and California State Polytechnic University, Pomona,
earning a degree in Business Management.
(2) Directors
All Directors commenced their service in the capacity of a
director on December 1, 1998. As of March 31, 2000, our Board of
Directors is comprised of 5 members, each of whom is elected for a term
of one year. Executive officers are chosen by, and serve at the
discretion of, the board of directors.
Rebecca M. Inzunza, President, CEO and Director
See Officers section above.
Robert E. Hegemann, Senior Vice President, Treasurer, Director
See Officers section above.
William L. Robbins, Director
Mr. Robbins served as the Vice President of Sales for American
Safety Razor Co. for 27 years until 1999. At American Safety Razor, Mr.
Robbins maintained relations with major retailers in the country such
as Kroger, Safeway, Walgreen, Rite-Aid, CVS, Target and K-Mart. His
experience in the health and beauty care industry started over
thirty-five years ago and has included positions at Johnson & Johnson
and Chesebrough Pond. Since 1999, Mr. Robbins has been associated with
a company called Grocery Link located in Norcross, Ga., that sells a
web-based customer service product to manufacturers and retailers.
<PAGE>
Edward E. Quincy DDS, Director
Dr. Quincy is currently President of Tri-State Dental, P.C., a
company that he founded in 1985, which has twenty-six dental offices in
three states. He also owns Dental Rental, LLC, a business that manages
the rental of fourteen dental-related buildings. Dr. Quincy previously
served as President for Quality Kare Dental, Crofton Dental
Partnership, and Henderson Family Dentistry and owned a successful
dental practice in Nebraska. Dr. Quincy graduated from Kearny State
College in 1970 with a BS Degree, as well as from the University of
Nebraska College of Dentistry in 1976 with a Doctor of Dental Surgery
Degree.
Earl Moore, DDS, M.S.D., F.A.C.D., F.I.C.D., Director
Dr. Moore founded and has maintained a successful private
dental practice since 1959 to date, specializing in Periodontology. Dr.
Moore is a member of the American Academy of Periodontology and the
Southwest Society of Periodontology. He is a member and has served as
President of the Southwest Society of Dental Medicine. Dr Moore is also
a member and past President of the Dallas County Dental Society. He is
an active member of the Texas Dental Association and the American
Dental Association.
(3) Board of Directors Committees.
The Board of Directors currently has no special committees.
However, the Company believes that it will add an executive committee
and a compensation committee in the near future.
IDENTITY OF SIGNIFICANT EMPLOYEES
Name Age Position
----------------------- ---- -------------------------
Kenneth Hegemann 52 Research and Development
Kenneth J. Hegemann, Research and Development
Mr. Hegemann currently has approximately 8 new products to add to our
product line. He has developed numerous products, which have been in use since
1971, and holds more than 20 US and foreign patents for products ranging from
irrigation systems, hand tools, and personal care products. Mr. Hegemann was the
sole owner of Hegemann Research and Development from June 1986 to his hiring in
1998 with Remedent USA, Inc. Mr. Hegemann graduated from Lier Siegler with a
degree in Engineering Technology.
<PAGE>
SIGNIFICANT CONSULTANTS
(1) Advisory Board
Ray Noel, M.D., Advisory Board Member
Dr. Noel is Director of the Chronic Nonmalignant Pain Board, a
division of Kaiser-Permanente that services the entire
Portland/Vancouver WA region with about 450,000 members for the past
eight years. He is closely involved with all studies conducted at
Kaiser-Permanente Center for Health Research. Dr. Noel has been serving
for the last eight years as a family physician and addiction treatment
specialist at Kaiser-Permanente in Washington. Prior to this, he served
as Medical Director and Administrator at Pomona Valley Community
Hospital Alcohol/Drug Treatment Center, a new state-of-the-art
addiction treatment center. For 12 years, Dr. Noel served as Family
Physician at Kaiser-Permanente, Oregon Region. Dr. Noel served the US
Navy in the Medical Corps for seven years when he received honorable
discharge upon resigning with the rank of Commander, USNR. Dr Noel
graduated from Oklahoma Baptist University in 1963 with a BS degree,
and Wake Forest University in 1969 with a M.D. degree. He did a
Medical/Pediatrics/Surgery Internship at St. Mary's Long Beach
Hospital. He is Board Certified with the American Board of Family
Practice and Certified in Addiction Medicine by the American Society of
Addiction Medicine.
(2) Outside Marketing Consultants
Double Eagle Market Development Company
On March 10, 1999, the Company entered into an agreement with
Double Eagle Holdings, Inc. (Double Eagle Market Development Company).
Double Eagle works on a consultant basis, providing sales and marketing
management services and using its best efforts to solicit wholesale
orders from customers in their territory, which includes the United
States of America, all U.S. military installations worldwide, and
Canada. The customers in the territory include but are not limited to
grocery, club stores, mass merchandisers, convenience, liquor, health
food, military, drug, hardware and food service.
The terms of the agreement contemplate a six month term with
automatic renewal, unless previously terminated by either party no
later that sixty days prior to the end of any specific six month
period. An initial consultant fee of $10,000 was paid upon signing of
the contract, and each month thereafter Double Eagle receives a minimum
guarantee of $4,000, which is offset partially or entirely by the 6%
fee commission earned on net invoiced wholesale orders placed by Double
Eagle.
Double Eagle has hired outside brokers to solicit and serve
the customers in the territory in a manner to maximize our sales, and
those outside brokers are compensated with an additional and separate
5% fee commission for all net invoiced sales generated directly by
their firm. This 5% commission is paid directly by Double Eagle who, in
turn, receives reimbursement from Remedent. Thus, making the total
commission paid to double Eagle equal to 11%.
<PAGE>
Based upon their review of the market and the oral care
industry, Double Eagle has restructured the advertising program and has
assumed general management duties for sales and marketing. The current
and most important objective is protecting existing customer base. They
have completed a coordinated market expansion plan to build consumer
awareness by creating consumer trial. In addition, we have modified all
sales materials to focus on Remedent Toothbrush's new market
positioning. Double Eagle has partially restructured the broker network
to cover all market areas and establish field sales management
accountability.
Double Eagle's CFO, Mr. Stephen Grassbaugh, serves as
Remedent's Chief Financial Officer.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
None of our officers, directors, promoters or control persons of the
Company have been involved in the past five (5) years in any of the following:
o Any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at
the time of the bankruptcy or within two years prior to that
time;
o Any conviction in criminal proceeding or being subject to a
pending criminal proceeding (excluding traffic violations and
other minor offenses);
o Being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any Court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities; or
o Being found by a court of competent jurisdiction (in a civil
action), the Commission or the Commodity Futures Trading
Commission to violate a federal or state securities laws or
commodities law, and the judgment has not been reversed,
suspended, or vacated.
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth the compensation granted by Remedent
USA, Inc. to its Chief Executive Officer and President and the next highest paid
executive officers. This information includes the dollar value of base salaries
and bonus awards if any. There was no other form of compensation paid to such
individuals.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------------------------------
Long Term Compensation
------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
------------------------------------------------------------------------------------------------------------------------------
Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principle Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
------------------------------------------------------------------------------------------------------------------------------
CEO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rebecca Inzunza* 1999 79,060 0 0 0 0 0 0
------------------------------------------------------------------------------------------------------------------------------
2000 80,400 0 0 0 0 0 0
------------------------------------------------------------------------------------------------------------------------------
SVP - Operations
Robert Hegemann 1999 36,086 0 0 0 0 0 0
------------------------------------------------------------------------------------------------------------------------------
2000 40,872
------------------------------------------------------------------------------------------------------------------------------
CFO Hired 4/1999
J. Stephen 1999 0 0 0 0 0 0 0
Grassbaugh**
------------------------------------------------------------------------------------------------------------------------------
2000 12,000 39,000
------------------------------------------------------------------------------------------------------------------------------
R & D Hired 9/1998
Kenneth J. Hegemann* 1999 60,300 0 0 0 0 0 0
------------------------------------------------------------------------------------------------------------------------------
2000 77,385 0 0 0 0 0 0
------------------------------------------------------------------------------------------------------------------------------
VP - International
Viviana Sempertegui * 1999 26,216 0 0 0 0 0 0
------------------------------------------------------------------------------------------------------------------------------
2000 31,205 5,868
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Since May of 1999, no compensation has been paid to Ms.
Inzunza or Mr. Kenneth Hegemann. Salaries for Ms. Inzunza and Mr.
Hegemann will be deferred until additional funding has been completed.
The per month salary of Ms. Inzunza is $6,700 and of Mr. Hegemann is
Approximately $5,025. Salaries for Ms. Inzunza and Mr. Hegemann have
been placed in a salary accrual general ledger each month and will be
paid when the Company can adequately do so. A bonus amount of $5,686
payable to Viviana Sempertegui for 1999 was also placed into the
officers' accrual general ledger account. At the time capital is raised
and past salaries are paid, 8% interest will be paid on the amount due
for both Ms. Inzunza and Mr. Hegemann.
**Only some of the stock portion of his salary has been paid
to Mr. Grassbaugh since April 1999. Mr. Grassbaugh's salary is $5,000
per month. Compensation from April 1999 through September 1999 is
payable in equivalent shares of our common stock and calculated on the
monthly average closing price per share for the month. For each month
thereafter, compensation has been paid monthly; $2,000 in cash and
$3,000 in equivalent shares at the monthly average price per share for
the month. However, to date, no cash has actually been paid to Mr.
Grassbaugh and the entire cash portion of the salary has been placed in
a general ledger accrual account. The shares that have been issued
through December 31, 1999 for services total 31,523 restricted common
shares.
<PAGE>
(1) Director Compensation
Directors currently do not receive any cash compensation for
serving on the Board of Directors, or for any other services rendered
to the Company in their capacity as a Director of the Company, but are
reimbursed for expenses they incur in connection with their attendance.
We anticipate adopting a director stock plan under which employee and
non-employee directors will be entitled to receive stock options.
(2) Employment Agreements
We have entered into one employment agreement with our CFO,
Mr. Grassbaugh (see "Executive Compensation"). We anticipates that we
will negotiate employment contracts with executive officers and key
personnel in the near future.
(3) Long Term Incentive or Option Plans
We currently do not have a long-term incentive plan or any
option plan in place.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATED PARTY TRANSACTIONS
Remedent leases 1,000 square feet of office space at 1220
Birch Way, Escondido, California. This dwelling belongs to Ms. Inzunza
and acts as our headquarters. Since January of 1998, Remedent has paid
$300 per month directly to Ms. Inzunza for this office space. As of
January 1, 2000, the lease amount was increased to $655. This lease is
opened ended, and we believe that with funding in place, Remedent will
be able to move offices to a more appropriate business center.
Ms. Inzunza loaned a total of $50,000 to Remedent USA, Inc. As
of December 31, 1999, Remedent owed a balance of $2,114 on the original
loan, which includes accrued interest. As of March 31, 2000, the entire
balance was paid in full including interest.
As of May 3, 1998, Famcare, Inc. owed Remedent a total of
$1,300. The amount increased since May of 1998 and Remedent is charging
5.5% interest on the total amount. As of March 31, 2000, Famcare owed a
total of $4,749, which includes accrued interest since May 1998.
Kenneth Hegemann is an employee of Remedent and owns 100% of Famcare,
Inc.
On October 5, 1996, we entered into a royalty agreement with
Jean Louis Vrignaud under which Mr. Vrignaud is to receive a 4.5%
royalty of the net sales with a cap of $2 million dollars as
compensation for the assignment of all Remedent patents. No royalties
have been paid and the balance owed has been accruing in a general
ledger and as of March 31, 2000 the total due is $40,754.
<PAGE>
We have entered into an agreement with Double Eagle for sales and
marketing shares. The terms of which are discussed herein, in the Section
entitled "Marketing Strategies." We also have entered into a separate agreement
for the services of Stephen Grassbaugh to serve as our acting chief financial
officer. Mr. Grassbaugh currently serves as the chief financial officer of
Double Eagle.
TRANSACTIONS WITH PROMOTERS
All contracts with promoters are being filed with the filing of this
registration statement.
On December 3, 1998, the Company entered into an agreement
with Continental Capital, 195 Wekiva Springs Road, Suite 200, Longwood,
FL 32779. Their duty was to provide introductions for merger,
acquisition candidates, identifying sources for capital and/or
providing other financial services, in exchange for $25,000.00 and
150,000 shares of unrestricted common stock issued in a single
transaction on March 2, 1999 to Continental Capital under Section 4(2)
of the Securities Act of 1933 and Rule 504 of Regulation D. Continental
Capital was to purchase print media, purchase more aggressive direct
marketing on the Internet, design/implement a minimum of banner ads on
the Internet, produce and mail 50,000 mailers and use its best efforts
to obtain exposure and further promote the Company. The contract with
Continental Capital expired December 1, 1999.
We entered into a six (6) month contract with In-Touch
Communications, 2990 Quebec Street, Suite 305, Vancouver, Canada V5T
4P7 on June 7, 1999. Under the terms of the contract, In-Touch was to
provide increased visibility and investor awareness through cost
effective methods. In-Touch arranged print advertising to a financial
publication to develop exposure for the Company to potential new
investors. In-Touch also provided follow-up to leads from the
advertising, calling and informing the interested potential investors.
They also mailed informational packages to them. In-Touch informed
current shareholders of our developments and answered shareholder
inquiries over the phone. They also mailed out an Information Request
Form (Business Reply Mail) and updated the database of the current
shareholders once the Information Request Forms were sent back by the
shareholders. In-Touch provided news dissemination via fax, mail, and
e-mail. Cost effective methods to create visibility and investor
awareness, for example, were: advertising in financial publications and
Internet Service, (i.e., webcasting provided by companies like Q1234,
which is an internet service dedicated to broadcasting investor
relations events for public companies). There are many companies that
provide this service, including Yahoo. In exchange, we would pay
expenses up to $500 per month and issue 60,000 shares of restricted
common stock to In-Touch provided for by Section 4(2) of the Securities
Act of 1933 and Rule 504 of Regulation D. As of March 31, 2000, a total
of $929.12 was been paid in expenses. Beginning July 1, 1999 through
December 1, 1999, 10,000 restricted common shares were issued per month
and restricted for one year from each issue date. The contract with
In-Touch Communications expired December 7, 1999.
<PAGE>
On August 9, 1999, we entered into an agreement with Rubicon
Capital Partners Inc, 4275 Executive Square, Suite 1100, La Jolla, CA
92037 to provide consulting services relating to our business
reorganization, re-capitalization, and mergers and acquisition
programs. This contract was to be for a period of twenty-four months,
but was mutually cancelled as of December 31, 1999. We paid $8,000.00
upon signing of the contract. As of December 31, 1999, we owed an
outstanding balance of $40,475.00, which will be satisfied with the
issuance of 34,100 of our restricted shares. The shares were calculated
on the closing price of the day the invoices were dated.
On February 15, 2000, the Company entered into a contract with
Merryvale Group International, 1620 Tiburon Ave, Tiburon, CA. 94920,
under the terms of which Merryvale is to provide a plan for raising $3
million in working capital, search out and introduce Remedent to
potential strategic partners for either a possible merger or
acquisition, effect a contact network base in the US, Canada, Great
Britain and Asia, draft corporate resolutions, board minutes and
shareholders minutes, coordinate shareholder meetings and oversee
relations with contacts on our behalf, in addition to performing
promotional services as directed. In exchange, Merryvale received
16,666 Remedent shares from Lee Grothe, a Remedent shareholder who, in
turn, received restricted common shares. Upon funding, we agreed that
we would pay an additional cash fee of 10% on the funds raised. In
addition, we have agreed to pay Merryvale an additional 100 shares for
every $1,000 raised. The duration of this agreement was until June 15,
2000; however, we have remained in contact with Merryvale. To date,
Merryvale has made a few introductions to potential investors.
On February 24, 2000 we entered into a contract with
Charterbridge Financial Group, 350 West Ash Street, Suite 1002, San
Diego, CA 92101. Charterbridge was to produce a shareholder
Communications/Investor Relations brochure to be distributed
bi-monthly; distribute company news through many different vehicles
such as newsletters, email, radio interviews; present Remedent USA,
Inc. to various media and periodical sources; introduce Remedent to
potential strategic partners for either merger or acquisition; and make
introductions to potential investors, lenders, borrowers, trust,
corporations, merger/acquisition candidates and unincorporated business
entities. In exchange, Charterbridge received 90,000 common shares from
Remedent shareholders Edward Quincy and Lee Dahl. On the first of each
following quarter, Charterbridge was to receive an additional 150,000
common shares. The term of this agreement was one year ending on
February 23, 2001, however, this agreement was mutually terminated on
March 1, 2000 and no additional compensation has been paid above the
initial 90,000 shares. Charterbridge did not perform any of the
services contemplated by the agreement.
On March 10, 2000, we entered into a contract with First
Canadian Capital, 1118 Homer Street #210, Vancouver, B.C. Canada V68
6L5 to provide assistance in identifying merger and acquisition
candidates, assist in any due diligence process, recommend transaction
terms, give advice and assistance during negotiations, and introduce
Remedent USA, Inc. to numerous broker/dealers and investment
professionals. In exchange, we pay $5,000 each month for one year in
our common shares, calculated at the average closing price for that
month. The contract is a quarterly agreement for one year and can be
cancelled 15 days prior to the end of each quarter. The agreement will
expire January 31, 2001. First Canadian has failed to provide services
and their contract was cancelled on March 15, 2000.
<PAGE>
The services that were to be provided by Merryvale,
Charterbridge and First Canadian were substantially similar. The
agreements overlap and duplicate. Each was to introduce us to potential
strategic partners for either merger or acquisition of our company, and
to make introductions to potential investment partners. These groups
are not brokers and as such they could only make introductions to us,
whereupon all presentations and negotiations are conducted exclusively
by us.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital of the Company consists of 50,000,000 Common
Shares, $0.001 par value. There are currently 12,578,637 common shares
outstanding. As of March 31, 2000, there are believed to be approximately 400
shareholders.
COMMON SHARES
Subject to preferences that may be applicable to any then outstanding
Preferred Shares, holders of Common Shares are entitled to receive, ratably,
such dividends as may be declared by the Board of Directors out of funds legally
available therefore. In the event of our liquidation, dissolution or winding up,
holders of the Common Shares are entitled to share ratably in all assets
remaining after the payment of liabilities and the liquidation preference of any
then outstanding Preferred Shares. Holders of Common Shares have no preemptive
rights and no right to convert their Common Shares into any other securities.
There are no redemption or sinking fund provisions applicable to the Common
Shares. All outstanding Common Shares are fully paid and non-assessable. The
holders of Common Shares are entitled to one vote for each share held of record
on all matters submitted to a vote of shareholders. We have not paid, and do not
intend to pay, cash dividends on the Common Shares in the foreseeable future.
WARRANTS & DEBT SECURITIES
We have not issued any warrants to date nor have we issued any
outstanding debt securities. There are currently no other issued and outstanding
securities, which require registration.
<PAGE>
PART II.
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Our securities have been, and we anticipate will be, traded on the National
Association of Securities Dealers (NASD) over-the-counter Bulletin Board under
the trading symbol REMM. The quotations reflect inter-dealer prices, without
retail mark-up, markdown or commission and may not represent actual
transactions. We have approximately 400 common stockholders. We have paid no
dividends on our common stock for the past two fiscal years and do not expect to
pay any dividends for at least the next five fiscal years.
Restricted Securities
As of October 2, 1998, except for 1,895,530 free trading
shares, all other shares issued by Remedent USA are "Restricted
Securities" within the meaning of Rule 144 under the Securities Act of
1933. Ordinarily, under Rule 144, a person holding restricted shares
for a period of one year may, every three months, sell in ordinary
brokerage transactions or in transactions directly with a market maker
an amount equal to the greater of one percent of Remedent's
then-outstanding Common Stock or the average weekly trading volume
during the four calendar weeks prior to such sale. Future sales of such
shares could have an adverse effect on the market price of the Common
Stock. All of the holders of the above mentioned "restricted
securities" have voluntarily chosen to hold shares for another year
expiring October 2, 2000, in order to alleviate the adverse effect in
the early stages of the market exposure for the Common Shares of
Remedent.
The market price of Remedent's common stock could drop if
substantial amounts of shares are sold in the public market or if the
market perceives that such sales could occur. A drop in the market
price could adversely affect holders of the stock and could also harm
Remedent's ability to raise additional capital by selling equity
securities. In addition, shares issued by Remedent USA, Inc., in
private transactions over the past two years will become eligible for
sale in October of 2000, into the public market under SEC Rule 144.
<PAGE>
The high and low prices by quarter since the inception of
trading on October 2, 1998 are as follows.
Remedent USA Inc. OTC:BB REMM
<TABLE>
<CAPTION>
1998 - 1999 - 2000 Bid Prices Ask Prices
-------------------------------------------------------------------------------------
High Low High Low
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
October 1 - October 31 3 1/2 2 15/16 3 1/2 3
November 1 - November 30 3 1/2 2 3/8 3 1/2 2 5/8
December 1 - December 31 3 2 11/16 3 1/4 2 11/16
January 1 - January 31 2 1/2 2 2 1/2 2
February 1 - February 28 2 1/8 1 7/8 2 1/8 1 15/16
March 1 - March 31 1 3/4 1/2 1 7/8 7/8
April 1- April 30 1 3/8 1 1 3/8 1
May 1 - May 31 1 1/4 3/4 1 1/4 1 1/16
June 1 - June 30 1 3/16 7/8 1 1/4 1 1/16
July 1 - July 31 1.29 13/16 1 7/16 13/16
August 1 - August 31 1 1/2 1 3/16 2 1.30
September 1 - September 30 2 5/16 1 3/8 2 1/2 1 1/2
October 1 - October 31 1 1/2 7/8 1 15/16 1 1/8
November 1 - November 30 1 1/4 5/8 1 1/2 1
December 1 - December 31 15/16 9/16 1 1/16 11/16
January 1 - January 7 7/8 7/8 7/8 7/8
January 10 - January 14 15/16 3/4
January 17 - January 21 3/4 5/8
January 24 - January 28 15/16 7/8
January 31 - February 4 1 5/8
February 21 - February 25 7/8 5/8
March 27 - March 31 1 1/2 1/8
</TABLE>
Predecessor: Resort World Enterprise, Inc OTC:BB RERT
<TABLE>
<CAPTION>
Bid Prices Ask Prices
-------------------------------------------------------------------------------------
1998 High Low High Low
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
June 1 - June 30 3 3 3 5/8 3 5/8
July 1 - July 31 2 5/8 2 5/8 3 1/2 3 1/2
August 1 - August 31 2 1/4 2 1/4 3 5/16 3 5/16
September 1 - September 30 2 7/16 2 7/16 3 3
</TABLE>
Predecessor: Global Golf Holding, Inc. OTC:BB DMFI.
<TABLE>
<CAPTION>
1997 - 1998 Bid Prices Ask Prices
-------------------------------------------------------------------------------------
High Low High Low
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
April 1- April 30 1/8 1/8 1/8 1/8
May 1 - May 31 1/8 1/8 1/8 1/8
June 1 - June 30 1/8 1/16 1/8 1/16
July 1 - July 31 1/16 1/16 1/16 1/16
August 1 - August 31 1/16 1/16 1/16 1/16
September 1 - September 30 1/16 1/16 1/16 1/16
October 1 - October 31 1/16 1/16 1/16 1/16
November 1 - November 30 .07 1/16 .07 1/16
December 1 - December 31 5 1/2 .06 5 3/4 1/8
January 1 - January 31 3 7/8 3 7/8 3 15/16 3 7/8
February 1 - February 28 3 3/4 3 3/4 3 3/4 3 3/4
March 1 - March 31 3 3/8 3 3/8 3 3/8 3 7/16
April 1- April 30 3 3/8 3 3/8 3 3/8 3 3/8
May 1 - May 31 3 3 3 3
June 1 - June 30 3 5/8 3 1/8 3 5/8 3 1/8
</TABLE>
<PAGE>
ITEM 2. LEGAL PROCEEDINGS
We are not a party to, and none of our property is subject to any
pending or threatened legal, governmental, administrative or judicial
proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
As of November 9, 1999, the Company has retained the following
independent auditing firm to audit its financial statements:
Siegel & Smith
2120 Jimmy Durante Blvd.
Del Mar, CA 92014
858-792-8606
No consultation was held with Siegel & Smith concerning the type of
opinion to be rendered, or written or oral advice. At the time of the retention
of this firm, no issues or views were discussed or mentioned. The Board ratified
this action by their unanimous consent.
The prior accountant Grice, Lund, and Tarkington, 144 West D Street,
Encinitas, CA., had completed tax preparation for years 1996 and 1997 and an
audit for six months ending September 30, 1998 just prior to the Company going
public. In its report for six months ending September 30, 1998, they noted that
Remedent USA Inc. balance sheet presented fairly, in all material aspects, the
financial position of the Company as of September 30, 1998, in conformity with
generally accepted accounting principles. Grice, Lund and Tarkington resigned
upon our becoming a public company because its services were limited to private
companies.
They also mention that they could not observe the physical inventory,
since that date was prior to their initial engagement as auditors for the
Company, and our records did not permit adequate retroactive tests of those
inventory costs. Accordingly, the scope of their work was not sufficient to
enable them to express, and did not express, an opinion on the statements of
income, changes in stockholders' equity, and cash flows for the six months ended
September 30, 1998.
There were no disagreements with the former accountants on any matter
of accounting principles or practices, financial statement disclosure, or on tax
preparation, scope or procedure.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Within the past 2 years, we have sold or issued the following
securities without registering them under the Securities Act of 1933. In each
transaction, the value of the stock was market price, as calculated based upon
the price the stock was trading in the day of or just prior to the transaction.
<PAGE>
On March 2, 1999, we conducted an offering of unregistered securities
in reliance upon provisions for exemption from registration under Rule 504 of
Regulation D of the Securities Act of 1933, Section 3 (b). In that offering, we
issued 133,333 shares of unrestricted common stock to six private investors in
exchange for a total of $200,000. These proceeds were used for operating
expenses. Together with the investors, we arrived at $1.50 as an equitable price
per share. The table below details the breakdown of shares and cash received.
<TABLE>
<CAPTION>
INVESTOR ADDRESS AMOUNT NO. SHARES
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Timothy J. Pieper 112 Holly Drive, Torrington, WY $100,000 66,667
82240
Luke E. & Pamela K. Lionberger 6019 Franklin Street, Lincoln, $3,000 2,000
NE 68506
Leon F. & Lois Grothe 565 Tompkins Drive, S. Sioux $10,000 6,666
City, NE 68776
Lee A. And Kayleen L. Dahl 401 Alma Box 97, Laurel, NE 68745 $9,000 6,000
Edward E. and Betty J. Quincy Box 87, Newman Grove, NE 68758 $75,750 50,500
Mark and Cynthia Lionberger 7521 South Downing Street, $2,250 1,500
Littleton, CO 80122
---------------------------------------------
Totals $200,000 133,333
</TABLE>
The above transactions have qualified for exemption under Rule 504. The
individual investors confirmed that they have a net worth exceeding $1,000,000
or have sophisticated investor status.
On March 2, 1999, we offered and issued in a single transaction 150,000
shares of restricted common stock to one entity, Continental Capital provided
for by Section 4(2) of the Securities Act of 1933 and Rule 504 of Regulation D
for service provided (see " Transactions with Promoters").
On January 21, 2000, we issued 31,523 new restricted common shares to
Double Eagle Holdings Inc., exchange for services provided. These shares were
issued in reliance on exemption from registration under section 4(2) of the
Securities Act. These shares were in partial compensation for services provided
by Steve Grassbaugh as our Chief Financial Officer.
On January 21, 2000, we issued 60,000 new restricted common shares to
In-Touch Communications for services rendered. Shares were calculated on a
straight 10,000 shares per month for the six month contract totaling 60,000
shares. ("See Transactions with Promoters").
On February 24, 2000, we issued 40,500 restricted common shares to Dr.
Lee Dahl who, in turn, paid 27,000 non-restricted common shares held by him to
Charterbridge Financial Group. On this same date, we issued to Dr. Edward Quincy
94,500 restricted common shares. In turn, Dr. Quincy granted 63,000
non-restricted common shares to Charterbridge Financial Group. (See
"Transactions with Promoters").
<PAGE>
On March 13, 2000, the Company issued 25,000 restricted common shares
to Mr. Leon F. Grothe and Mrs. Lois Grothe. Mr. and Mrs. Grothe granted 16,666
non-restricted shares held by them to The Merryvale International Group for
services rendered to Remedent USA, Inc. (See "Transactions with Promoters").
It was our intention that the above referenced transactions with
In-Touch, Charterbridge and Merryvale be exempt from registration under section
4(2) of the Securities Act of 1933.
We also plan to raise additional capital through the offering of
convertible debentures in a 506 Regulation D offering. More specifically, the
offering will be available to accredited investors only, the potential investors
will receive a private placement memorandum which details material information
regarding the Company's businesses, financial condition, operations and
industry, and purchasers will receive restricted securities. While this will not
result in a change of control, the offering will reduce the percentage of
ownership of the officers, directors, beneficial shareholders and all other
shareholders of the Company.
As of March 31, 2000 we had 50,000,000 shares of $0.001 par value
common stock authorized. At March 31, 2000 and March 31, 1999, there were
12,578,637 shares and, 12,433,780 shares outstanding, respectively.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the terms of our Bylaws, we have the power to indemnify any
person who was or is a party to any proceeding (other than an action by, or in
the right of, the corporation), by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise
against liability incurred in connection with such proceeding, including any
appeal thereof, if he acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any proceeding by judgment, order,
settlement, or conviction or upon a plea of nolo contendere or its equivalent
does not, of itself, create a presumption that the person did not act in good
faith and in a manner, which he reasonably believed to be in, or not opposed to,
the best interests of the corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
In addition, a corporation may indemnify any officer or director under
circumstances similar to those described in the preceding paragraph against
expenses (including amounts paid in settlement and attorneys fees actually and
reasonable incurred by that person) in connection with the defense or settlement
of the action or suit. This indemnification is also premised on the person's
ability to show that he acted in good faith and in a manner, which he reasonably
believed to be in (or not opposed to) the best interest of the corporation.
However, indemnification for expenses is limited to the amount that the court,
after viewing all of the circumstances of the claim, believes is reasonable
under those circumstances.
<PAGE>
Under Nevada law, corporations may also purchase and maintain insurance
or make other financial arrangements on behalf of any person who is or was a
director or officer (or is serving at the request of the corporation as a
director or officer of another corporation or entity) for any liability asserted
against that person and any expenses incurred by him in his capacity as a
director or officer. These financial arrangements may include the creation of
trust funds, self insurance programs, the granting of security interests,
letters of credit, guarantees and insurance policies.
We have not sought or obtained any director or officer insurance
coverages or made any other arrangements for the funding of any indemnification
obligations it might incur under the terms of its Articles of Incorporation and
Nevada law.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
Independent Auditors' Report F-1
Financial Statements:
Balance Sheet as of March 31, 2000 and 1999 F-2
Statements of Income for the years ended March 31, 2000 and 1999 F-3
Statements of Equity for the years ended March 31, 2000 and 1999 F-4
Statements of Cash Flows for the years ended March 31, 2000 and 1999 F-5
Notes to Financial Statements F-6 - F-14
Financial Statements
Balance Sheet for periods ended June 30, 2000 and 1999 F-17
Statement Of Operations for the periods ended June 30, 2000 and 1999 F-18
Statement of Cash Flow for the periods ended June 30, 2000 and 1999 F-19
Statement of Changes in Shareholders Equity (Deficit)
for the period ended June 30, 2000 and 1999 F-20
Notes to Financial Statements F-21
<PAGE>
Remedent USA, Inc.
Financial Statements
March 31, 2000 and March 31, 1999
(Audited)
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
REMEDENT USA, INC.
We have audited the accompanying balance sheets of Remedent USA, Inc. as of
March 31, 2000 and 1999, and the related statements of operations, changes in
stockholders' equity (deficit) and cash flows for the years ended March 31, 2000
and 1999. These financial statements are the responsibility of our management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the over all financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Remedent USA, Inc. as of March
31, 2000 and March 31 1999, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note I to the financial
statements, the Company has suffered recurring losses from operations, has a net
working capital deficiency, and its total liabilities exceed its total assets,
which raises substantial doubt about its ability to continue as a going concern.
Management's plans in regards to these matters are also described in Note I. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Siegel & Smith
Del Mar, California
May 23, 2000
F-1
<PAGE>
<TABLE>
<CAPTION>
REMEDENT USA, INC.
BALANCE SHEET
For the year ended For the year ended
ASSETS March 31, 2000 March 31, 1999
------------------ -------------------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 8,125 $ 89,382
Accounts receivable, net 40,897 35,374
Due from related party 16,919 5,944
Inventories, net 153,712 171,136
Prepaid expense 536 638
------- -------
TOTAL CURRENT ASSET 220,189 302,474
PROPERTY AND EQUIPMENT, net 31,795 26,277
PATENTS, net of accumulated amortization 28,274 30,555
OTHER ASSETS 4,782 1,180
------ ------
TOTAL ASSETS $285,040 $360,486
======== ========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable $396,208 $ 57,504
Note payable-related parties 37,096 0
Accrued salaries-officers 85,567 0
Accrued liabilities 154,110 36,186
Customer deposits 8,892 0
Note payable - officer 0 22,202
Royalty payable - officer 40,754 23,792
Current portion capital lease 1,629 1,646
Note payable-Union Bank 50,000 50,000
------- -------
TOTAL CURRENT LIABILITIES 774,256 191,330
LONG TERM LIABILITIES & CAPITAL LEASES, 0 1,629
net of current portion ------- -------
TOTAL LIABILITIES 774,256 192,959
------- -------
SHAREHOLDERS' EQUITY (Deficit)
Common stock 12,579 12,434
Additional paid in capital 1,446,124 1,187,332
Prepaid services for stock (12,983)
Accumulated deficit (1,934,936) (1,032,239)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY (Deficit) (489,216) 167,527
--------- -------
TOTAL LIABILITIES AND EQUITY (Deficit) $285,040 $360,486
======== ========
</TABLE>
F-2
<PAGE>
REMEDENT USA, INC.
STATEMENTS OF OPERATIONS
For the year ended For the year ended
March 31, 2000 March 31, 1999
------------------ ------------------
NET SALES $448,459 $323,267
COST OF SALES 161,375 129,921
------- -------
GROSS PROFIT 287,084 193,346
OPERATING EXPENSES
Research and development 60,586
Sales and marketing 322,454 248,846
General and administrative 769,232 525,159
Depreciation and amortization 13,314 10,723
------- -------
TOTAL OPERATING EXPENSES 1,165,586 784,728
--------- -------
(LOSS) FROM OPERATIONS (878,502) (591,382)
OTHER INCOME (EXPENSES)
Interest income 343 4,709
Interest expense (23,438) (3,668)
-------- -------
TOTAL OTHER INCOME (EXPENSES) (23,095) 1,041
-------- -----
(LOSS) BEFORE INCOME TAXES (901,597) (590,341)
Income tax benefit (expense) (1,100) 800
------- ---
NET (LOSS) $(902,697) $(591,141)
========== ===========
LOSS PER SHARE ($0.07) ($0.09)
======= ======
WEIGHTED AVERAGE SHARES OUTSTANDING 12,476,789 6,310,352
========== =========
F-3
<PAGE>
REMEDENT USA, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated Accounts
Shares Amounts Capital Deficit Receivable Total
------ ------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1998 511,469 $783,781 $ - $ (441,098) $ - $342,683
April - September 1998 39,150 215,985 - - - 215,985
Merger - October 2, 1998 11,749,828 (987,465) 987,465 - - -
Shares Issued March 1999 133,333 133 199,867 - - 200,000
March 31, 1999 Net Loss - - (591,141) - (591,141)
----------- --------- --------- ----------- --------- ---------
Balance, March 31, 1999 12,433,780 $12,434 1,187,332 $1,032,239 $ 0 $167,527
=========== ========= ========= ========== ======= ========
April 1999- March 2000 144,857 $145 $248,792 - $(12,983) $235,954
July 13, 1999 - - 10,000 - - 10,000
Debenture Conversion
March 31, 2000 Net loss - - - (902,697) - (902,697)
--------- ------- ---------- ------------ --------- ---------
Balance, March 31, 2000 12,578,637 $12,579 $1,446,124 $(1,934,936) $(12,983) $(489,216)
========== ======= ========== ============ ========= ==========
</TABLE>
F-4
<PAGE>
REMEDENT USA, INC.
STATEMENTS OF CASH FLOWS
For the For the
year ended year ended
March 31, 2000 March 31, 1999
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(902,697) $(591,141)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 13,314 10,723
Stock for services 245,954 0
Changes in operating assets and liabilities:
Accounts receivable (5,523) 10,706
Inventories 17,424 (15,002)
Prepaid expenses 102 (194)
Accounts payable 338,704 27,071
Accrued liabilities 202,690 13,882
Customer deposits 8,892 0
Royalties payable 16,962 7,508
Deposits (3,602) (655)
------- -----
NET CASH USED IN OPERATING ACTIVITIES (67,780) (537,102)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment (16,551) (12,037)
(Notes) repayments from/to related parties (10,975) 98,146
Patent costs 0 (5,651)
------- ------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (27,526) 80,458
CASH FLOWS FROM FINANCING ACTIVITIES
Lease payments (1,646) (1,645)
Proceeds from notes and debentures 52,697 50,000
Officer loans (repayments) (22,202) 22,202
Note payments (14,800) (41,682)
Sale of common stock 0 415,985
------ -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 14,049 444,860
------ -------
NET (DECREASE) IN CASH (81,257) (11,784)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 89,382 101,166
------ -------
CASH AND CASH EQUIVALENTS, END OF YEAR $8,125 $89,382
====== =======
Supplemental Non Cash Investing and Financing Activities:
During the year ended March 31,2000 the Company incurred expenses for
consulting, marketing, personnel services and debenture conversion benefit for
stock valued at $248,936.
The Company acquired equipment with $1,500 down payment and recorded a lease
obligation of $4,920 during the year ended March 31,1999
Supplemental Information:
Interest paid $14,550 $ 641
Taxes paid $ 50 $ 50
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
REMEDENT USA, INC.
NOTES TO FINANCIAL STATEMENTS
A. Organization and Summary of Significant Accounting Policies:
Organization and Nature of Operations
Remedent USA, Inc. (the "Company") is engaged in the distribution of a
product that combines a toothbrush, gum brush and tongue cleaner on one
handle. Credit sales are made to the Company's customers, primarily retail
store chains, located throughout the United States, as well as a minor amount
of international sales. The Company was originally incorporated on September
30, 1996 in the state of Arizona, and has offices in Escondido, California
and Scottsdale, Arizona.
On October 2, 1998 the Remedent USA ("Remedent") merged with Resort World
Enterprises, Inc., a Nevada corporation ("RWE"). The surviving Company was
RWE and immediately changed the name of the Corporation to Remedent USA, Inc.
The exchange was a "reverse merger" and accounted for as a recapitalization
of Remedent. As a result of the merger RWE obtained all of the issued and
outstanding stock of Remedent for approximately 79% of the new Remedent USA,
Inc. stock. Financial statements for the pre-merger periods are the
historical financial statements of Remedent.
Basis of Accounting
The Company's financial statements have been prepared on an accrual basis of
accounting, in conformity with generally accepted accounting principles as a
going concern. These principles contemplate the realization of assets and
liquidation of liabilities in the normal course of business. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates. The financial statements do not include
any adjustments that might be necessary if the Company is unable to continue
as a going concern, see Note I.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three
months or less to be cash or cash equivalents.
Accounts Receivable
The Company sells premium toothbrushes to various companies, primarily to
retail chains located throughout the United States. The terms of sales are 2%
10 days, net 30 days. Accounts receivable is reported at net realizable value
and net of allowance for doubtful accounts. As of March 31, 2000 and 1999 the
allowance for doubtful accounts was $3,000. During the year ended March 31,
2000 and 1999 the Company had written off uncollectable accounts totaling
$2,831 and $632, respectively.
F-6
<PAGE>
The Company uses the allowance method to account for uncollectable accounts
receivable. The Company's estimate is based on historical collection
experience and a review of the current status of trade accounts receivable.
It is reasonably possible that the company's estimate of the allowance for
doubtful accounts will change.
Inventories
Inventories are stated at the lower of cost (weighted average) or market.
Inventory costs include material, labor and manufacturing overhead.
Individual components of inventory are listed below:
2000 1999
---- ----
Inventory-Supplies $34,751 $5,428
Displays and Raw Materials 61,970 43,275
Finished Goods 56,991 122,433
------ -------
$ 153,712 $171,136
========= ========
Patents
Patent costs are amortized using the straight-line method over 15 years.
Patent values and accumulated amortization at March 31, 2000 and 1999 are as
follows:
2000 1999
---- ----
Patent $34,199 $34,199
Accumulated amortization 5,925 3,644
----- -----
Patents, net $28,274 $30,555
======= =======
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided using
accelerated methods over the estimated useful lives of five to seven years
for equipment and furniture and shorter of lease term or life of
improvements.
Advertising
Advertising costs are expensed in the year incurred. Advertising cost for the
year ended March 31, 2000 and 1999 were $123,010, and totaled $76,218,
respectively.
Research and Development
Research and development costs, consisting principally of design and
development costs devoted to creating new products or improving existing
products, are expensed as incurred. For the fiscal year ended March 31, 2000
and 1999, total research and development costs were $60,586 and $0,
respectively.
Income Taxes
Income taxes, are provided in accordance with Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes."
Deferred taxes are recognized for temporary differences in the basis of
assets and liabilities for financial statement and income tax reporting as
well as for operating losses and credit carry forwards. A provision has been
made for income taxes due on taxable income and for the deferred taxes on the
temporary differences. The components of the deferred tax asset and liability
are individually classified as current and non-current based on their
characteristics.
F-7
<PAGE>
Deferred tax assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of
enactment.
Earnings Per Share
Earnings per share are provided in accordance with Statement of Financial
Accounting Standard No. 128 (FAS No. 128) "Earnings Per Share". Basic
earnings per share are computed by dividing earnings (loss) available to
common stockholders by the weighted average number of common shares
outstanding during the period.
Revenue Recognition
Sales are recorded when products are shipped to customers. Provisions for
discounts and rebates to customers, estimated returns and allowances, and
other adjustments are provided for in the same period that related sales are
recorded.
The Company is currently evaluating the impact of the Staff Accounting
Bulletin ("SAB") 101 regarding revenue recognition. However, management does
not believe that SAB 101 will have a material effect on the Company's past or
present financial results.
Fair Value of Financial Instruments
The Company's financial instruments are cash and cash equivalents, accounts
receivable, accounts payable, and notes payable. The recorded values of cash
and cash equivalents, accounts receivable, and accounts payable approximate
their fair values based on their short-term nature. The recorded value of
notes payable approximate their fair values, as interest is tied to or
approximates market rates and their short-term nature.
Impairment of Long-Lived Assets
Long-lived assets consist primarily of property and equipment and patents.
The recoverability of long-lived assets is evaluated by an analysis of
operating results and consideration of other significant events or changes in
the business environment. If impairment exists, the carrying amount of the
long-lived assets is reduced to its estimated fair value, less any costs
associated with the final settlement. As of March 31, 2000, management
believes there was no impairment of the Company's long-lived assets.
Impact of Recently Issued Accounting Standard
SFAS No. 131 establishes standards for reporting information about operating
segments in annual financial statements issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. Operating segments are defined as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker
in deciding how to allocate resources and in assessing performance. The
Company's financial reporting as well as the chief operating decision-maker,
does not currently provide or review information by segments. All financial
information is currently analyzed in the aggregate. The Company is currently
evaluating various methods of segment reporting for the method which they
believe will be most useful to management.
In June 1998, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 133 (Accounting for Derivative Instruments and Hedging
Activities), which establishes accounting and reporting standards for
derivative instruments. This Statement requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. In June 1999, the FASB
issued SFAS No. 137 (Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133) which
postponed the adoption date of SFAS No. 133. As such, the Company is not
required to adopt the new Statement until the year 2001. The Company is
currently evaluating the effect that implementation of the new standard will
have on its results of operations and financial position.
F-8
<PAGE>
B. Property and Equipment:
Property and equipment at March 31, 2000 and 1999 are summarized as follows:
2000 1999
---- ----
Machinery and equipment 50,436 $33,883
Furniture and fixtures 7,596 7,596
Leasehold improvements 779 779
Less accumulated depreciation (27,015) (15,981)
------ --------
Property and equipment, net $31,796 $26,277
======= =======
Capital Leases
The Company leases equipment under a capital lease expiring March 17, 2001.
The asset and liability under the capital lease were recorded at the fair
value of the asset of $6,420. The equipment is depreciated over its useful
life. Lease payments amounted to $2,127 for the year.
Minimum future lease payments under this capital lease at March 31, 2000 are
as follows:
YEAR AMOUNT
---- -------
2001 $ 1,629
Thereafter 0
C. Notes Payable:
The Company has a $50,000 note payable to Union Bank of Arizona N.A
originally dated December 11, 1998. The loan bears interest at 10.25%
annually and is secured by UCC1 filing on all the Company's assets.
Subsequent to March 31, 2000 the Company renewed the loan. The loan now is
due on demand or if no demand is made, matures April 26, 2005 and bearing
interest at 11.50%.
During the year ended March 31, 2000 the Company has borrowed from a
shareholder a total of $15,000 as a working capital loan. This loan is
unsecured, due on demand without a maturity date and bears no interest. The
Company has not accrued interest on this note.
On July 14, 1999 the Company borrowed $10,802 from a shareholder in the form
of a convertible debenture. The debenture is unsecured and bears interest at
10% per annum. The note is due on demand or if no demand is made April 15,
2001 and can be converted to stock at 37.5% of the average trading price 30
days prior to maturity. The Company has recorded interest expense of $10,000
as part of the conversion feature of the debenture. Additionally there is
$802 accrued and unpaid interest at March 31, 2000. The following represents
the conversion feature calculation for the debenture:
Share price 30 day average at July 14, 1999 $ 1.159
Conversion factor 37.5%
-----
Conversion price $ 0.435
Shares upon conversion 22,989
Conversion benefit (Share Price $1.159 less Conversion Price $0.435) $ 0.724
Conversion feature (22,989 shares X $ 0.724) limited to proceeds
of debenture $10,000
F-9
<PAGE>
Kenneth Hegemann, an employee of the Company, operates a related business
that has advanced a total of $21,563 to Remedent. The Company has repaid
$14,000 of theses advances leaving a balance of $7,563 at March 31, 2000.
Similar to the other working capital loans, this is an unsecured debt and
does not bear interest. The Company has not accrued interest on this debt.
Rebecca Inzunza, an officer of the Company, has advanced to the Company
$4,533 from an unsecured credit card in her personal name. The Company has
been making the monthly payments on the credit card including interest at
19.99% annually. The loan is unsecured and classified as a current liability
since the officer can request repayment at any time.
Additionally, at March 31, 1999 the Company was indebted to Ms. Inzunza in
the amount of $22,202. The loan was unsecured and bears interest at a rate of
7% annually. The loan was paid in full during the year ending March 31, 2000.
D. Income Taxes:
A reconciliation of the provision (benefit) for income taxes with amounts
determined by applying the statutory U.S. federal income tax rate to income
before income taxes is as follows:
2000 1999
---- ----
Computed tax at the federal statutory rate of 34% $(309,200) $(200,987)
Valuation allowance $ 308,100 $ 200,187
--------- ---------
Provision (benefit ) for income taxes $1,100 $800
====== ====
Change in Valuation Allowance $ 107,913 $ 200,187
For the period ended March 31, 2000 the Company had available approximately
$1,013,000 of unused net operating loss carry-forwards for federal tax and
Arizona state tax purposes and approximately $506,500 for the State of
California. These loss carry-forwards begin to expire in the year 2011 if not
previously utilized. In addition, the Company has an unused research credit
for the year ended March 31, 2000 of approximately $16,000.
E. Shareholders' Equity:
Common Stock
The Company has 50,000,000 shares of $0.001 par value common stock
authorized. At March 31, 2000 and 1999, there were 12,578,636 shares, and
12,433,780 shares issued and outstanding respectively.
During the year the Company entered into various stock for service
transactions. All transactions totaled $264,328 and represent services for
$216,328 and compensation for $48,000. Also, the Company paid a creditor
300,000 shares of stock in exchange for an accounts payable of $79,305.
Each transaction is described in more detail below.
F-10
<PAGE>
The Company entered into an agreement with In Touch, to enhance market
exposure. Services provided by In Touch were valued at $71,220 payable in
60,000 shares and expired December 14, 1999. The transaction value was
based upon the stock price on the date of the contract, June 7, 1999. The
following table represents the valuation of the contract for services:
CONTRACT DATE SHARE PRICE SHARES ISSUED VALUE
June 7, 1999 $1.187 60,000 $71,220
The Company has an agreement with Double Eagle, a Sales and Marketing
Management concern, for the services of Steve Grassbaugh as acting Company
CFO. Services provided by Mr. Grassbaugh are valued at $60,000 per annum
and payable in both cash and shares. The shares issued total 31,523, and
represent $39,000 of compensation from April 1999 through December 1999.
The shares issued to Double Eagle were determined based upon the average
price of the stock for the month the services were provided to the
Company. The following table demonstrates the calculation:
AVERAGE STOCK
MONTH STOCK PRICE COMPENSATION SHARES
April 1999 $ 1.44 $ 5,000 3,472
May 1999 $ 1.11 $ 5,000 4,505
June 1999 $ 1.11 $ 5,000 4,505
July 1999 $ 1.18 $ 5,000 4,237
August 1999 $ 1.39 $ 5,000 3,597
September 1999 $ 1.88 $ 5,000 2,660
October 1999 $ 1.33 $ 3,000 2,256
November 1999 $ 1.14 $ 3,000 2,632
December 1999 $ 0.82 $ 3,000 3,659
------- ------
TOTAL $39,000 31,523
The Company has accrued and owes Double Eagle $9,000 of compensation,
representing the 12,648 shares for the period January 1, 2000 through
March 31, 2000. The 12,648 shares are demonstrated below:
AVERAGE STOCK
MONTH STOCK PRICE COMPENSATION SHARES
January 2000 $ 0.823 $ 3,000 3,647
February 2000 $ 0.644 $ 3,000 4,659
March 2000 $ 0.691 $ 3,000 4,342
------- ------
TOTAL $ 9,000 12,648
Additionally, the Company issued 159,999 restricted shares in exchange for
106,666 free trading shares, a net increase of 53,333 shares outstanding.
The free trading shares were transferred to various vendors for services
performed. The shares issued are valued at $138,716, based upon the price
of the stock on the day the contracts were signed. The balance of $138,716
is comprised of $125,733 in services performed and $12,983 in prepaid
services for stock.
F. Related Party Transactions:
The Company's headquarters in California occupy approximately 1000 square
feet of Rebecca M. Inzunza's, an officer shareholder, primary residence
that totals 4,000 square feet. Rent paid directly to Ms. Inzunza each
month is currently $650, and was $300 in 1999. The total rent paid to this
officer shareholder totaled $4,665 and $3,600 for the years ended March
31, 2000 and 1999 respectively. The rental agreement is a month to month
agreement.
F-11
<PAGE>
Kenneth Hegemann is an employee of Remedent and owns 100% of Famcare, Inc.
As of March 31, 2000 and March 31, 1999, Famcare, Inc. owed Remedent
$4,749 and $4,644 respectively.
The Company has a royalty agreement with Jean Louie Vrignaud which
provides 4.5% royalty of the net sales with a cap of $2 million dollars on
royalties for the assignment of all patents to the Company. Mr. Vrignaud
was an officer and director during the fiscal year ending March 31, 1999,
however he has resigned his position as director and is no longer an
officer. Mr. Vrignaud was owed $40,754 as of March 31, 2000 and $23,792 as
of March 31, 1999. Total royalty expenses incurred under this agreement
totaled $16,962 and $11,718 respectively, for the years ended March 31,
2000 and 1999 respectively.
The Company entered into an agreement with Double Eagle for Sales and
Marketing Services. The services Double Eagle will provide are valued at
11% (6% management fee and a 5% brokerage commission) of net invoiced
amounts for all products delivered to customers. A guaranteed minimum
management fee of $4,000 monthly when Stage 1 is complete, is payable and
available for offset of the 6% management fee. The Company incurred
$51,729 in services with an accrued balance payable of $45,076 as of March
31, 2000. The agreement for services is renewable every six months (see
Note H).
The Company has a separate agreement with Double Eagle, for the services
of Steve Grassbaugh as acting Company CFO. Services provided by Mr.
Grassbaugh are valued at $60,000 per annum and payable in both cash and
shares. The shares issued total 31,523, and represent $39,000 of
compensation from April 1999 through December 1999. The shares issued to
Double Eagle were determined based upon the average price of the stock for
the month the services were provided to the Company, (see Note E).
A Rebecca Inzunza, an officer of the Company, has advanced to the Company
$4,533 from an unsecured credit card in her personal name. The Company has
been making the monthly payments on the credit card including interest at
19.99% annually. The loan is unsecured and classified as a current
liability since the officer can request repayment at any time, (see Note
C). Additionally, during the year the Company has advanced to Ms. Inzunza,
the Company's President $2,170.
G. Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash
equivalents and accounts receivable. The Company places its cash and
cashes equivalents with high quality financial institutions and limits the
amount of credit exposure with any one institution. The Company controls
credit risk to accounts receivable through credit approvals, credit
limits, and monitoring procedures.
For the year ended March 31, 2000 one customer, CVS, accounted for 41.68%
of sales. For the same period ended March 31, 1999 three customers
accounted for approximately 48% of the Company's sales. The largest of
these customers accounted for 20% of total sales and the other two
customers 15% and 13%.
At March 31, 2000 three customers, each of who accounted for more than 10%
of the Company's accounts receivable, accounted for 67% of the accounts
receivable in aggregate. At March 31, 1999 two customers, each of who
accounted for more than 10% of the Company's accounts receivable,
accounted for 46% of accounts receivable in aggregate.
H. Commitments and Contingencies
Facilities Lease
On September 28, 1999 the Company entered into a three-year lease with
D.E.K. Enterprises, Inc., an unrelated party, for 3,330 square feet in
Phoenix, Arizona, to be used for shipping and warehousing operations. The
minimum lease payments are $2,065 per month. This new leased warehousing
facility will allow the Company to consolidate current warehousing
operations and reduce warehousing and shipping costs.
F-12
<PAGE>
The following table represents the minimum lease commitments over the next
five years:
YEAR AMOUNT
2001 $ 24,775
2002 $ 24,775
2003 $ 2,065
Thereafter $ -0-
Services Contracts
The Company entered into an agreement with First Canadian Capital,
("FCC"), and a financial consulting firm. Services provided by FCC are
valued at $60,000 payable in cash or shares and expires January 31,2001.
The Company incurred $10,000 in services with an accrued balance payable
of $10,000 as of March 31, 2000. The contract can be canceled quarterly by
either party.
The Company entered into an agreement with Merryvale Group International
("MGI"), a financial consulting organization. Services provided by MGI are
valued at $20,773 and payable in shares, of which $7,790 in services has
been incurred and $12,983 is prepaid. The agreement for services will
remain in effect, subject to payments of $5,000 every 30 days beyond the
expiration date, (see Note E).
A cash or stock fee, as a percentage of funds raised, is payable to FCC or
MGI from any proceeds of financing raised by these organizations. To date
no funds have been raised.
The Company entered into an agreement with Charterbridge Financial Group,
("CFG"), to enhance Company visibility and market value. Services to be
provided by CFG are valued at $370,980, payable in cash or shares,
expiring February 23, 2001. The Company incurred $61,830 of these services
as of March 31, 2000. Contract terms can be canceled quarterly by either
party, (see Note E).
The Company entered into an agreement with Double Eagle for Sales and
Marketing Services. The services Double Eagle will provide are valued at
11% (6% management fee and a 5% brokerage commission) of net invoiced
amounts for all products delivered to customers. A guaranteed minimum
management fee of $4,000 monthly when Stage 1 is complete, is payable and
available for offset of the 6% management fee. The Company incurred
$51,729 in services with an accrued balance payable of $45,076 as of March
31, 2000. The agreement for services is renewable every six months.
I. Going Concern
The Company has sustained substantial net losses since its inception in
September 1996. In addition, as of March 31, 2000 the Company had a
working capital deficit totaling $554,067 and a shareholders' deficit of
$489,216. These factors raise substantial doubt about the Company's
ability to continue as a going concern. The Company is currently working
with various groups in an effort to raise significant capital for working
capital and completion of the Company's marketing plan.
The Company entered into a contract with Double Eagle Market Development
Company on March 10, 1999, to develop and implement a national marketing
plan, (referred to above). The Company approved and recently began
implementation of the first phase of a two-year plan to achieve national
distribution. The targeted markets for the first phase are Washington,
Oregon, Idaho, Montana, Utah and Arizona. In November 1999 the Company
achieved distribution at Kroger-owned Fred Meyer Stores, Smith's Food and
Drug and Quality Food Centers (QFC) with 337 stores in the first phase
targeted markets. The Company expects to achieve its distribution goals in
the first phase targeted markets by the summer of 2000, at which time the
Company plans to launch a comprehensive 32-week radio ad campaign in these
markets.
F-13
<PAGE>
Management believes that if the Company can complete its marketing plan
that the Company can achieve a significant enough market share to sustain
operations. There can be no assurance that the Company will be successful
in its efforts to obtain adequate working capital or achieve anticipated
market share. If the Company is unsuccessful in its efforts, it may be
necessary to undertake other actions to preserve asset value. The
financial statements do not include adjustments that might result from the
outcome of this uncertainty.
J. Subsequent Events
On July 15, 2000 the Company borrowed $27,200 from a shareholder in the
form of a convertible debenture. The debenture is unsecured and bears
interest at 10% per annum. The note is due on demand, or if no demand,
April 15, 2001 and can be converted to stock at 37.5% of the average
trading price.
Share price 30 day average at July 15, 2000 $ 0.20
Conversion factor 37.5%
-----
Conversion Price $ 0.075
Shares upon conversion 362,667
Conversion benefit (Share Price $0.20 less Conversion Price $0.075) $ 0.125
Conversion feature (362,667 shares X $ 0.125) limited to proceeds
of debenture $27,200
Since the debenture has a due on demand clause and is convertible at the
will of the debenture holder the entire conversion benefit will be
recognized in the accounting period of issuance.
K. Foreign Operation Disclosures
During the fiscal year ended 2000, the Company had sales to foreign
customers totaling $39,637. The following table reflects sales by country and
customer.
Customer Revenue Percentage
Received of Revenue
-------- ----------
Japan Sun Dental $ 10,884
Japan Feed Corporation 1,584
Japan Trendy Corporation 14,645
Subtotal $ 27,213 68%
Thailand KWH Internation 4,979 13%
Israel Wienstein 5,174 13%
Morocco Co.Ma 2,000 5%
Others 272 1%
-------- ------
TOTAL $39,637 100%
F-14
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use of our report included in the Registration
Statement on Form 10-SB/A dated September 15, 2000 relating to the financial
statements of Remedent USA, Inc.
Siegel & Smith
Del Mar, California
September 11, 2000
F-15
<PAGE>
Remedent USA, Inc.
Financial Statements
for the periods ending
June 30, 2000 and June 30, 1999
(Unaudited)
F-16
<PAGE>
<TABLE>
<CAPTION>
Remedent USA, Inc.
Balance Sheet (Unaudited)
ASSETS
For the period For the period
ending June 30, ending June 30,
2000 1999
------------------ --------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 14,869 $ 14,438
Accounts receivable, net 54,422 117,535
Due from related parties 35,170 5,280
Inventory, Net 109,643 150,900
Prepaid expenses 338 4,436
---------------------------------------------------------------------------------------------------
Total current assets 214,442 292,589
Property and Equipment, net 29,037 24,111
Patents, net of accumulated amortization 27,704 29,284
Other Assets 7,782 8,790
---------------------------------------------------------------------------------------------------
Total Assets $ 278,965 $ 355,474
===================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
For the period For the
ending June 30, period
2000 ending
June 30,
1999
-------------------------------
Current Liabilities
Accounts payable $ 467,647 & 111,416
Notes payable-related parties 99,345 883
Accrued salaries officers 105,667
Accrued liabilities 153,639 42,485
Royalty payable 43,117 30,224
Current portion capital lease 1,108 1,777
Note payable-Union Bank 48,809 50,000
------------------------------------------------------------------------------------- -------------
Total current liabilities 840,027 236,785
Long Term Liabilities and Capital Leases 2,763
Stockholders' Equity (Deficit)
Common stock 12,879 12,446
Additional paid in capital 1,525,129 1,199,802
Accumulated deficit (2,099,070) (1,096,322)
------------------------------------------------------------------------------------- -------------
Total stockholders' equity (deficit) (561,062) 115,926
---------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity (Deficit) $ 278,965 $355,474
===================================================================================================
</TABLE>
F-17
<PAGE>
<TABLE>
<CAPTION>
Remedent USA, Inc.
Statement of Operations
(Unaudited)
For the period ending For the period
June 30, 2000 ending June 30, 1999
---------------------------------------------------
<S> <C> <C>
Revenues
Net Sales $ 200,053 $ 188,860
----------------------------------------------------------------------------------------------------
Total Revenue 200,053 188,860
Cost of Goods Sold 69,865 77,384
----------------------------------------------------------------------------------------------------
Gross profit 130,188 111,476
Operating Expenses
Research and development 15,085 10,131
Sales and marketing 198,165 44,221
General and administrative 75,134 117,305
Depreciation and amortization 3,329 2,736
----------------------------------------------------------------------------------------------------
Total operating expenses 291,713 174,393
----------------------------------------------------------------------------------------------------
Net loss from operation (161,525) (62,917)
Other Income (Expenses)
Interest income (68) (143)
Interest expense 2,677 1,309
----------------------------------------------------------------------------------------------------
Total other income (expenses) 2,609 1,166
----------------------------------------------------------------------------------------------------
Loss before income tax (164,134) (64,083)
State Income Taxes 0 0
----------------------------------------------------------------------------------------------------
Net loss $ (164,134) $ (64,083)
====================================================================================================
Loss per share (0.01) (0.01)
Weighted average shares outstanding 12,578,637 12,437,730
</TABLE>
F-18
<PAGE>
<TABLE>
<CAPTION>
Remedent USA, Inc.
Statement of Cash Flows
(Unaudited)
For the period For the period ending
ending June 30, 2000 June 30, 1999
-------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net loss $ (164,134) $ (64,083)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 3,328 2,737
Stock for services 12,983 12,482
Changes in:
Accounts receivable (13,525) (82,161)
Inventory 44,069 20,236
Prepaid expenses 198 (3,798)
Accounts payable 71,439 53,912
Accrued liabilities 19,629 6,299
Customer deposits (8,892) 0
Royalties payable 2,363 6,432
Deposits (3,000) (7,610)
----------------------------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (35,542) (55,554)
Cash Flows from Investing Activities
Notes to related parties (18,251) 664
----------------------------------------------------------------------------------------------------------------
Net Cash (Used) Provided by Investing Activities (18,251) 664
Cash Flows from Financing Activities
Lease payments (521) 0
Proceeds of notes and debenture 62,249 2,149
Officer loans (repayments) 0 (22,202)
Sale of common stock 0 0
Note payments (1,191) 0
----------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 60,537 (20,053)
Net Increase in Cash 6,744 (74,943)
Cash, beginning of the year 8,125 89,382
----------------------------------------------------------------------------------------------------------------
Cash, March 31 14,869 $ 14,439
================================================================================================================
Supplemental Non Cash Investing and Financing Activities:
The Company acquired services as CFO for 12, 482 shares of stock. The
Company paid a creditor 300,000 shares of stock in exchange for an
accounts payable of $79,305
Supplemental Information:
Interest paid $ 473 $ -
Taxes paid $ - $ -
</TABLE>
F-19
<PAGE>
<TABLE>
Remedent USA, Inc.
Statement of Changes in Stockholders Equity (Deficit)
(Unaudited)
Common Stock Additional Paid Accounts Accumulated
Date Description Shares Dollars in Capital Receivable Deficit Total
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance March 31, 2000 12,578,637 $ 12,579 $ 1,446,124 $ (12,983) $ (1,934,936) $(489,216)
------------------------------------------------------------------------------------------------------------------------
June 15, 2000 Shares for A/P 300,000 $ 300 $ 79,005 $ 79,305
June 15, 2000 Shares for Services $ 12,983 $ 12,983
June 30, 200 Net loss $ (164,134) $(164,134)
------------------------------------------------------------------------------------------------------------------------
Balance June 30, 2000 12,878,637 $ 12,879 $1,525,129 $ (0) $(2,099,070) $(561,062)
========================================================================================================================
</TABLE>
F-20
<PAGE>
REMEDENT USA, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
Unaudited
1. Basis of Preparation
The unaudited financial statements of Remedent USA, Inc. (the "Company""),
presented herein have been prepared in accordance with the instructions to Form
10-QSB and do not include all of the information and note disclosures required
by generally accepted accounting principles. These statements should be read in
conjunction with the financial statements and notes thereto included in our last
audited financial statements. These audited statements are contained in our FORM
10-KSB for the year ended March 31, 2000 and have been filed with the Securities
and Exchange Commission.
In management's opinion the accompanying financial statements include all
adjustments (consisting only of normal, recurring adjustments) necessary to
summarize fairly the financial position and results of operations for the three
months ended June 30, 2000 may not be indicative of the results that may be
expected for the full fiscal year.
2. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three
months or less to be cash equivalents.
3. Accounts Receivable
The Company sells premium toothbrushes to various companies, primarily to retail
chains located throughout the United States. The terms of sales are 2% 10 days,
net 30 days. Accounts receivable is reported at net realizable value and net of
allowance for doubtful accounts. As of June 30, 2000 and 1999 the allowance for
doubtful accounts was $3,000.
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. It is
reasonably possible that the company's estimate of the allowance for doubtful
accounts will change.
4. Inventories
Inventories are stated at lower of cost (weighted average) or market. Inventory
costs include material, labor and manufacturing overhead. Individual components
of inventory are listed below:
2000 1999
--------------------------------------------------------------------------------
Inventory-Supplies $ 32,629 $ 5,359
Displays and Raw Materials $ 52,962 $ 42,587
Finished Goods $ 24,052 $ 103,568
--------- --------
Total $ 109,643 $ 151,514
F-21
<PAGE>
5. Patents
Patent costs are amortized using straight-line method over 15 years. Patent
values and accumulated amortization at June 30, 2000 and 1999 are as follows:
2000 1999
--------------------------------------------------------------------------------
Patent $ 34,199 $ 34,199
Accumulated amortization $ 6,495 $ 4,215
Patents, net $ 27,704 $ 29,984
6. Net Loss Per Share
Basic net loss per share is computed by dividing net loss by the weighted
average number of common shares outstanding during the period.
7. Impact of Recently Issued Accounting Standards
SFAS No.131 establishes standards for reporting information about operating
segments in financial statements issued to stockholders. It also establishes
standards for related disclosures about products and services, geographic areas
and major customers. Operating segments are defined as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The company's financial
reporting as well as the chief operating decision-maker, does not currently
provide or review information by segments. All financial information is
currently analyzed in the aggregate. The company is currently evaluating various
methods of segment reporting for the method which they believe will be most
useful to management.
In June 1998, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 133 (Accounting for Derivative Instruments and Hedging Activities), which
establishes accounting and reporting standards for derivative instruments. This
Statement requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. In June 1999, the FASB issued SFAS No. 137 (Accounting for
Derivative Instruments and Hedging Activities-Deferral of the Effective Date of
FASB Statement No. 133) which postponed the adoption date of SFAS No.133. as
such, the Company is not required to adopt the new statement until the year
2001. The Company is currently evaluating the effect that implementation of the
new standard will have on its operations and financial position.
8. Going Concern
The Company has sustained substantial net losses since its inception in
September 1996. In addition, as of June 30, 2000 the Company had a working
capital deficit totaling $704,890 and a shareholders deficit of $640,367. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. The Company is currently working with various groups in an effort
to raise significant working capital and completion of the Company's marketing
plan.
F-22
<PAGE>
9. Related Party Transactions
The Company's headquarters in California occupy approximately 1000 square feet
of Rebecca M. Inzunza's, an officer shareholder, primary residence that total's
4,000 square feet. Rent paid directly to Ms. Inzunza each monthly is currently
$650.
The Company has borrowed various amounts totaling $99,345 from several
stockholders to meet the current financial obligations of the Company. The notes
are unsecured, due on demand and include interest at 10% per annum. The Company
may continue to borrow from shareholders and officers to meet current financial
needs.
F-23
<PAGE>
PART III
ITEMS 1 and 2. INDEX TO EXHIBITS; DESCRIPTION OF EXHIBITS
The Exhibits required by Item 601 of Regulation S-B, and an index thereto are
attached to this Form 10-SB.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has caused this amended registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: November 6,2000 By: /s/ Rebecca M. Inzunza
Rebecca M. Inzunza, President
<PAGE>
EXHIBIT INDEX
Number Description
2.1*** Stock Exchange Agreement with
Resort World Enterprises, Inc.
3.1(i)*** Articles of Incorporation
3.1(ii)*** By-laws
4.1*** Instrument defining the rights of holders
N/A
9.1*** Voting Trust Agreement N/A
10.1*** Marketing Agreement with
Jean Louis Vrignaud
10.1(i)*** Addendum to Marketing Agreement
10.2*** Sales and Marketing
Agreement with Double Eagle
10.3*** Option Agreement with Rubicon Capital Partners
10.4*** Convertible Debenture with Dr. Edward Quincy
10.5*** Client Service Agreement with Continental Capital
& Equity Corporation
10.6*** Agent Agreement with Continental Capital
10.7*** Agreement with the Merryvale Group International
10.8*** Contract with In-Touch Communications
10.9*** Agreement with First Canadian Capital
10.10*** Investment Banking Rider with Charterbridge
10.11*** Agreement for Financial Public Support/Retail
Support with Charterbridge
10.12*** Consulting Agreement and Finders Fee Agreement
with Rubicon Capital Partners
10.13*** Shummi Manufacturing Contract
16.1*** Letter from Former Accountants
27.1*** Financial Data Schedule
99.2*** Patents
99.3*** Trademarks
* To be filed by amendment
*** Previously filed
