REMEDENT USA, INC.- REGISTRATION STATEMENT
DATE FILED: 1/17/2001
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SBA-A3
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
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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. The development of our future products depends entirely on our
ability to generate sufficient revenues from our current product or upon our
obtaining additional funding.
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.
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.
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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.
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.
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(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.
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.
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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.
At the suggestion of Double Eagle, the company re-designed the package
in an effort to present the toothbrush in an attractive, eye catching manner and
hopefully provide increased visibility of the toothbrush over other toothbrush
packages 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.
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.
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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.
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.
<PAGE>
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 represented
approximately 9% of the total revenue for the fiscal year ended March 31, 2000.
International sales for the quarter ended June 30, 2000 totaled $145,169, and
for the quarter ending September 30, 2000 the international sales were or
$4,514.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.
<PAGE>
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.
(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.
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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.
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
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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.
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.
<PAGE>
(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.
(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.
<PAGE>
(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.
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.
<PAGE>
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
OPERATING EXPENSES
Research and Development 60,586 -0-
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)
----------- ----------
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.
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.
<PAGE>
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. As of
April 25, 2000 we had 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.
Monthly payments include payments towards both principal and interest.
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.
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.
<PAGE>
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. Our auditors note that we have sustained substantial net losses since
our inception in September 1996. In addition, as of June 30, 2000, we had a
working capital deficit totaling $632,629 and a shareholders deficit of $568,106
and as of September 30, 2000 the working capital deficit totaled $725,599 and a
shareholders deficit of $663,895. According to our auditors, these factors raise
substantial doubt about our ability 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.
THREE AND SIX MONTH PERIODS ENDING SEPTEMBER 30, 2000
COMPARED TO THREE AND SIX MOTNH PERIODS ENDING SEPTEMBER 30, 1999
OVERVIEW
Other than $50,000 raised through convertible debentures, our plans to
raise additional capital have not materialized and our ability to continue as a
going concern is in further jeopardy. Net sales decreased $62,481 for the three
months ending September 30, 2000 when compared to the three months ended
September 30, 1999, and decreased $51,288 for the six months ending September
30, 2000 when compared to the six months ended September 30, 1999. Net sales
were approximately $11,619 for the month of September 2000.
Total assets decreased by $27,630 from $285,040 at fiscal year ending
March 31, 2000 to $257,410 in September 30, 2000. Accounts receivable totaled
$16,254 on September 30, 2000 primarily due to lack of sales and the fact that
international sales are conducted on a cash basis only. Amounts due from related
parties increased $28,874 from $16,919 at fiscal year ending March 31, 2000 to
$45,793 for September 30, 2000. The increase in notes from related parties are
loans to three officers. One loan in the amount of $2,324 was paid in full as of
the filing of this 10QSB.
<PAGE>
Inventory decreased $41,118 from $153,712 at fiscal year ending March
31, 2000 to $112,594 on September 30, 2000, due to minimal sales and the
continual replenishing of blister packaging only on an as needed basis.
Liabilities increased $147,049 when comparing $921,305 at September 30,
2000 to $774,256 at fiscal year ending March 31, 2000. Accounts payable
decreased $16,743 from $396,208 at fiscal year ending March 31, 2000 on
September 30, 1999 to $379,465 on September 30, 2000. This is primarily due to
increases in sales and marketing expenses.
Accrued liabilities increased by $16,998 due to accrued employee's
salaries, and interest. Royalties payable increased $3,522 or 9%, for the six
month period ending September 30, 2000 and is based on net sales.
The company is aggressively working towards a contingency marketing
plan that would involve turning marketing and distribution in its entirety over
to a well-established oral care distributing company. Several candidates have
been identified. The Company is currently negotiating with one such company,
Breath Asure, Inc. If the Company is successful in completing an agreement with
Breath Asure or similar company, advertising and all other such expenses would
no longer be a burden on the Company and other operating expenses would be
significantly reduced as well since the new distributing company would handle
all marketing, distribution and fulfillment activities. However, until such
contingency plan is finalized, our current marketing plan is effective but,
temporarily curtailed until we can raise sufficient capital to support it.
In further effort to reduce costs, Rebecca Inzunza has assumed
responsibilities of both CEO and CFO, replacing Steve Grassbaugh as our CFO.
Once the Company has adequate funding, a CFO will be hired.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 AS COMPARED TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1999
Net Sales. Our net sales for the three months ended September 30, 2000
totaled $42,261, compared to $104,742 for the three months ended September 30,
1999, reflecting a decrease of $62,481 or 60%. Our sales decrease occurred
primarily because our cash shortfall has made it virtually impossible to
purchase advertising, delays in implementing the market expansion plan including
redesign of the package. Additionally, as of July 31, 2000, we have temporarily
curtailed our marketing operations, which also caused a decrease in net sales.
Absent substantial additional funding, we expect that our sales will continue to
decline as we deplete our remaining inventories. For the three month period
ending September 30, 1999, international sales totaled $10,233 with $5,408 or
53% applied to promotional discounts compared to the three month period ending
September 30, 2000, which totaled $4,514 in international sales with promotional
discounts of $2,470 or 55% applied.
<PAGE>
In an effort to provide additional exposure of the Company's unique
product, the Company does provide, to certain first time buyers, all dental
professional customers, and all international customers, an opportunity to
acquire the product with certain special marketing discounts. The Company views
these discounts not as sales discounts but as a method of marketing its products
to customers that may not otherwise purchase the product. Promotional discounts
for the three month period ending September 30, 2000 totaled $16,313, which is
included within sales and marketing expenses. This amount should be deducted
from sales to evaluate the exact sales number. Beginning April 1, 2001, the
accounting procedure for posting sales will reflect the actual sales price and
not the Company's standard blanket cost to all buyers.
Cost of goods sold. Cost of goods sold during the three months ended
September 30, 2000 totaled $11,763 or 28% of net sales, reflecting a decrease of
$9,673 or 45% over the comparable three months ending September 30, 1999. Our
cost of goods decrease is directly related to the decrease in sales. Our gross
margin was 72% for the three months ended September 30, 2000 compared to our
gross margin of 80% for the three months ended September 30, 1999. This increase
in percentage is directly related to the higher cost for the package redesign.
Operating expenses. Our sales and marketing expenses decreased to
$34,818 during the three months ended September 30, 2000 compared to $195,659
for the three months ending September 30, 1999. The largest component of our
sales and marketing expenses for the three months ended September 30, 2000 was
in advertising and promotional discounts. As a percentage of net sales, sales
and marketing expenses are 82% for the three months ended September 30, 2000, as
compared to 187% for the three months ended September 30, 1999. The percentage
decrease is primarily due to a reduction in sales and marketing expenses, sales,
and the slowing of the marketing expansion plan.
General and administrative expenses decreased to $66,440 for the three
months ended September 30, 2000 from $73,923 for the three months ended
September 30, 1999. The decrease is primarily due to a reduction in the
workforce and temporarily curtailing our marketing operations. As a percentage
of net sales, general and administrative expenses were 157% for the three months
ended September 30, 2000, as compared to 71% for the three months ended
September 30, 1999. The percentage increase is primarily attributable to a
reduction in sales.
Interest expense. Interest expense was $59,363 for the three months
ending September 30, 2000 as compared to $1,733 for the three months ended
September 30, 1999. The increase in interest expense for 2000 related
principally to $50,000 for one time interest expense accrual associated with the
convertible debentures
<PAGE>
SIX MONTHS ENDED SEPTEMBER 30, 2000 AS COMPARED TO THE SIX MONTHS ENDED
SEPTEMBER 30, 1999
Net sales. Our net sales decreased to $242,314 for the six months ended
September 30, 2000 compared to $293,602 for the six months ended September 30,
1999, reflecting a decrease of $51,288 or 17%. The decrease was the result of
our cash shortfall, which has made it virtually impossible to implement the
marketing expansion plan. We expect our sales to decline without additional
substantial funding, as almost all of vendors who supply radio advertising have
ceased all services to us. Additionally, we have temporarily curtailed marketing
expansion plans, which have also caused a decrease in net sales. International
sales for the six month period ending September 30, 2000 totaled $149,683 with
promotional discounts of $86,147 or 58% applied as compared to the six month
period ending September 30, 1999, in which international sales totaled $16,253
with promotional discounts applied of $8,619 or 53%.
Cost of goods sold. Cost of goods sold during the six months ended
September 30, 2000 was $76,283 or 31% of net sales, reflecting a decrease of
$22,537 or 23%. Our cost of goods decrease is directly related to the decrease
in sales. Our gross margin was 69% of net sales for the six months ended
September 30, 2000 as compared to 66% of net sales for the six months ended
September 30, 1999.
Operating expenses. Our sales and marketing expenses decreased to
$233,382 during the six months ended September 30, 2000 from $239,880 for the
six months ended September 30, 1999. The decrease is due to increases in new
promotional literature, tradeshow fees, commissions, and advertising, and offset
with decreases in samples, consulting, promotional discounts, and public
relations. Sales and marketing expenses should fall even further during fiscal
third quarter. As a percentage of net sales, sales and marketing expenses were
96% for the six months ended September 30, 2000, as compared to 82% for the six
months ended September 30, 1999. As our sales decline, we expect that our sales
and marketing expenses will increase as a percentage of our sales.
General and administrative expenses decreased to $141,879 for the six
months ended September 30, 2000 from $191,228 for the six months ended September
30, 1999. This decrease is due our efforts to downsize and economize operations
wherever possible. The primary components for the six month ending September 30,
2000 of the decrease were employee salaries, officer's salaries, insurance,
royalties, and rent. As a percentage of sales, general and administrative
expenses were 59% for the six months ended September 30, 2000, as compared to
65% for the six months ended September 30, 1999. As our sales decline, we expect
that our general and administrative expenses will increase as a percentage of
our sales. The decreases in officer's salaries were due to the elimination of
the Company's CFO. Payroll taxes also decreased during the six-month period
September 30, 2000.
During the six months ended September 30, 2000, our lack of working
capital forced us to downsize our operations and reduce the number of employees.
As a result of our inability to return to the Bulletin Board, and to obtain
additional capital, we believe that our ability to continue as a going concern
is in jeopardy.
Interest expense. Interest expense was $121,581 for the six months
ended September 30, 2000, as compared to $3,042 for the six months ended
September 30, 1999. The increase in interest expense is related principally to
$50,000 for the one time interest expense accrual for the convertible debentures
obtained during the fiscal second quarter and $53,200 obtained in the fiscal
first quarter for a total of $103,200. The additional interest is for officers
and employee salaries accruing, credit cards, and loans from related parties.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Current situation. Our ability to continue as a going concern is in
jeopardy. As of November 30, 2000 we had approximately $10,000 of cash. Our
inventory is low and in need of replenishing to fill orders. An increasing
number of creditors have placed us with collection agencies. We are not paying
vendors timely and virtually all vendors have placed us on credit hold until the
Company has paid them in full. In addition, because we are unable to timely pay
our creditors, we face a possibility of lawsuits and other threats of legal
action seeking payment.
We historically financed our operations primarily through sales and
loans. Primary uses of cash have been to fund our operation to date. If we are
successful in achieving revenue growth, our working capital requirement is
likely to increase. However, more recently, we have been unable to raise cash
through any source.
During the three month period ending September 30, 2000, the Company borrowed
$50,000 from various shareholders in the form of convertible debentures. The
debentures are unsecured and bear interest at 10% per annum. The debentures are
due on demand and if no demand is made before the maturity dates, the debentures
can be converted to stock at 37.5% of the average trading price 30 days before
maturity. The Company has recorded interest expense of $50,000 as part of the
conversion feature of the debenture.
Date of Debenture Amount of Maturity Date
Debenture
-------------------------------- ---------------- --------------------
August 21, 2000 $ 15,000 August 21, 2001
-------------------------------- ---------------- --------------------
August 23, 2000 $ 5,000 August 23, 2001
-------------------------------- ---------------- --------------------
September 1, 2000 $ 5,000 September 1, 2001
-------------------------------- ---------------- --------------------
September 25, 2000 $ 25,000 September 25, 2001
-------------------------------- ---------------- --------------------
TOTAL $ 50,000
-------------------------------- ---------------- --------------------
Net cash provided by our operating expenses during the six months ended
September 30, 2000 was $67,851 as compared to $13,513 used during the six months
ended September 30, 1999. Net cash used by operating activities during the six
months ended September 30, 2000 was primarily the result of the loss for the
first six months, offset by the beneficial conversion feature of the debentures
and increases in accounts payable and accrued liabilities. We continue verbal
communications with vendors on an open basis, keeping them abreast of our
activities and as a result, no legal actions have developed in their effort to
collect past due amounts from the Company.
<PAGE>
Revenues for the six months and three months ended September 30, 2000
decreased by $51,288 or 17% and $62,481 or 60%, respectively, over the
comparable periods a year earlier. Decrease in revenue was primarily due to a
decrease in sales.
Net losses from continuing operations for the six and three months ended
September 30, 2000 decreased $24,377 and increased $62,972 respectively.
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, 2000, and 1999, 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.
(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.
<PAGE>
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.
(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.
<PAGE>
(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.
(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.
<PAGE>
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.
(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.
<PAGE>
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.
(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.
<PAGE>
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.
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.
<PAGE>
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.
Shares
Beneficially Percent of
Title of Class Name/Address of Owner Owned Class
------------------- --------------------------- ------------- -----------
Common (Restricted) Rebecca M. Inzunza 2,679,495 21.30%
(President/CEO, Director)
1220 Birch Way
Escondido, CA 92097
Common (Restricted) Robert E. Hegemann (SVP, 991,900 7.89%
Treasurer, 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 5,325,320 42.34%
and owners of more than 5%
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
Shares
Beneficially Percent of
Title of Class Name/Address of Owner Owned Class
------------------- ------------------------------ ------------ ---------
Common (Restricted) Rebecca M. Inzunza 2,679,495 21.30%
(President/CEO, Director)
1220 Birch Way
Escondido, CA 92097
Common (Restricted) Robert E. Hegemann (SAP, 991,900 7.89%
Treasurer, 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 4,358,372 34.65%
as a group
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.
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, CFO and Director
Robert E. Hegemann 32 Senior Vice President, Treasurer and Director
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
<PAGE>
BUSINESS EXPERIENCE
(1) Officers
Rebecca M. Inzunza, President, CEO, CFO and Director -
Ms. Inzunza co-founded Remedent USA, Inc. in September 1996. She serves
as President, Chief Financial Officer 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.
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.
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.
<PAGE>
(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.
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.
<PAGE>
(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.
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.
<PAGE>
(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%.
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.
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)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principle Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
------------------------------------------------------------------------------------------------------------------------------
CEO
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.
<PAGE>
**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.
(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.
<PAGE>
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.
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.
<PAGE>
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.
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, requested and received 25,000
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.
<PAGE>
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 who in turn requested, and received 94,500 and 40,500
restricted common shares respectively. 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.
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.
<PAGE>
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.
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.
<PAGE>
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.
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.
INVESTOR ADDRESS AMOUNT NO. SHARES
--------------------------------------------------------------------------------
Timothy J. Pieper 112 Holly Drive $100,000 66,667
Torrington, WY 82240
Luke E. & Pamela K. Lionberger 6019 Franklin Street $3,000 2,000
Lincoln, NE 68506
Leon F. & Lois Grothe 565 Tompkins Drive $10,000 6,666
S. Sioux City, NE 68776
Lee A. And Kayleen L. Dahl 401 Alma Box 97 $9,000 6,000
Laurel, NE 68745
Edward E. and Betty J. Quincy Box 87 $75,750 50,500
Newman Grove, NE 68758
Mark and Cynthia Lionberger 7521 South Downing Street $2,250 1,500
Littleton, CO 80122
-------------------
Totals $200,000 133,333
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"). The agreement with
Continental Capital expired on December 1, 1999.
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").
<PAGE>
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").
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").
We believe that the above referenced transactions with In-Touch,
Charterbridge and Merryvale were exempt from registration under section 4(2) of
the Securities Act of 1933 because they were not part of or constitute a public
offering.
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.
<PAGE>
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.
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 Operations 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-16
Financial Statements
Balance Sheet for periods ended September 30, 2000 and 1999 F-18
Statement Of Operations for the periods ended
September 30, 2000 and 1999 F-19
Statement of Cash Flow for the periods ended
September 30, 2000 and 1999 F-20
Statement of Changes in Shareholders Equity (Deficit)
for the period ended September 30, 2000 F-21
Notes to Financial Statements F-22
<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>
REMEDENT USA, INC.
BALANCE SHEET
For the year For the year
ended ended
ASSETS March 31, 2000 March 31, 1999
-------------- --------------
CURRENT ASSETS
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,
net of current portion 0 1,629
------ -----
TOTAL LIABILITIES 774,256 192,959
------- -------
SHAREHOLDERS' EQUITY (Deficit)
Common stock 12,685 12,434
Additional paid in capital 1,446,018 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
======== ========
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
REMEDENT USA, INC.
STATEMENTS OF OPERATIONS
For the year For the year
ended 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 0
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 12,487,573 6,310,352
========== =========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
REMEDENT USA, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
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- June 30, 1999 251,523 $251 $248,686 - $(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 12,685,303 $12,685 $1,446,018 $(1,934,936) $(12,983) $(489,216)
========== ======= ========== =========== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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.
F-6
<PAGE>
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.
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.
F-7
<PAGE>
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.
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.
F-8
<PAGE>
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.
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
======= =======
F-9
<PAGE>
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-10
<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.
F-11
<PAGE>
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.
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
F-12
<PAGE>
Additionally, the Company issued 160,000 new restricted shares in exchange for
106,666 free trading shares. 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.
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).
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.
F-13
<PAGE>
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.
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.
F-14
<PAGE>
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.
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.
F-15
<PAGE>
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-16
<PAGE>
Remedent USA, Inc.
Financial Statements
for the periods ending
September 30, 2000 and September 30, 1999
(Unaudited)
F-17
<PAGE>
REMEDENT USA, INC.
BALANCE SHEET (Unaudited)
ASSETS
September 30, March 31, 2000
2000
-------------------------------
CURRENT ASSETS
Cash and cash equivalents $ 19,854 $ 8,125
Accounts receivable, net 16,254 40,897
Due from related parties 45,793 16,919
Inventories, net 112,594 153,712
Prepaid expenses 1,211 536
-----------------------------------------------------------------------
TOTAL CURRENT ASSETS 195,706 220,189
Property and Equipment, net 26,278 31,795
OTHER ASSETS
Patents, net of accumulated amortization 27,644 28,274
Other assets 7,782 4,782
-----------------------------------------------------------------------
TOTAL OTHER ASSETS 35,426 33,056
-----------------------------------------------------------------------
TOTAL ASSETS $ 257,410 $ 285,040
=======================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
September 30, March 31,
2000 2000
------------------------------
CURRENT LIABILITIES
Accounts payable $ 379,465 $ 396,208
Notes payable-related parties 153,120 37,096
Accrued salaries - officers 125,767 85,567
Accrued liabilities 171,108 154,110
Customer Deposits 8,892
Royalty payable 44,276 40,754
Current portion capital lease 575 1,629
Note payable-Union Bank 46,994 50,000
----------------------------------------------------------------------
Total current liabilities 921,305 774,256
Long Term Liabilities and Capital Leases,
net of current portion 0 0
-------------------------------------------------------------------------
TOTAL LIABILITIES 921,305 774,256
Stockholders' Equity (Deficit)
Common stock 12,989 12,685
Additional paid in capital 1,628,718 1,446,018
Prepaid services for stock 0 (12,983)
Accumulated deficit (2,305,602) (1,934,936)
----------------------------------------------------------------------
Total stockholders' equity (deficit) (663,895) (489,216)
----------------------------------------------------------------------
Total Liabilities and Stockholders'
Equity (Deficit) $ 257,410 $ 285,040
======================================================================
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
<TABLE>
<CAPTION>
Remedent USA, Inc.
Statement of Operations (Unaudited)
Three months Six months
ending ending
September 30, September 30,
-------------------------------------------------------------------
2000 1999 2000 1999
-------------------------------------------------------------------
Revenues
<S> <C> <C> <C> <C>
Sales $ 42,261 $ 104,742 $ 242,314 $293,602
-----------------------------------------------------------------------------------------------------------------------
Total Revenue 42,261 104,742 242,314 293,602
Cost of Goods Sold 11,763 21,436 76,283 98,820
-----------------------------------------------------------------------------------------------------------------------
Gross profit 30,498 83,306 166,031 194,782
Operating Expenses
Research and development 15,160 18,580 30,245 28,711
Sales and marketing 34,818 195,659 233,382 239,880
General and administrative 66,440 73,923 141,879 191,228
Depreciation and amortization 3,328 2,736 6,657 5,472
-----------------------------------------------------------------------------------------------------------------------
Total operating expenses 119,746 290,898 412,163 465,291
-----------------------------------------------------------------------------------------------------------------------
Net (loss) from operations (89,248) (207,592) (246,132) (270,509)
Other Income (Expenses)
Interest income 69 65 137 208
Interest expense (59,363) (1,733) (121,581) (3,042)
Other income/expense 2,254 (3,090)
-----------------------------------------------------------------------------------------------------------------------
Total other income (expenses) (57,040) (1,668) (124,534) (2,834)
-----------------------------------------------------------------------------------------------------------------------
Net (loss) before taxes (146,288) (209,260) (370,666) (273,342)
State Income Taxes 0 0 0 0
------------------------------------------------------------------------------------------------------------------------
Net (loss) $ (146,288) $(209,260) $(370,666) $(273,342)
======================================================================================---------------------------------
(Loss) per share (0.01) (0.02) (0.03) (0.02)
Weighted average shares outstanding 12,738,050 12,685,303 12,989,470 12,561,603
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
Remedent USA, Inc.
<TABLE>
<CAPTION>
Statement of Cash Flows
(Unaudited)
Six Months Ended September 30,
2000 1999
---------------------------------
Cash Flows From Operating Activities
<S> <C> <C>
Net loss $ (370,666) $ (273,342)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,657 5472
Stock for services 12,983 74,501
Beneficial Conversion Feature 103,200
Changes in:
Accounts receivable 24,643 (24,029)
Inventory 41,118 43,497
Prepaid expenses (675) (4,009)
Accounts payable 63,061 112,985
Accrued liabilities 57,198 41,416
Customer deposits (8,892) 0
Royalties payable 3,522 9,996
----------------------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (67,851) (13,513)
Cash Flows from Investing Activities
Patents (510)
Equipment (10,291)
Deposits (3,000)
Notes to related parties (28,874) (9,174)
----------------------------------------------------------------------------------------------------------
Net Cash (Used) Provided by Investing Activities (32,384) (19,465)
Cash Flows from Financing Activities
Lease payments (1,054) (1,006)
Proceeds of notes and debenture 116,024 8,563
Officer loans (repayments) 0 0
Note payments (3,006) 0
----------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 111,964 7,557)
Net Increase in Cash 11,729 (25,421)
Cash, beginning of the year 8,125 89,382
----------------------------------------------------------------------------------------------------------
Cash, September 30 19,854 $ 63,961
==========================================================================================================
Supplemental Non Cash Investing and Financing Activities:
The Company issued 304,167 shares of stock in lieu of paying an account
payable for $79,805.
Supplemental Information:
Interest paid $ 479 $ -
Taxes paid $ - $ -
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
<TABLE>
<CAPTION>
Remedent USA, Inc.
Statement of Changes in Stockholders Equity (Deficit)
(Unaudited)
Common Stock Additional A/P Accumulated
Paid-in
Date Description Shares Dollars Capital Deficit Total
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
June 30, 2000 Balance 12,985,303 $ 12,985 $ 1,578,223 $(0) $ (2,159,314) $ (568,106)
------------------------------------------------------------------------------------------------------------------------------
July 1, 2000 Shares for 4,167 $ 4 $ 496 $ 500
Services
August 21, 2000 Debenture $ 15,000 $ 15,000
August 23, 2000 Debenture $ 5,000 $ 5,000
September 1, 2000 Debenture $ 5,000 $ 5,000
September 25, 2000 Debenture $ 25,000 $ 25,000
September 30,2000 Net Loss $ (146,288) $ (146,288)
------------------------------------------------------------------------------------------------------------------------------
September 30, 2000 Balance 12,989,470 $ 12,989 $1,628,719 $(0) $(2,305,602) $ (663,894)
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
REMEDENT USA, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 CONDENSED FINANCIAL STATEMENTS
A. Disclosure
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These financial statements should be read in
conjunction with the Form 10-SBA-A3 Filed January 12, 2001.
B. Management's Representation
The consolidated balance sheet as of September 30, 2000 and the consolidated
statement of operations for the three month and six-month periods ended
September 30, 2000 and September 30, 1999 and the statement of cash flows for
the six-month periods ended September 30, 2000 and 1999 have been prepared by
the Registrant, without audit. In the opinion of management, all adjustments
necessary to present fairly the financial position, results of operations, and
cash flows at September 30, 2000 and for all periods presented, have been made.
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-SB 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 September 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 September 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.
F-22
<PAGE>
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 at September 30, 2000 and 1999 as follows:
2000 1999
---- ----
Inventory-Supplies $ 32,628 $ 5,397
Displays and Raw Materials $ 53,438 $ 43,257
Finished Goods $ 26,528 $ 78,984
--------- --------
Total $112,594 $127,638
5. Patents
Patent costs are amortized using straight-line method over 15 years. Patent
values and accumulated amortization at September 30, 2000 and 1999 are as
follows:
2000 1999
---- ----
Patent $ 34,709 $ 34,199
Accumulated amortization $ 7,065 $ 4,785
-------- ---------
Patents, net $ 27,644 $ 29,414
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.
F-23
<PAGE>
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 September 30, 2000 the Company had a working
capital deficit totaling $725,599 and a shareholders deficit of $663,895. 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.
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
$655. The Company has borrowed various amounts totaling $103,200 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.
10. Other Information
In an effort to provide additional exposure of the Company's unique product, the
Company does provide, to certain first time buyers, all dental professional
customers, and all international customers, an opportunity to acquire the
product with certain special marketing discounts. The Company views these
discounts not as sales discounts but as a method of marketing its products to
customers that may not otherwise purchase the product. These discounts should be
deducted from sales to evaluate the exact sales number. Beginning April 1, 2001,
the accounting procedure for posting sales will reflect the actual sales price
and not the Company's standard blanket cost to all buyers.
F-24
<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: January 17, 2001 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
