SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549  FORM 10-QSB/A Amendment No. 1  |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006 or |_| TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934  Commission File Number 001-15975  REMEDENT, INC. (Exact name of small business issuer as specified in its charter)   NEVADA

86-0837251(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)
   XAVIER DE COCKLAAN 42, 9831 DEURLE, BELGIUM
N/A(Address of principal executive offices)
(Zip code)
   011 32 9 321 70 80 (Issuer's telephone number)  Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesxNoo  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesoNox  Number of shares of issuer's common stock outstanding as of August 11, 2006: 12,996,245  Transitional Small Business Disclosure Format (check one). YesoNox  Documents incorporated by reference: None.    Explanatory Note



Remedent, Inc. is filing this Amendment No. 1 to Form 10-QSB/A (Form 10-QSB/A) to reflect corrections to the previously filed Form 10-QSB for the quarterly period ended June 30, 2006, that were originally filed with the Securities and Exchange Commission on August 21, 2006 (the Original Filing). This Form 10-QSB/A is being filed to correct the typographical errors found in the following sections of the Original Filing: Item 2, Condensed Consolidated Balance Sheet at June 30, 2006 and notes to the financial statements.



We are only amending those parts of our Form 10-QSB that have been changed. We have not modified or updated disclosures presented in the Original Filing. Accordingly, this Form 10-QSB/A does not reflect events occurring after the filing of our Original Filing or modify or update those disclosures affected by subsequent events. Information not affected by this Form 10-QSB/A is unchanged and reflects disclosure made at the time of the Original Filing. This Form 10-QSB/A should be read in conjunction with the Original Filing.



REMEDENT, INC.

TABLE OF CONTENTS

FORM 10-QSB REPORT

June 30, 2006





PART I - FINANCIAL INFORMATION
PageItem 1. Interim Consolidated Financial StatementsCondensed Consolidated Balance Sheets as of June 30, 2006 (Unaudited)

and March 31, 2006
1Condensed Consolidated Statements of Operations for the Three

Months Ended June 30, 2006 and June 30, 2005 (Unaudited)
2Condensed Consolidated Statements of Comprehensive Income (Loss) for

the Three Months Ended June 30, 2006 and June 30, 2005 (Unaudited)
3Condensed Consolidated Statements of Cash Flows for the Three

Months Ended June 30, 2006 and June 30, 2005 (Unaudited)
4Notes to Interim Condensed Consolidated Financial Statements for the Three

Months Ended June 30, 2006 and June 30, 2005 (Unaudited)
6Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
18PART II - OTHER INFORMATIONItem 6. Exhibits
23Signatures
24



 




PART I - FINANCIAL INFORMATION

Item 1. Interim Condensed Consolidated Financial Statements



REMEDENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30,2006
March 31, 2006(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
$ 128,337
$ 332,145Cash, restricted
79,065
70,762Accounts receivable, net of allowance for doubtful accounts of $71,507 at June 30, 2006 and $74,133 at March 31, 2006
1,301,913
2,370,846Inventories, net
1,367,663
1,470,553Prepaid expense
404,515
335,111Total current assets
3,281,493
4,579,417PROPERTY AND EQUIPMENT, NET
368,825
317,361OTHER ASSETSPatents, net
158,598
166,166TOTAL ASSETS
$ 3,808,916
$ 5,062,944LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Current portion, long term debt
$ 12,641
$ 12,641Line of Credit
699,215
605,200Notes payable
31,282
31,282Accounts payable
1,104,125
1,632,449Accrued liabilities
599,631
601,042Due to related parties
58,958
58,958Income taxes payable
-
103,001Total current liabilities
2,505,852
3,044,573LONG TERM DEBT
60,710
60,998STOCKHOLDERS EQUITY:Preferred Stock $0.001 par value (10,000,000 shares authorized, none issued and outstanding)
-
-Common stock, $0.001 par value; (50,000,000 shares authorized, 12,964,112 shares issued and outstanding at June 30, 2006 and 12,764,112 shares issued and outstanding at March 31, 2006 )
12,964
12,764Additional paid-in capital
11,737,943
11,624,234Accumulated deficit
(10,491,281)
(9,651,551)Common stock subscribed, not issued
-
200Accumulated other comprehensive income (loss)

-(foreign currency translation adjustment)
(17,272)
(28,274)Total stockholders equity
1,242,354
1,957,373TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
$ 3,808,916
$ 5,062,944


See notes to the financial statements


 
1



REMEDENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



For the three months endedJune 30,2006
2005(Unaudited)Net sales
$ 1,295,639
$ 1,378,308Cost of sales
745,662
630,685Gross profit
549,977
747,623Operating ExpensesResearch and development
125,282
51,814Sales and marketing
386,575
108,886General and administrative
837,350
782,096Non cash restructuring expense
-
764,151Depreciation and amortization
41,262
13,143TOTAL OPERATING EXPENSES
1,390,469
1,720,090INCOME (LOSS) FROM OPERATIONS
(840,492)
(972,467)OTHER INCOME (EXPENSES)Interest expense
(24,015)
(102,792)Non cash interest expense
-
-Other income
24,777
38,712TOTAL OTHER INCOME (EXPENSES)
762
(64,080)LOSS BEFORE INCOME TAXES
(839,730)
(1,036,547)Income tax (expense) benefit
-
24,159NET INCOME (LOSS)
$ (839,730)
$ (1,012,388)LOSS PER SHAREBasic and fully diluted
$ (0.07)
$ (0.32)WEIGHTED AVERAGE SHARES OUTSTANDINGBasic and Fully Diluted
12,898,178
3,164,856


See notes to the financial statements


 
2



REMEDENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)





For the three months ended June 30,(Unaudited)2006

2005Net Income (Loss)
$ (839,730)

$ (1,012,388)OTHER COMPREHENSIVEINCOME (LOSS):Foreign currency translation adjustment
11,002

(108,471)Comprehensive income (loss)
$ (828,728)

$ (1,120,859)




See notes to the financial statements




 
3



REMEDENT INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS




For the three months endedJune 30, 2006
June 30, 2005(Unaudited)
(Unaudited)CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)
$ (839,730)
$ (1,012,388)Adjustments to reconcile net income (loss)to net cash used by operating activitiesDepreciation and amortization
41,167
14,368Inventory reserve
-
-Allowance for doubtful accounts
(6,082)
(4,133)Common Stock issued to MDB Capital for noncash interest on conversion of $100,000 note payable
-
100,000Common Stock issued to MDB Capital for consulting fees
-
395,677Warrants issued to MDB Capital for consulting fees
-
368,474Value of issued stock options to employees
113,709
-Changes in operating assets and liabilities:Accounts receivable
1,143,177
521,266Due from related party
-
(11,113)Inventories
169,269
(128,871)Prepaid expenses
(61,266)
(79,262)Accounts payable
(579,825)
(77,532)Accrued liabilities
(25,366)
67,629Deferred revenue
-
-Income taxes payable
(103,529)
(24,159)Net cash provided (used) by operating activities
(148,476)
129,957CASH FLOWS FROM INVESTING ACTIVITIESIncrease in restricted cash
(8,303)
-Purchase of patent rights
-
-Purchases of equipment
(61,339)
(237,942)Net cash used by investing activities
(69,642)
(237,943)CASH FLOWS FROM FINANCING ACTIVITIESIncrease in deferred offering costs

(63,722)Principal payments on capital lease note payable
2,637
-Note payments-unrelated parties
-
(64,495)Proceeds from (repayments of) line of credit
60,830
158,944Proceeds from installment note payable
-
89,320Net cash provided (used) by financing activities
63,468
120,047NET INCREASE (DECREASE) IN CASH
(156,016)
12,060Effect of exchange rate changeson cash and cash equivalents
(49,158)
(29,069)CASH AND CASH EQUIVALENTS, BEGINNING
332,145
40,442CASH AND CASH EQUIVALENTS, ENDING
$ 128,337
$ 23,433Supplemental Information:Interest paid
$ 24,548
$ 2,290Income taxes paid
$ -
$ -

See notes to the financial statements and supplemental disclosures on following page.
 
4



SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:



On June 3, 2005, the Company issued 7,715,703 shares of its common stock in exchange for 78% of the stock of Remedent N.V., a commonly controlled subsidiary and the $1,178,592 minority interest associated with this 78% interest as of the closing of the transaction was recorded by the Company as additional paid in capital ($1,170,586) and common stock ($7,716).



On June 3, 2005 a $100,000 note payable issued by the Company on March 23, 2004 the Christopher T. Marlett Living Trust (Marlett Note) converted to 197,839 shares of common stock pursuant to its terms which required automatic conversion contingent upon successful completion of the Companys corporate restructuring. The Company recognized the value of the beneficial conversion feature of the Marlett Note equal to the difference between the effective conversion price, $0.57 per share, and the fair market value of the Companys common stock as of the date of the Marlett Note was issued ($1.60 per share as of March 23, 2004) as additional interest expense as of the date of the conversion, not to exceed the amount of the proceeds received from the Marlett Note. Accordingly, the Company recorded $100,000 in additional non-cash interest expense as of June 3, 2005.



On June 3, 2005, the Company issued to MDB Capital Group, LLC (MDB) for consulting fees related to the Companys corporate restructuring 247,298 shares of the Companys common stock and 247,298 five year common stock purchase warrants that will be exercisable beginning sixty (60) days after June 3, 2005 with an exercise price of $1.20 per share. The market value of the Companys common stock on June 3, 2005 was $1.60 per share, resulting in a value attributable to the stock issued to MDB of $395,677. The value of the warrants, determined in accordance with the Black-Scholes pricing model is $1.49 per warrant, for a total for the warrants of $368,474. Accordingly the Company recognized a non-cash restructuring expense as of June 3, 2005 of $764,151.



On June 15, 2005, the Company entered into two five year capital lease agreements for manufacturing equipment totaling $85,231 of which $73,351 was outstanding at June 30, 2006. The leases require monthly payments of principal and interest at 4.20% of 1,258 ($1,599 at June 30, 2006) and provide for buyouts at the conclusion of the five year term of 2,820 ($3,585) or 4.0% of original value. The book value as of June 30, 2006 of the equipment subject to the foregoing leases is $68,902.



Effective July 13, 2005, the Companys Board of Directors approved the repayment of a 115,000 advance to Dental Marketing Development N.V. ("DMD"), a company owned and operated by Guy De Vreese which later merged with Lident N.V., another company controlled by Mr. De Vreese, in exchange for 93,533 shares of the Companys common stock held by Lident valued at $1.50 per share based upon a principal amount of 115,000 and a conversion rate of $1.22 to the Euro. The 93,533 shares of common stock received have been cancelled and are available for reissue as of June 30, 2006.


 
5



REMEDENT, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006

(UNAUDITED)



1.
BACKGROUND AND BUSINESS ACTIVITIES


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



The accompanying consolidated financial statements include the accounts of Remedent, Inc. (formerly Remedent USA, Inc.), a Nevada corporation, and its three subsidiaries, Remedent N.V. (Belgian corporation) located in Deurle, Belgium, Remedent Professional, Inc. (incorporated in California) and a subsidiary of Remedent Professional Holdings, Inc. and Remedent Asia Pte Ltd, a wholly-owned subsidiary formed under the laws of Singapore (collectively, the Company). Remedent, Inc. is a holding company with headquarters in Deurle, Belgium and, as of October 2005, offices in Los Angeles, California. Remedent Professional, Inc. and Remedent Professional Holdings, Inc. have been dormant since inception. Remedent Asia Pte. Ltd., commenced operations as of July 2005. All significant inter-company accounts and transactions have been eliminated in the consolidated financial statements.



The Company was originally incorporated under the laws of Arizona in September 1996 under the name Remedent USA, Inc. In October 1998, the Company was acquired by Resort World Enterprises, Inc., a Nevada corporation (RWE) in a share exchange and RWE immediately changed its name to Remedent USA, Inc. The share exchange was a reverse acquisition and accounted for as if the Company acquired RWE and then recapitalized its capital structure. On July 1, 2001, the Company formed three wholly-owned subsidiaries, Remedent Professional Holdings, Inc., Remedent Professional, Inc. and Remedent N.V. (a Belgium corporation). Remedent Professional, Inc. and Remedent Professional Holdings, Inc. are both wholly-owned subsidiaries and have been inactive since inception. In June 2005, the Company formed Remedent Asia Pte Ltd, a wholly-owned subsidiary formed under the laws of Singapore. In
October, 2005, the Company established a sales office in Los Angeles, California in order to introduce its products to the United States market.



During the quarter ended March 31, 2002, through the Companys Belgium based subsidiary, Remedent N.V., the Company initiated its entrance into the high technology dental equipment market. Since that time, the majority of the Companys operations have been conducted through its subsidiary, Remedent N.V. For the last four fiscal years, substantially all of the Companys revenue has been generated by Remedent N.V., which has become a leading provider of cosmetic dentistry products, including a full line of professional dental and retail over-the-counter tooth whitening products in Europe. Because the controlling stockholders of Remedent N.V. consisted of the Companys executive officers or companies owned by these executive officers, the Company has always had effective "control" over Remedent N.V., as defined by APB 51 "Consolidated Financial Statements," even though it
owned only twenty two percent (22%) of this subsidiary.



On June 3, 2005, the Company consummated the acquisition of the remaining 78% of Remedent N.V., and issued 7,715,703 shares of the Companys common stock in exchange for the 78% of the


 
6



common stock of Remedent N.V. not owned by the Company. As a result of this acquisition, Remedent N.V. became our wholly-owned subsidiary. In addition, on June 3, 2005, the Company amended its Articles of Incorporation pursuant to the filing of the Amended and Restated Articles of Incorporation with the Nevada Secretary of State. The Amended and Restated Articles of Incorporation (i) changed the name of the Company from "Remedent USA, Inc." to "Remedent, Inc." (ii) increased the number of authorized shares to 60,000,000 shares consisting of 50,000,000 shares of common stock and 10,000,000 shares of Preferred Stock, and (iii) effected a one-for-twenty reverse stock split. The consolidated financial statements and accompanying notes have been retroactively adjusted to reflect the effects of the reverse split and authorization of 10,000,000 shares of Preferred Stock.



2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Organization



The accompanying consolidated financial statements include the accounts of Remedent, Inc. (formerly Remedent USA, Inc.), a Nevada corporation, and its three subsidiaries, Remedent N.V. (Belgian corporation) located in Deurle, Belgium, Remedent Professional, Inc. (incorporated in California) and a subsidiary of Remedent Professional Holdings, Inc. and Remedent Asia Pte Ltd, a wholly-owned subsidiary formed under the laws of Singapore (collectively, the "Company"). Remedent, Inc. is a holding company with headquarters in Deurle, Belgium and, as of October 2005, offices in Los Angeles, California. Remedent Professional, Inc. and Remedent Professional Holdings, Inc. have been dormant since inception. Remedent Asia Pte. Ltd., commenced operations as of July 2005. All significant inter-company accounts and transactions have been eliminated in the consolidated financial statements.



Interim Financial Information



The interim consolidated financial statements of Remedent, Inc. and Subsidiaries (the Company) are condensed and do not include some of the information necessary to obtain a complete understanding of the financial data. Management believes that all adjustments necessary for a fair presentation of results have been included in the unaudited consolidated financial statements for the interim periods presented. Operating results for the three months ended June 30, 2006, are not necessarily indicative of the results that may be expected for the year ended March 31, 2007. Accordingly, your attention is directed to footnote disclosures found in the Annual Report on Form 10-KSB for the year ended March 31, 2006, and particularly to Note 1, which includes a summary of significant accounting policies.



Basis for Presentation



The Companys financial statements have been prepared on an accrual basis of accounting, in conformity with accounting principles generally accepted in the United States of America. These principles contemplate the realization of assets and liquidation of liabilities in the normal course of business. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.



 
7



Principles of Consolidation



All inter-company balances and transactions have been eliminated in consolidation. Corporate administrative costs are not allocated to subsidiaries.



Revenue Recognition



The Company recognizes revenue from product sales when persuasive evidence of a sale exists: that is, a product is shipped under an agreement with a customer; risk of loss and title has passed to the customer; the fee is fixed or determinable; and collection of the resulting receivable is reasonably assured. Sales allowances are estimated based upon historical experience of sales returns.



Impairment of Long-Lived Assets



Long-lived assets consist primarily of patents and property and equipment. The recoverability of long-lived assets is evaluated by an analysis of operating results and consideration of other significant events or changes in the business environment. If impairment exists, the carrying amount of the long-lived assets is reduced to its estimated fair value, less any costs associated with the final settlement. As of March 31, 2006, management believes there was no impairment of the Companys long-lived assets.



Cash-Restricted



The Company has deposited $79,065 in cash in an escrow with Wells Fargo Bank as security for the Companys credit card merchant processing associated with anticipated direct sales activities in the U.S.



Accounts Receivable and Allowance for Doubtful Accounts



The Company sells professional dental equipment and consumer dental products to various companies, primarily to distributors located in Western Europe. The terms of sales vary by customer, however, generally are 2% 10 days, net 30 days. Accounts receivable is reported at net realizable value and net of allowance for doubtful accounts. The Company uses the allowance method to account for uncollectible accounts receivable. The Companys estimate is based on historical collection experience and a review of the current status of trade accounts receivable.



Prepaid Expense



Included in the Companys prepaid expenses are prepayments to suppliers for inventory purchases and to the Belgium customs department, to obtain an exemption of direct VAT payments for imported goods out of the European Union (EU). This prepayment serves as a guarantee to obtain the facility to pay VAT at the moment of sale and not at the moment of importing goods at the border.



Property and Equipment



Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income.



 
8



The Company depreciates its property and equipment for financial reporting purposes using the straight-line method based upon the following useful lives of the assets:



Tooling
3 Years
Manufacturing Equipment
4 Years
Furniture and fixtures
4 Years


Research and Development Costs



The Company expenses research and development costs as incurred.



Warranties



The Company records warranty liabilities at the time of sale for the estimated costs that may be incurred under its basic warranty programs. The specific warranty terms and conditions vary depending upon the product sold but generally include technical support, repair parts, labor for periods up to 18 months. Factors that affect the Companys warranty liability include the number of installed units currently under warranty, historical and anticipated rates of warranty claims on those units, and cost per claim to satisfy the Companys warranty obligation. Based upon the foregoing, we have recorded as of June 30, 2006 a provision for potential future warranty costs of $19,070.



Computation of Earnings per Share



Basic net income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Net income (loss) per common share attributable to common stockholders assuming dilution is computed by dividing net income by the weighted average number of shares of common stock outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued. Potential common shares related to stock options and stock warrants are excluded from the computation when their effect is antidilutive.



Conversion of Foreign Currencies



The reporting currency for the consolidated financial statements of the Company is the U.S. dollar. The functional currency for the Companys European subsidiary, Remedent N.V. is the Euro. The functional currency for Remedent Professional, Inc. is the U.S. dollar. The functional currency for Remedent Asia Pte is the Singapore dollar. The Company translates foreign currency statements to the reporting currency in accordance with FASB 52. The assets and liabilities of companies whose functional currency is other than the U.S. dollar are included in the consolidation by translating the assets and liabilities at the exchange rates applicable at the end of the reporting period. The statements of income of such companies are translated at the average exchange rates during the applicable period. Translation gains or losses are accumulated as a separate component of stockholders deficit. The
Company reports the reporting currency equivalent of foreign currency cash flows using an appropriately weighted average exchange rate for the period and reports the effect of exchange rate changes on cash balances held in foreign currencies as a separate part of the reconciliation of the change in cash and cash equivalents during the period.





 
9



Impact of New Accounting Standards



In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB No. 20, and FAS No. 3. SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable,

retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. SFAS No. 154 also provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable. The correction of an error in previously issued financial statements is not an accounting change. However, the reporting of an error correction involves adjustments to previously issued financial statements similar to those generally applicable to reporting an accounting change retrospectively. Therefore, the reporting of a correction of an error by restating previously issued financial statements is also addressed by SFAS No. 154. SFAS No. 154 is required to be adopted in fiscal years beginning
after December 15, 2005. The Company does not believe adoption of SFAS No. 154 will have a material impact on its financial position, results of operations or cash flows.



In February 2006, the Financial Accounting Standard Board (FASB) issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140. This Statement resolves issues addressed in Statement 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interest in Securitized Financial Assets. This pronouncement will be effective on the fiscal year beginning after September 15, 2006. Currently, the Company does not have any derivative instruments or participate in any hedging activities, and therefore the adoption of SFAS No. 155 is not expected to have a material impact on the Companys financial position or results of operations.



In March 2006, the Financial Accounting Standard Board (FASB) issued SFAS No. 156, Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140. This Statement requires recognition of servicing a financial asset by entering into a servicing contract in certain situations. This pronouncement will be effective on the fiscal year beginning after September 15, 2006. Currently, the Company does not have any servicing asset or liability, and therefore the adoption of SFAS No. 156 is not expected to have a material impact on the Companys financial position or results of operations.



3.
CONCENTRATION OF RISK


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

Concentration of credit risk-Concentrations of credit risk with respect to trade receivables are normally limited due to the number of customers comprising the Companys customer base and their dispersion across different geographic areas. At June 30, 2006, two customers accounted for 27.8% and 11.7%, respectively, of the Companys trade accounts receivable. For the three months ended June 30, 2005, a different customer accounted for 30.2% of the Companys trade accounts receivable. The Company performs ongoing credit evaluations of its customers and normally does not require collateral to support accounts receivable.

Revenues - For the three months ended June 30, 2006 the Company had one customer that accounted for 29.4% of total revenues. For the three months ended June 30, 2005, the Company had one customer whose sales were 21.2% of total revenues



 
10



Purchases The Company has diversified its sources for product components and finished goods and, as a result, the loss of a supplier would not have a material impact on the Companys operations. The Company currently relies on two factories to manufacture certain components of its new MetaTray and iWhite products, of which one represented 24% of the Companys purchases for the three months ended June 30, 2006.



4.
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS


A summary of accounts receivable and allowance for doubtful accounts as of June 30, 2006 and March 31, 2006 is as follows:



June 30, 2006

March 31, 2006Accounts receivable, gross
$ 1,373,420

$ 2,444,979Less: allowance for doubtful accounts
(71,507)

(74,133)Accounts receivable, net
$ 1,301,913

$ 2,370,846


5.
INVENTORIES


Inventories are stated at the lower of cost (weighted average) or market. Inventory costs include material, labor and manufacturing overhead. Individual components of inventory are listed below as follows:



June 30, 2006

March 31, 2006Raw materials
$ 32,404

$ 30,538Components
1,074,143

1,102,231Finished goods
273,829

349,8881,380,376

1,482,657Less: reserve for obsolescence
(12,713)

(12,104)Net inventory
$ 1,367,663

$ 1,470,553


6.
PROPERTY AND EQUIPMENT


Property and equipment are summarized as follows:



June 30, 2006

March 31, 2006Furniture & Fixtures
$ 114,950

$ 94,368Machinery & Equipment
219,745

167,764Tooling
188,450

175,950$ 523,145

438,082Less: Accumulated Depreciation
(154,320)

(120,721)Property & equipment, net
$ 368,825

$ 317,361




 
11



7.
LICENSED PATENTS


In October 2004, the Company acquired from the inventor the exclusive, perpetual license to two issued United States patents which are applicable to several teeth whitening products currently being marketed by the Company. Pursuant to the terms of the license agreement, the Company was granted an exclusive, worldwide, perpetual license to manufacture, market, distribute and sell the products contemplated by the patents subject to the payment of $65,000 as reimbursement to the patent holder for legal and other costs associated with obtaining the patents, which was paid in October 2004, and

royalties for each unit sold subject to an annual minimum royalty of $100,000 per year. The Company is amortizing the initial cost of $65,000 for these patents over a ten year period and the Company has recorded $11,375 of accumulated amortization for this patent as of June 30, 2006.



In September 2004, the Company entered into an agreement with Lident N.V. (Lident), a company controlled by Mr. De Vreese, the Companys Chairman, to obtain an option, exercisable through December 31, 2005, to license an international patent (excluding the US) and worldwide manufacturing and distribution rights for a potential new product which Lident had been assigned certain rights by the inventors of the products, who are unrelated parties, prior to Mr. De Vreese association with the Company. The patent is an Italian patent which relates to a single use universal applicator for dental pastes, salves, creams, powders, liquids and other substances where manual application could be relevant. The Company has filed to have the patent approved throughout Europe. The agreement required the Company to advance to the inventors through Lident a fully refundable deposit of 100,000
subject to the Companys due diligence regarding the enforceability of the patent and marketability of the product, which, if viable, would be assigned to the Company for additional consideration to the inventors of  100,000 ($118,840 as of June 30, 2006) and an ongoing royalty from sales of products related to the patent equal to 3% of net sales and, if not viable, the deposit would be repaid in full by Lident. The consideration the Company had agreed to pay Lident upon the exercise of the option is the same as the consideration Lident is obligated to pay the original inventors. Consequently, Lident would not have profited from the exercise of the option. Furthermore, at a meeting of the Companys Board of Directors on July 13, 2005, the Board accepted Lidents offer to facilitate an assignment of Lidents intellectual property rights to the technology to the Company in exchange for the reimbursement of Lidents actual costs incurred relating to the intellectual
property. Consequently, when the Company exercises the option, all future payments, other than the reimbursement of costs would be paid directly to the original inventors and not to Lident.



On December 12, 2005, the Company exercised the option and the Company and the patent holder agreed to revise the assignment agreement whereby the Company agreed to pay 50,000 additional compensation in the form of prepaid royalties instead of the 100,000 previously agreed, 25,000 of which had been paid by the Company in September 2005 and the remaining 25,000 to be paid upon the Companys first shipment of a product covered by the patent. The patent is being amortized over five (5) years and the Company has recorded $13,867 of accumulated amortization for this patent as of June 30, 2006.



8.
LINE OF CREDIT


On October 8, 2004, the Company obtained a new line of credit facility with a new Belgian bank for  1,050,000 (US $1,334,865 at June 30, 2006) Line of Credit Facility
(the "Facility") with a Belgian bank , consisting of a 800,000 (US $1,017,040) credit line based on the eligible accounts receivable and
a 250,000 (US $317,825) general line of credit. Advances are approved by the bank based upon dated bills of exchange issued and signed
by the customer for shipped goods. These advances are discounted at a rate of 2.125%. As of May 3, 2005, the Company and the bank agreed
to increase the general line of




 
12



credit to 500,000 ($635,650) and decrease the credit line based on the eligible accounts receivable
to 550,000 ($699,215). Interest on each advance under this line is charged at the banks published rate, which was 7.3% at
June 30, 2006. All other terms and conditions
remained unchanged. There was 550,000 ($699,215) in advances outstanding for this line of credit as of June 30, 2006
and 500,000 ($605,200) advances outstanding as of March 31, 2006.



9.
DUE TO RELATED PARTIES


June 30, 2006

March 31, 2006Demand loan from a former officer anda major stockholder
$ 58,958

$ 58,958


Borrowings from employees and entities controlled by officers of the Company are due upon demand and bear no interest.



10.
ACCRUED LIABILITIES


Accrued liabilities are summarized as follows:



June 30, 2006
March 31, 2006Accrued employee benefit taxes
$ 226,818
$ 227,369Royalties
50,000
100,000Commissions
22,686
80,366Accrued audit and tax preparation fees
33,478
23,500Reserve for warranty costs
19,070
18,156Accrued interest
11,628
15,584Accrued consulting fees
4,068
9,021Other accrued expenses
231,883
127,046$ 599,631
$ 601,042


11.
NOTES PAYABLE

June 30, 2006
March 31, 2006Convertible Debentures:Maturity Dates: September 1, 2001 thru February 8, 2002Interest rate: 10% per annumDebentures are unsecuredConvertible at 30% of the average trading price (average of bid and ask) for the 30 days immediately prior to the maturity dateUnpaid principal balance
$ 20,000
$ 20,000Union Bank Debt:Maturity Dates: April 26, 2005Interest rate: 7.5% per annumSecurity: All of the assets of the companyUnpaid principal balance
$11,282
$ 11,282Total notes payable
$ 31,282
$ 31,282




 
13



12.
LONG TERM DEBT


On June 15, 2005, the Company entered into two five year capital lease agreements for manufacturing equipment totaling 70,245 of which 57,697 ($73,351) was outstanding at June 30, 2006. The leases require monthly payments of principal and interest at 4.20% of 1,258 ($1,599 at March 31, 2006) and provide for buyouts at the conclusion of the five year term of 2,820 ($3,585) or 4.0% of original value. Principal payable within 12 months of June 30, 2006 totals $12,641. The

book value as of March 31, 2006 and June 30, 2006 of the equipment subject to the foregoing leases are $73,411 and $69,262, respectively.



13.
STOCK OPTIONS


The Board of Directors and stockholders approved the Nonstatutory Stock Option Plan (the 2001 Plan) and adopted it on May 29, 2001. The Company has reserved 250,000 shares of its common stock for issuance to the directors, employees and consultants under the Plan. The Plan is administered by the Board of Directors. Vesting terms of the options range from immediate to five years.



In an Information Statement on Schedule 14C mailed on May 9, 2005 to all stockholders of record as of the close of business on February 1, 2005 and became effective June 3, 2005, the Company authorized the implementation of a 2004 Incentive and Nonstatutory Stock Option Plan (2004 Plan) reserving 800,000 shares of common stock for issuance to employees, directors and consultants of the Company or any subsidiaries. This plan became effective as of June 3, 2005 after the Company had completed a one for twenty reverse split.



A summary of the option activity for the three months ended June 30, 2006 pursuant to the terms of the plans is as follows:



2001 Plan

2004 PlanOutstanding Options
Weighted Average Exercise Price

Outstanding Options
Weighted Average Exercise PriceOptions outstanding , March 31, 2006
222,500
$ 1.30

475,000
$ 3.76Granted
-
-

-
-Exercised
-
-

-
-Cancelled or expired
-
-

-
4.00Options outstanding June 30, 2006
222,500
$ 1.30

475,000
$ 3.76Options exercisable June 30, 2006
222,500
$ 1.30

141,667
$ 3.34Exercise price range
$1.00 to $4.00


$2.46 to $4.00Weighted average remaining life

(in years)
5.8
years

5.1
yearsShares available for future issuance
27,500


325,000













 
14



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



Plan Category
Number ofsecurities to beissued uponexercise ofof outstandingoptions, warrantsand right
Weighted-averageexercise price ofoutstanding optionswarrants and rights
Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingsecurities reflectedin column (a))Equity CompensationPlans approvedby security holders
697,500
$2.97
352,500Equity CompensationPlans not approvedby security holders
467,288
$2.18
NA1,164,788
$2.15
352,500




14.
STOCK BASED COMPENSATION


Prior to January 1, 2006, the Company accounted for employee stock-based compensation under the recognition and measurement principles of Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and related Interpretations, as permitted by SFAS No. 123, Accounting for Stock-Based Compensation. Under the recognition principles of APB No. 25, compensation expense related to restricted stock and performance units was recognized in the financial statements. However, APB No. 25 generally did not require the recognition of compensation expense for stock options because the exercise price of these instruments was generally equal to the fair value of the underlying common stock on the date of grant, and the related number of shares granted were fixed at that point in time.



Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R), Share-Based Payment. In addition to recognizing compensation expense related to restricted stock and performance units, SFAS No. 123(R) also requires recognition of compensation expense related to the estimated fair value of stock options. The Company adopted SFAS No. 123(R) using the modified-prospective-transition method. Under that transition method, compensation expense recognized subsequent to adoption includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the values estimated in accordance with the original provisions of SFAS No. 123, and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair values estimated in accordance with the provisions
of SFAS No. 123(R). Consistent with the modified-prospective-transition method, the Companys results of operations for prior periods have not been adjusted to reflect the adoption of FAS 123(R). For the three months ended June 30, 2006, the Company recognized $113,709 in compensation expense in the consolidated statement of operations.


For purposes of proforma disclosures prior to January 1, 2006, the estimated fair value of the options is amortized to expense over the options vesting periods. The Companys unaudited proforma information follows:



15



June 30, 2005Net income (loss):As reported
$ (1,012,338)Pro forma
$ (1,012,338)Earnings per share:Basic and fully dilutedAs reported
$ (0.32)Pro forma
$ (0.32)


15.
SEGMENT INFORMATION


The Companys only operating segment consists of dental products and oral hygiene products sold by Remedent N.V. The other subsidiaries of the Company have been dormant since inception. Since the Company only has one segment, no further segment information is presented.



Customers Outside of the United States



Sales to customers outside of the United States were 96.6% and 98.9% of total sales for the three month periods ended June 30, 2006 and 2005, respectively. The sales were made mostly to customers in countries that are members of the European Union (EU).



June 30, 2006

June 30, 2005U.S. sales
$ 42,986

$ 15,406Foreign sales
1,252,653

1,362,902$ 1,295,639

$ 1,378,308


16.
COMMITMENTS AND CONTINGENCIES


Real Estate Lease



The Company leases its 26,915 square feet office and warehouse facility in Deurle, Belgium from an unrelated party pursuant to a nine year lease commencing December 20, 2001 at a base rent of 6,560 per month ($8,340 per month at June 30, 2006). In addition, the Company is responsible for the payment of annual real estate taxes for the property which totaled  3,245 ($4,207) for calendar year 2005. The minimum aggregate rent to be paid over the remaining lease term based upon the conversion rate for the (Euro) at June 30, 2006 is $431,760. Rent expense for the foregoing lease for the three months ended June 30, 2006 and 2005 was $24,353 and $25,024 respectively.



From November 2, 2005 to July 2006, the Company leased an office space in Los Angeles, California on a month to month base. The monthly rent was $4,675.00.



Equipment Lease



In November 2004, the Company leased new computer equipment from a Belgium based Lessor pursuant to a three year operating lease with monthly payments of 1,005 ($1,194). The aggregate rent to be paid over the remaining lease term is $21,720.



16



Minimum monthly lease payments for real estate and equipment for the next five fiscal years are as follows based upon the conversion rate for the (Euro) at June 30, 2006.



June 30, 2007
$109,879June 30, 2008
$106,648June 30, 2009
$96,916June 30, 2010
$96,916June 30, 2011
$72,687


17.
SUBSEQUENT EVENTS


On July 19, 2006, the Company and Mr. Hoffman entered into an Employment Severance Agreement (the Agreement) pursuant to which an employment agreement between the Company and Mr. Hoffman dated October 12, 2005 (the Employment Agreement) was mutually terminated. As of July 19, 2006, Mr. Hoffman is no longer the Companys Vice President of Worldwide Sales and Operations. Under the Agreement, the Company agreed to make a one-time severance payment to Mr. Hoffman in an amount equal to Mr. Hoffmans base salary currently in effect as of July 19, 2006 through August 31, 2006. In addition, the Company agreed to allow 110,666 of Mr. Hoffmans options to vest at August 31, 2006. The balance of Mr. Hoffmans options lapsed upon his termination. In conjunction with the terms of the Agreement, Mr. Hoffman has agreed to (a) a general release of liability and (b) a
non-solicitation clause for a term of eighteen (18) months commencing on August 31, 2006. As a result of the foregoing the Company will recognize severance costs of $31,731 and compensation related to the vesting of the options of $36,329 as of July 19, 2006.




 
17



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



The discussion contained herein is for the three months ended June 30, 2006 and 2005. The following discussion should be read in conjunction with the Companys condensed consolidated financial statements and the notes to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-QSB for the quarterly period ended June 30, 2006. The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements that include words such as anticipates, expects, intends, plans, believes, may, will or similar expressions that are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections or other
characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Such statements include, but are not limited to, statements regarding our intent, belief or current expectations regarding our strategies, plans and objectives, our product release schedules, our ability to design, develop, manufacture and market products, our intentions with respect to strategic acquisitions, the ability of our products to achieve or maintain commercial acceptance and our ability to obtain financing for our obligations. Such statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, the Companys actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. Factors that could cause or contribute to the differences are discussed in Risk Factors and elsewhere in the Companys
annual report on Form 10-KSB filed on July 14, 2006 with the Securities and Exchange Commission. Except as required by applicable law or regulation, the Company undertakes no obligation to revise or update any forward-looking statements contained in this Quarterly Report on Form 10-QSB for the quarterly period ended June 30, 2006. The information contained in this Quarterly Report on Form 10-QSB for the quarterly period ended June 30, 2006 is not a complete description of the Companys business or the risks associated with an investment in the Companys common stock. Each reader should carefully review and consider the various disclosures made by the Company in this Quarterly Report on Form 10-QSB for the quarterly period ended June 30, 2006 and in the Companys other filings with the Securities and Exchange Commission.



Overview



We are a manufacturer and distributor of cosmetic dentistry products, including a full line of professional dental and retail Over-The-Counter tooth whitening products which are distributed in Europe, and recently in Asia and the United States. We manufacture many of our products in its facility in Deurle, Belgium as well as outsourced manufacturing in China.



In August 2005, we introduced MetaTray®, our next generation of products targeted for the professional dentist market. In addition, earlier this year a variation of our MetaTray® product named iWhite® was introduced to our global retail distribution network.



We distribute our products using both its own internal sales force and through the use of third party distributors. As a result of this approach, in just four years we have established dealers in 35 countries encompassing, Europe, Asia, Latin America, the Pacific Rim and the Middle East. In addition, pursuant to distribution agreements we have granted certain distributors exclusive rights to distribute our products in the following territories: Cyprus, Morocco, Tunisia, Algeria, South Africa, Italy, Vatican City, Republic of San Marino, China, Korea, Vietnam, Mongolia, and Thailand.


 
18



Background and Corporate History



We were originally incorporated under the laws of Arizona in September 1996 under the name Remedent USA, Inc. In October 1998, we were acquired by Resort World Enterprises, Inc., a Nevada corporation (RWE) in a share exchange and RWE immediately changed its name to Remedent USA, Inc. The share exchange was a reverse acquisition and was accounted for as if we acquired RWE. On June 3, 2005, we changed our name to Remedent, Inc.



We have four wholly-owned subsidiaries, Remedent Professional Holdings, Inc., Remedent Professional, Inc., Remedent Asia Pte. Ltd and Remedent N.V. Remedent Professional, Inc. and Remedent Professional Holdings, Inc. are both wholly-owned subsidiaries which have been inactive since inception. In June 2005, the Company formed Remedent Asia Pte. Ltd, a wholly-owned subsidiary formed under the laws of Singapore.



For the fiscal years ending March 31, 2003 through 2006, substantially all of our revenue has been generated by our Belgian subsidiary, Remedent N.V. From 2002 to 2005, we held a minority interest in Remedent N.V. Although we owned only 22% of Remedent N.V. until 2005, because the controlling stockholders of Remedent N.V. consist of our executive officers or companies owned by our executive officers, we have always had effective control over Remedent N.V., as defined by APB 51 Consolidated Financial Statements. On June 3, 2005, we consummated the acquisition of the remaining 78% of our subsidiary, Remedent N.V., and issued 7,715,703 shares of our restricted common stock in exchange for all of the issued and outstanding shares of Remedent N.V. owned or controlled by our executive officers. As a result of this acquisition, Remedent N.V. became our wholly-owned subsidiary.



In February and December 2004, in an action taken by written consent of the holders of a majority of the issued and outstanding shares of our common stock, our stockholders authorized the acquisition of the remaining 78% of our subsidiary, Remedent N.V., which we did not own, in exchange for 7,715,703 post-split shares of our common stock in a transaction involving Messrs. Guy De Vreese and Robin List, our Chairman and Chief Executive Officer respectively. On June 3, 2005, we consummated the acquisition of Remedent N.V. and issued 7,715,703 post- split shares of its restricted common stock to the Lausha N.V., a company controlled by Guy De Vreese, and to Robin List in exchange for all of the issued and outstanding shares of Remedent N.V. owned by Lausha N.V. and Robin List. As a result of this acquisition, Remedent N.V. became our wholly owned subsidiary.



On June 3, 2005, we amended our Articles of Incorporation to; (i) change our name from Remedent USA, Inc. to Remedent, Inc. (ii) increase the number of authorized shares to 60,000,000 shares consisting of 50,000,000 shares of common stock and 10,000,000 shares of Preferred Stock, and (iii) effect a one-for-twenty reverse stock split.



Our Critical Accounting Policies



The discussion and analysis of the Companys financial condition and results of operations is based upon the Companys consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to bad debts, intangible assets, income taxes, and contingencies and litigation, among others. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or


 
19



conditions. The Company believes that the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements: revenue recognition, inventory valuation, research and development costs, stock-based compensation, impairment of long-lived assets and conversion of foreign currencies. These accounting policies are discussed in ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION contained in the Companys Annual Report on Form 10-KSB for the fiscal year ended March 31, 2006, as well as in the notes to the March 31, 2006 consolidated financial statements. There have not been any significant changes to these accounting policies since they were previously reported at March 31, 2006.



Results of Operations



Results of Operations for the three months ended June 30, 2006 compared with the three months ended June 30, 2005.



The following table presents our consolidated statements of income (loss), as a percentage of sales, for the periods indicated.



For the three months endedJune 30,2006
2005NET SALES
100.00%
100.00%COST OF SALES
57.55%
45.76%GROSS PROFIT
42.45%
54.24%OPERATING EXPENSESResearch and development
9.67%
3.76%Sales and marketing
29.84%
7.90%General and administrative
64.63%
56.74%Non cash restructuring expense
0.00%
55.44%Depreciation and amortization
3.18%
0.95%TOTAL OPERATING EXPENSES
107.32%
124.80%INCOME (LOSS) FROM OPERATIONS
(64.87)%
(70.56)%Other income (expense)
0.06%
(4.65)%INCOME (LOSS) BEFORE INCOMETAXES AND MINORITY INTEREST
(64.81)%
(75.20)%Minority interest
0.00%
0.00%Income tax benefit (expense)
0.00%
1.75%NET INCOME (LOSS)
(64.81)%
(73.45)%


Net Sales



We experienced a sales decrease for the three months ended June 30, 2006 of $82,669, or 6.0%, to $1,295,639 as compared to $1,378,308 for the three months ended June 30, 2005. We believe that the decrease in net sales for the three months ended June 30, 2006 is attributable for the most part to the delayed launch of our iWhite product in some countries. This delay was caused by regulatory issues which were raised by some local authorities. As a direct result orders in access of $1,700,000 were postponed. Subsequent to June 30, 2006, the regulatory issues have been resolved and the postponed orders were


 
20



shipped during the month of July 2006. Another factor which influenced the result was the reduction of our RemeCure selling price, which was decreased by 28% in order to maintain a competitive position in the market.



Cost of Sales


Our cost of sales increased for the three months ended June 30, 2006 by $114,977, or 18.2%, to $745,662 as compared to $630,685 for the three months ended June 30, 2005. The increase in percentage of cost of sales occurred primarily as a result of a higher percentage of net sales being comprised of our lower margin products. We anticipate that we will achieve reduction in our cost of sales, as a percentage of net sales, when we ship our, higher margin, iWhite products.



Gross Profit



Our gross profit decreased by $197,646, or 26.4%, to $549,977 for the three months period ended June 30, 2006 as compared to $747,623 for the three month period ended June 30, 2005 resulting in a decrease in gross profit as a percentage of sales of 11.8% from 54.2% to 42.4%. The decrease in gross profit is the result of the decrease in sales and the increase in cost of sales discussed above as well the effect of the reduced margins on the Remecure products resulting from the 28% reduction in the average selling price of the Remecure products.



Operating Expenses



Research and Development. Our research and development expenses increased $73,468 to $125,282 for the three months ended June 30, 2006 as compared to $51,814 for the three months ended June 30, 2005, an increase of 141.8%. The principal reason for this increase is the agreement for consultancy services in the development of our Meta Tray and iWhite products that was agreed with an individual as of January 1, 2006, consisting in a monthly fee of $25,000, resulting in a total of $ 75,000 for the three month ended June 30, 2006.



Sales and marketing costs. Our sales and marketing costs increased $277,689, or 255.0%, to $386,575 for the three months ended June 30, 2006 as compared to $108, 886 for the three months ended June 30, 2005. The principal reason for this increase is the launch of our new sales office located in Los Angeles, California which resulted in additional sales and marketing costs of $194,232 for the three month period. Also contributing to the increase in sales and marketing costs was our increased presence at trade shows as part of the introduction of our new iWhite and MetaTray products.



General and administrative costs. Our general and administrative costs for the three months ended June 30, 2006 and 2005 were $837,350 and $782,096, respectively, representing an increase of $55,254 or 7.1%. The increase in general and administrative costs for the three months ended June 30, 2006 as compared to the prior year includes general and administrative costs related to our new office in Los Angeles, California totaling $67,604 and $32,051 in general administrative costs associated with our new office in Singapore. We believe that we have taken necessary steps to improve the cost effectiveness of these 2 new offices. In addition, we increased the number of personnel in our Belgium headquarters from 20 employees as of June 30, 2005 to 29 employees as of June 30, 2006, resulting in an increase in salary and related costs for the three months ended June 30, 2006.



Restructuring expense. For the three months ended June 30, 2005, we recognized a non-cash restructuring expense of $764,151 in connection with our corporate restructuring effective as of June 3, 2005. As compensation for financial advisory services rendered by MDB Capital Group, LLC (MDB) for the restructuring, we issued MDB or its designee, 247,298 shares of the Companys common stock and



21



247,298 five year common stock purchase warrants. The market value of our common stock on June 3, 2005 was $1.60 per share, resulting in a value attributable to the stock issued to MDB of $395,677. The value of the warrants, determined in accordance with the Black-Scholes pricing model utilizing an historic volatility factor of 1.52, a risk free interest rate of 6.0% and an expected life for the warrants of five years, is $1.49 per warrant, for a total of $368,474 for the warrants.



Depreciation and Amortization.Our depreciation and amortization expense increased from $13,143 to $41,262 for the three months ended June 30, 2005 compared to the three months ended June 30, 2006, an increase of 214%. This increase was a result of an exercise of option in December 2005, pursuant to which the Company agreed to pay a certain patent holder 50,000 additional compensation in the form of prepaid royalties instead of the 100,000 previously agreed, 25,000 of which had been paid by the Company in September 2005 and the remaining 25,000 to be paid upon the Companys first shipment of a product covered by the patent. The patent is being amortized over five (5) years and the Company has recorded $13,867 of accumulated amortization for this patent as of June 30, 2006.



Net interest expense. Our net interest expense decreased by $78,777 to $24,015 from $102,792 during the three months ended June 30, 2005 compared to the three months ended June 30, 2006, a decrease of 76.6%. For the three months ended June 20, 2005, we converted a $100,000 promissory note into shares of our common stock, resulting in a non cash interest expense of $100,000.



Liquidity and Capital Resources



We believe we have sufficient cash to continue operations for the next twelve months. However, we anticipate that we will require additional financing to expand our product line and customer base, and establish operations in markets other than Europe. We intend to obtain the additional capital required for expansion by obtaining debt or through the sale of our equity securities.



Cash and cash equivalent. Our balance sheet at June 30, 2006 reflects cash and cash equivalents of $128,337 as compared to $332,145 as of March 31, 2006, a decrease of $203,808. During the three months ended June 30, 2006, we recognized an increase in cash and cash equivalents of $11,002 from the effect of exchange rates between the Euro and the Singapore Dollar to the US Dollar.



Operations. Net cash provided (used by) operations decreased by $278,434 resulting in net cash being used by operations of $ 148,476 for the three months ended June 30, 2006 as compared to net cash provided from operations of $129,957 for the three months ended June 30, 2005. The decrease in net cash provided from operations for the three months ended June 30, 2006 as compared to the three months ended June 30, 2005 is primarily attributable to the net loss.



Investing activities. Net cash used in investing activities totaled $69,642 for the three months ended June 30, 2006 as compared to net cash provided in investing activities of $237,943 for the three months ended June 30, 2005. The decrease in net cash used in investing activities for the three months ended June 30, 2006 is attributable to a decrease in the rate of our expansion of our in house manufacturing capability and investments in office equipment as staffing levels in all three locations, Belgium, Los Angeles, Ca. and Singapore stabilized or, in the case of our Los Angeles location, decreased.



Financing activities. Net cash provided by financing activities totaled $63,468 for the three months ended June 30, 2006 as compared to net cash provided in financing activities of $120,047 for the three months ended June 30, 2005. The increase in net cash provided from financing activities in the three months period ended June 30, 2005 is primarily attributable to the cash proceeds received by the Company from an installment note.


 
22



Principal Commitments



Office and warehouse. We lease a 26,915 sq. ft. office and warehouse facility in Deurle, Belgium from an unrelated party pursuant to a three year lease commencing December 20, 2001 at a base rent of 6,560 per month ($7,795 per month at June 30, 2006). In addition, we are responsible for the payment of annual real estate taxes for the property which totaled 3,245 ($3,856) for calendar year 2005. The minimum aggregate rent to be paid over the remaining lease term based upon the conversion rate for the (Euro) at June 30, 2006 is $431,760. Rent expense for the foregoing lease for the three months ended June 30, 2006 and 2005 was $24,353 and $25,024 respectively.



Equipment Lease. In November 2004, we leased new computer equipment from a Belgium based Lessor pursuant to a three year operating lease with monthly payments of 1,005 ($1,194). The aggregate rent to be paid over the lease term is $21,720.



Minimum monthly lease payments for real estate and equipment for the next five fiscal years are as follows based upon the conversion rate for the (Euro) at June 30, 2006.



June 30, 2007
$109,879June 30, 2008
$106,648June 30, 2009
$96,916June 30, 2010
$96,916June 30, 2011
$72,687


Off-Balance Sheet Arrangements



At June 30, 2006, we did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.



Item 6. Exhibits



The following documents are filed as part of this report:



Exhibit No.



31.1
Certifications of the Chief Executive Officer Under Section 302 of the Sarbanes-Oxley Act


31.2
Certifications of Chief Financial Officer Under Section 302 of the Sarbanes-Oxley Act


32.1
Certifications of the Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act


32.2
Certifications of the Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act

 
23



SIGNATURES



In accordance with the requirements of the Exchange Act the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



REMEDENT, INC.




Dated: September 5, 2006
/s/ Robin List
By: Robin List
Its: Chief Executive Officer (Principal
Executive Officer) and Director




Dated: September 5, 2006
/s/ Philippe Van Acker
By: Philippe Van Acker
Its: Chief Financial Officer (Principal
Financial Officer and Principal
Accounting Officer)



 
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