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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-KSB
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended March 31, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15
(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 001-15975
 REMEDENT, INC.
 (Name of small business issuer as specified in its charter)
 Nevada
    
    86-0837251(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)Xavier de Cocklaan 42, 9831 Deurle, Belgium
    
    N/A(Address of principal executive offices)
    
    (Zip code)
 011-329-321-70-80  (Issuers telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value
 þ o
 þ
 o þ
    Documents incorporated by reference:
 Transitional Small Business Disclosure Format o þ




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TABLE OF CONTENTS
 PART IItem 1. Description of Business
    
    
    1Item 2. Description of Property
    
    
    10Item 3. Legal Proceedings
    
    
    10Item 4. Submission of Matters to a Vote of Security Holders
    
    
    10PART IIItem 5. Market for Common Equity and Related Stockholder Matters
    
    
    11Item 6. Managements Discussion and Analysis or Plan of Operation
    
    
    12Item 7. Financial Statements
    
    
    27Item 8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    27Item 8A. Controls and Procedures
    
    
    27Item 8B. Other Information
    
    
    28PART IIIItem 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act
    
    
    28Item 10. Executive Compensation
    
    
    28Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    28Item 12. Certain Relationships and Related Transactions
    
    
    28Item 13. Exhibits
    
    
    28Item 14. Principal Accountant Fees and Services
    
    
    29Exhibit Index
    
    
    31Financial Statements
    
    
    F-1EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  In addition to historical information, this Annual Report on Form 10-KSB (Annual
Report) for Remedent, Inc. (Remedent the Company, we, our or us) 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 (the Exchange Act),
including statements regarding the growth of product lines, optimism regarding the business,
expanding sales and other statements. Words such as expects, anticipates, intends, plans,
believes, sees, estimates and variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees of future
performance and involve certain risks and uncertainties that are difficult to predict. Actual
results could vary materially from the description contained herein due to many factors including
continued market acceptance of our products. In addition, actual results could vary materially
based on changes or slower growth in the oral care and cosmetic dentistry products market; the
potential inability to realize expected benefits and synergies; domestic and international business
and economic conditions; changes in the dental industry; unexpected difficulties in penetrating the
oral care and cosmetic dentistry products market; changes in customer demand or ordering patterns;
changes in the competitive environment including pricing pressures or technological changes;
technological advances; shortages of manufacturing capacity; future production variables impacting
excess inventory and other risk factors listed in the section of this Annual Report entitled Risk
Factors and from time to time in our Securities and Exchange Commission filings under risk
factors and elsewhere.
 Each forward-looking statement should be read in context with, and with an understanding of,
the various disclosures concerning our business made elsewhere in this Annual Report, as well as
other public reports filed by us with the United States Securities and Exchange Commission.
Readers should not place undue reliance on any forward-looking statement as a prediction of actual
results of developments. Except as required by applicable law or regulation, we undertake no
obligation to update or revise any forward-looking statement contained in this Annual Report.




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PART I
 
 ITEM 1  DESCRIPTION OF BUSINESS
 Introduction
   
 
 
 
    1




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Current Products and Business Strategy
 Products
  Professional Dental Products
 GLAMSMILE
 
    
    no local anaesthesia is required to prepare the teeth;
    
    reduced (if any) tooth sensitivity post-procedure; and
    
    the process is reversible.
 
     REMEWHITE IN OFFICE WHITENING SYSTEM
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REMEWHITE HOME MAINTENANCE KIT
 METATRAY
 
    
    Does not require chair time.
    
    Incorporates all the benefits of heat and light for activating gel.
    
    Introduces a proprietary gel delivery system that eliminates
dripping and running while enhancing protection for surrounding
gums and tissue.
   REMECURE
 Over-The-Counter Products
 CLEVERWHITE
 CLEVERWHITE DAY & NIGHT
 3




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IWHITE
 REME)SENSE TRAY AND FOAM STRIPS
 Distribution
     4




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Locations
   Manufacturing
   5




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Research and Development
    New Product Development
 Universal Applicator Intellectual Property
 Intellectual Property
    6




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
 Major Customers
  Competition
  7




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
    
    Better combined pricing strategy than the competition when considering net cost for
whitening materials and initial cost of light.
    
    Dual purpose light to maximize value of initial investment.
    
    Ease of use from automated functionality of light, speed and gel application method.
    
    Superior gel formulation which maximizes performance while minimizing sensitivity.
    
    Home maintenance kit for improved patient satisfaction.
  Regulatory Issues
    8




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Costs and Effects of Compliance with Environmental Laws and Regulations
  Employees
  9




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ITEM 2  DESCRIPTION OF PROPERTY
  
 ITEM 3  LEGAL PROCEEDINGS
  
 ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  10




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PART II
 
 ITEM 5  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 Market Information
   Bid PricesHigh
    
    LowQuarter ended June 30, 2005
    
    $
    3.00
    
    
    $
    0.94Quarter ended September 30, 2005
    
    $
    4.00
    
    
    $
    1.78Quarter ended December 31, 2005
    
    $
    4.00
    
    
    $
    2.46Quarter ended March 31, 2006
    
    $
    2.75
    
    
    $
    2.43Quarter ended June 30, 2006
    
    $
    2.75
    
    
    $
    1.80Quarter ended September 30, 2006
    
    $
    2.10
    
    
    $
    1.40Quarter ended December 31, 2006
    
    $
    1.80
    
    
    $
    0.95Quarter ended March 31, 2007
    
    $
    2.05
    
    
    $
    1.39
  Stockholders
  Dividends
  Securities Authorized for Issuance under Equity Compensation Plans
  11




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Number of
    
    
    
    
    
    Number of securitiessecurities to be
    
    
    
    
    
    remaining available forissued upon
    
    
    
    
    
    future issuance underexercise of
    
    Weighted-average
    
    equity compensationof outstanding
    
    exercise price of
    
    plans (excludingoptions, warrants
    
    outstanding options
    
    securities reflectedPlan Category
    
    and right
    
    warrants and rights
    
    in column (a))Equity Compensation
Plans approved
by security holders
    
    
    433,166
    
    
    $
    2.22
    
    
    
    616,834Equity Compensation
Plans not approved
by security holders
    
    
    297,298
    
    
    $
    1.50
    
    
    NATotal
    
    
    730,464
    
    
    $
    1.93
    
    
    
    616,834
 
 ITEM 6  MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 In addition to historical information, this section contains forward-looking statements,
including statements regarding the growth of product lines, optimism regarding the business,
expanding sales and other statements. Words such as expects, anticipates, intends, plans,
believes, sees, estimates and variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees of future
performance and involve certain risks and uncertainties that are difficult to predict. Actual
results could vary materially from the description contained herein due to many factors including
continued market acceptance of our products. In addition, actual results could vary materially
based on changes or slower growth in the oral care and cosmetic dentistry products market; the
potential inability to realize expected benefits and synergies; domestic and international business
and economic conditions; changes in the dental industry; unexpected difficulties in penetrating the
oral care and cosmetic dentistry products market; changes in customer demand or ordering patterns;
changes in the competitive environment including pricing pressures or technological changes;
technological advances; shortages of manufacturing capacity; future production variables impacting
excess inventory and other risk factors listed in the section of this Annual Report entitled Risk
Factors and from time to time in our Securities and Exchange Commission filings under risk
factors and elsewhere.
 Each forward-looking statement should be read in context with, and with an understanding of,
the various disclosures concerning our business made elsewhere in this Annual Report, as well as
other public reports filed by us with the Securities and Exchange Commission. Readers should not
place undue reliance on any forward-looking statement as a prediction of actual results of
developments. Except as required by applicable law or regulation, we undertake no obligation to
update or revise any forward-looking statement contained in this Annual Report. This section
should be read in conjunction with our consolidated financial statements.
 12




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Overview
       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis for Presentation
  13




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Revenue Recognition
  Impairment of Long-Lived Assets
  Pervasiveness of Estimates
  Accounts Receivable and Allowance for Doubtful Accounts
  Research and Development Costs
  Inventories
   14




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Patents
  Conversion of Foreign Currencies
  Stock Based Compensation
  Recent Accounting Pronouncements
 Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and
140
 Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140
 15




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Accounting for Uncertainty in Income Taxes  an interpretation of FASB No. 109
 Fair Value Measures
 Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans
 The Fair Value Option for Financial Assets
and Financial Liabilities
 Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements
 16




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Results of Operations
  2007
    
    2006NET SALES
    
    
    100.00
    %
    
    
    100.00
    %COST OF SALES
    
    
    50.07
    %
    
    
    51.56
    %GROSS PROFIT
    
    
    49.93
    %
    
    
    48.44
    %OPERATING EXPENSESResearch and development
    
    
    5.12
    %
    
    
    15.61
    %Sales and marketing
    
    
    13.31
    %
    
    
    16.26
    %General and administrative
    
    
    49.26
    %
    
    
    57.28
    %Non-cash restructuring
    
    
    0.00
    %
    
    
    10.33
    %Depreciation and amortization
    
    
    3.14
    %
    
    
    1.45
    %TOTAL OPERATING EXPENSES
    
    
    70.83
    %
    
    
    100.93
    %INCOME (LOSS) FROM OPERATIONS
    
    
    (20.89
    )%
    
    
    (52.49
    )%Other income (expense)
    
    
    (1.51
    )%
    
    
    (1.01
    )%INCOME (LOSS) BEFORE INCOME TAXES
    
    
    (22.41
    )%
    
    
    (53.50
    )%Income tax benefit (expense)
    
    
    0.00
    %
    
    
    (0.93
    )%NET INCOME (LOSS)
    
    
    (22.41
    )%
    
    
    (52.57
    )%
 Net Sales
  Cost of Sales
   17




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Gross Profit
  Operating Expenses
 Research and Development
 Sales and marketing costs
 General and administrative costs
 Depreciation and amortization
 Net interest expense
 18




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Liquidity and Capital Resources
      19




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Risks Relating To Our Business
 We have a history of losses and we could suffer losses in the future.
   Our quarterly sales and operating results have fluctuated and may continue to fluctuate in future
periods which may cause the price of our common stock to decline.
  
    
    variation in demand for our products, including variation due to seasonality;
    
    our ability to research, develop, introduce, market and gain market acceptance of
new products and product enhancements in a timely manner;
    
    our ability to control costs;
    
    the size, timing, rescheduling or cancellation of orders from distributors;
    
    the introduction of new products by competitors;
    
    long sales cycles and fluctuations in sales cycles;
    
    the availability and reliability of components used to manufacture our products;
    
    changes in our pricing policies or those of our suppliers and competitors, as well
as increased price competition in general;
    
    the risks and uncertainties associated with our international business;
    
    costs associated with any future acquisitions of technologies and businesses;
    
    developments concerning the protection of our proprietary rights; and
    
    general global economic, political, international conflicts, and acts of terrorism.
  20




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The government extensively regulates our products and failure to comply with applicable regulations
could result in fines, suspensions, seizure actions, product recalls, injunctions and criminal
prosecutions.
    We may not have effective internal controls if we fail to remedy any deficiencies we may identify
in our system of internal controls.
  21




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The loss of or a substantial reduction in, or change in the size or timing of, orders from
distributors could harm our business .
  We do not have long term commitments from our suppliers and manufacturers.
  We face intense competition, and many of our competitors have substantially greater resources than
we do.
  Our success will depend on our ability to update our technology to remain competitive.
  22




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We depend on market acceptance of the products of our customers. If our products do not gain market
acceptance, our ability to compete will be adversely affected.
  Failure to meet customers expectations or deliver expected performance of our products could
result in losses and negative publicity, which will harm our business
  If product liability lawsuits are successfully brought against us, we may incur substantial
liabilities and may be required to limit commercialization of our products.
  
    
    decreased demand for our products;
    
    injury to our reputation;
    
    costs of related litigation;
    
    substantial monetary awards to customers;
    
    product recalls;
    
    loss of revenue; and
    
    the inability to commercialize our products.
 We may have difficulty managing our growth.
  23




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It may be difficult to enforce a United States judgment against us, our officers and directors, or
to assert United States securities laws claims in Belgium and to serve process on substantially all
our of our directors and officers and these experts.
  If we are unable to protect our intellectual property rights or our intellectual property rights
are inadequate, our competitive position could be harmed or we could be required to incur expenses
to enforce our rights .
   24




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If we are unable to meet customer demand or comply with quality regulations, our sales will suffer .
  We are dependent on Guy De Vreese, our Chairman, and/or Robin List, our Chief Executive Officer,
and any loss of such key personnel could result in the loss of a significant portion of our
business.
  Substantially all of our assets are secured under a credit facility with Fortis Bank, a bank
located outside of the United States, and in the event of default under the credit facility we may
lose all of our assets.
  We may not be able to secure additional financing to meet our future capital needs.
  25




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Our results of operations may be adversely impacted by currency fluctuations.
  Substantially all of our operations are located outside of the United States, substantially all of
our sales are generated outside of the United States and substantially all of our assets are
located outside of the United States, subjecting us to risks associated with international
operations.
  
    
    difficulties in collecting accounts receivable and longer collection periods,
    
    changes in overseas economic conditions,
    
    fluctuations in currency exchange rates,
    
    potentially weaker intellectual property protections,
    
    changing and conflicting local laws and other regulatory requirements,
    
    political and economic instability,
    
    war, acts of terrorism or other hostilities,
    
    potentially adverse tax consequences,
    
    difficulties in staffing and managing foreign operations, or
    
    tariffs or other trade regulations and restrictions.
 If we cannot build and maintain strong brand loyalty our business may suffer.
  26




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Risks Relating To Our Common Stock
 There is a limited public trading market for our common stock.
  The ownership of our stock is highly concentrated in our management.
  We have a substantial number of shares authorized but not yet issued.
  We have historically not paid dividends and do not intend to pay dividends.
  
 ITEM 7  FINANCIAL STATEMENTS
  
 ITEM 8  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 8A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  27




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Changes in internal control over Financial Reporting
  
 ITEM 8B. OTHER INFORMATION
  
 PART III
 
 ITEM 9  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
16(a) OF THE EXCHANGE ACT
   
 ITEM 10  EXECUTIVE COMPENSATION
  
 ITEM 11  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 ITEM 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
  
 ITEM 13. EXHIBITS
  28




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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
       2007
    
    2006Audit Fees
    
    $
    40,847
    
    
    $
    34,000Audit Related Fees
    
    $
    1,536
    
    
    
    -0-Tax Fees
    
    
    -0-
    
    
    
    -0-All Other Fees
    
    
    -0-
    
    
    
    -0-
  29




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SIGNATURES
  REMEDENT, INC.Dated: July 13, 2007
    
    /s/ Robin ListBy: Robin ListIts: Chief Executive Officer (Principal
Executive Officer) and Director
 Dated: July 13, 2007
    
    /s/ Philippe Van AckerBy: Philippe Van AckerIts: Chief Financial Officer (PrincipalFinancial Officer and Principal
Accounting Officer)
  Dated: July 13, 2007
    
    /s/ Robin ListRobin List  Chief Executive Officer and DirectorDated: July 13, 2007
    
    /s/ Guy De VreeseGuy De Vreese Chairman of the Board of DirectorsDated: July 13, 2007
    
    /s/ Stephen RossStephen Ross  Secretary and DirectorDated: July 13, 2007
    
    /s/ Fred KolsteegFred Kolsteeg  Director
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EXHIBIT INDEX
 Exhibit No.
    
    Description2.1
    
    Stock Exchange Agreement with Resort World Enterprises, Inc. (1)3.1
    
    Articles of Incorporation of Jofran Confectioners International, Inc., a Nevada
corporation, dated July 31, 1986 (1)3.2
    
    Amendment to Articles of Incorporation changing name from Jofran Confectioners
International, Inc., a Nevada corporation, to Cliff Typographers, Inc., a Nevada
corporation, dated July 31, 1986 (1)3.3
    
    Amendment to Articles of Incorporation changing name from Cliff Typographers,
Inc., a Nevada corporation, to Cliff Graphics International, Inc., a Nevada
corporation, dated January 9, 1987 (1)3.4
    
    Amendment to Articles of Incorporation changing name from Cliff Graphics
International, Inc., a Nevada corporation, to Global Golf Holdings, Inc., a
Nevada corporation, dated March 8, 1995 (1)3.5
    
    Amendment to Articles of Incorporation changing name from Global Golf Holdings,
Inc., a Nevada corporation, to Dino Minichiello Fashions, Inc., a Nevada
corporation, dated November 20, 1997 (1)3.6
    
    Amendment to Articles of Incorporation changing name from Dino Minichiello
Fashions, Inc., a Nevada corporation, to Resort World Enterprises, Inc., a
Nevada corporation, dated August 18, 1998 (1)3.7
    
    Amendment to Articles of Incorporation changing name from Resort World
Enterprises, Inc., a Nevada corporation, to Remedent , Inc., dated October 5,
1998 (1)3.8
    
    Amended and Restated Articles of Incorporation changing name from Remedent, USA,
Inc. to Remedent, Inc. and to effect a one-for-twenty reverse stock split on
June 3, 2005 (2)3.9
    
    Amended and Restated Bylaws (2)4.1
    
    Specimen of Stock Certificate (7)4.2
    
    Form of Subscription Agreement (5)4.3
    
    Form of Warrant for Common Stock (5)4.4
    
    Form of Registration Rights Agreement (5)4.5
    
    Form of Warrant for Unit (8)4.6
    
    Form of Warrant for Common Stock (17)10.1
    
    Incentive and Nonstatutory Stock Option Plan, dated May 29, 2001 (1)
 31




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Exhibit No.
    
    Description10.2
    
    2004 Incentive and Nonstatutory Stock Option Plan (8)10.3
    
    Exchange Agreement by and among Remedent, Inc. and Lausha, N.V. and Robin List
dated June 3, 2005 (2)10.4
    
    Amendment to Line of Credit Agreement by and Between Remedent, N.V. and Fortis
Bank dated May 3, 2005, subject to General Terms and Conditions (6)10.5
    
    Exclusive License Agreement between Remedent, Inc. and Dan Darnell dated October
11, 2004 (6)10.6
    
    Amendment to Development Agreement between Remedent, Inc. and P. Michael
Williams dated August 4, 2004 (6)10.7
    
    Option Agreement between Remedent, N.V. and Lident NV dated July 6, 2004 (6)10.8
    
    Development Agreement between Remedent, Inc. and P. Michael Williams dated March
15, 2004 (6)10.9
    
    Convertible Promissory Note dated March 23, 2004 (3)10.10
    
    Letter Agreement by and between MDB Capital Group, Inc. and Remedent, Inc. dated
September 22, 2003 (6)10.11
    
    Stock Purchase Agreement with Dental Advisors, dated September 14, 2001 (1)10.12
    
    Asset Purchase Agreement for IMDS, dated January 15, 2001 (1)10.13
    
    Stock Purchase Agreement, dated January 11, 2002 (1)10.14
    
    Stock Purchase Agreement, dated May 1, 2002 (1)10.15
    
    Securities Purchase Agreement dated July 6, 2005 (5)10.16
    
    Registration Rights Agreement dated July 6, 2005 (5)10.17
    
    Warrant dated July 6, 2005 (5)10.18
    
    Amendment to Warrant (8)10.19
    
    Employment Agreement between Remedent N.V. and Philippe Van Acker (7)10.20
    
    Agreement between Remedent N.V. and Omega Pharma NV dated as of September 9,
2003(8)10.21
    
    Addendum to Distribution Agreement between Remedent N.V. and Omega Pharma NV
dated September 24, 2003 (7)
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Exhibit No.
    
    Description10.22
    
    Addendum to Distribution Agreement between Remedent N.V. and Omega Pharma NV
dated February 4, 2004 (7)10.23
    
    Lease Agreement dated December 20, 2001 (7)10.24
    
    Consulting Agreement between Remedent, Inc., and P. Michael Williams dated
February 10, 2006 (9)10.25
    
    Consulting Agreement between Remedent, Inc. and Pierre Fabre Medicament S.A.
dated December 21, 2005 (10)10.26
    
    Agreement between Remedent N.V, and Chefaro Pharma Italia S.R.L. dated February
15, 2006 (11)10.27
    
    Exclusive License and Distribution Agreement between Remedent and Dream Life
dated March 22, 2006 (12)10.28
    
    Employment Agreement between Remedent, Inc. and Judd D. Hoffman (8)10.29
    
    Employment Severance Agreement between Remedent, Inc. and Judd D. Hoffman (13)10.30
    
    Fortis Bank General Lending Conditions for Corporate Customers (General Terms
and Conditions) (14)10.31
    
    Line of Credit Agreement by and between Remedent, N.V. and Fortis Bank dated
September 8, 2004, subject to the General Terms and Conditions (14)10.32
    
    Amendment to Line of Credit Agreement by and Between Remedent, N.V. and Fortis
Bank dated March 13, 2006, subject to the General Terms and Conditions (15)10.33
    
    Amendment to Line of Credit Agreement by and Between Remedent, N.V. and Fortis
Bank dated September 1, 2006, subject to the General Terms and Conditions (16)10.34
    
    Purchase Agreement between Remedent, Inc. and certain Investors, dated June 20,
2007 (17)10.35
    
    Registration Rights Agreement between Remedent, Inc. and certain Investors, dated
June 20, 2007 (17)14.1
    
    Code of Ethics, adopted March 25, 2003 (4)21.1
    
    List of Subsidiaries (8)23.1
    
    Consent of PKF Bedrijfsrevisoren, Antwerp, Belgium31.1
    
    Certifications of the Chief Executive Officer under Section 302 of the
Sarbanes-Oxley Act.31.2
    
    Certifications of the Chief Financial Officer under Section 302 of the
Sarbanes-Oxley Act.
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Exhibit No.
    
    Description32.1
    
    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.
 
 (1)
    
    Incorporated by reference from Registration Statement on Form SB-2 filed with the SEC on July
24, 2002.(2)
    
    Incorporated by reference from Form 8-K filed with the SEC on June 8, 2005.(3)
    
    Incorporated by reference from Form 10-KSB/A filed with the SEC on February 8, 2005.(4)
    
    Incorporated by reference from Form 10-KSB filed with the SEC on July 15, 2003.(5)
    
    Incorporated by reference from Form 8-K filed with the SEC on July 11, 2005.(6)
    
    Incorporated by reference from Form 10-KSB filed with the SEC on July 14, 2005.(7)
    
    Incorporated by reference from Form SB-2 filed with the SEC on August 4, 2005.(8)
    
    Incorporated by reference from Form SB-2/A filed with the SEC on October 26, 2005(9)
    
    Incorporated by reference from Form 8-K filed with the SEC on February 16, 2006.(10)
    
    Incorporated by reference from Form 10-QSB filed with the SEC on February 21, 2006.(11)
    
    Incorporated by reference from Form 8-K filed with the SEC on February 22, 2006.(12)
    
    Incorporated by reference from Original Filing on Form 10-KSB filed with the SEC on July 14, 2006.(13)
    
    Incorporated by reference from Form 10-QSB filed with the SEC on August 21, 2006.(14)
    
    Incorporated by reference from Form 10-KSB/A2 filed with the SEC on June 11, 2007.(15)
    
    Incorporated by reference from Form 10-KSB/A filed with the SEC on June 11, 2007.(16)
    
    Incorporated by reference from Form 10-QSB/A filed with the SEC on June 11, 2007.(17)
    
    Incorporated by reference from Form 8-K filed with the SEC on June 27, 2007. 34




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##### Table of Contents



REMEDENT, INC. AND SUBSIDIARIES
 
 CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2007
 Index
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    F-2CONSOLIDATED BALANCE SHEETS
    
    F-3CONSOLIDATED STATEMENTS OF OPERATIONS
    
    F-4CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
    
    F-5CONSOLIDATED STATEMENTS OF CASH FLOWS
    
    F-7CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
    
    F-9NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
    
    F-10
 F-1




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##### Table of Contents



Bedrijfsrevisoren
    
    (PKF LOGO)
 INDEPENDENT AUDITORS REPORT
 REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM
 To the Board of Directors and Stockholders of Remedent, Inc.:
     
 /s/ Ria VerheyenRegistered Auditor antwerpen@pkf.be www.pkf.be
 F-2




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##### Table of Contents



REMEDENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 March 31, 2007
    
    
    March 31, 2006ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    126,966
    
    
    $
    332,145Cash, restricted
    
    
    
    
    
    
    70,762Accounts receivable, net of allowance
for doubtful accounts of $79,996 at
March 31, 2007 and $74,133 at March 31,
2006
    
    
    1,724,121
    
    
    
    2,370,846Inventories, net
    
    
    1,132,941
    
    
    
    1,470,553Prepaid expense
    
    
    668,421
    
    
    
    335,111Total current assets
    
    
    3,652,449
    
    
    
    4,579,417PROPERTY AND EQUIPMENT, NET
    
    
    589,623
    
    
    
    317,361OTHER ASSETSPatents, net
    
    
    135,894
    
    
    
    166,166135,894
    
    
    
    166,166TOTAL ASSETS
    
    $
    4,377,966
    
    
    $
    5,062,944LIABILITIES AND STOCKHOLDERS DEFICITCURRENT LIABILITIES:Current portion, long term debt
    
    $
    43,499
    
    
    $
    12,641Line of Credit
    
    
    1,530,276
    
    
    
    605,200Notes payable
    
    
    11,282
    
    
    
    31,282Accounts payable
    
    
    1,441,502
    
    
    
    1,632,449Accrued liabilities
    
    
    412,435
    
    
    
    601,042Due to related parties
    
    
    50,536
    
    
    
    58,958Income taxes payable
    
    
    
    
    
    
    103,001Total current liabilities
    
    
    3,489,530
    
    
    
    3,044,573LONG TERM DEBT
    
    
    152,343
    
    
    
    60,998STOCKHOLDERS DEFICIT: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,
12,996,245 shares issued and outstanding
at March 31, 2007 and 12,764,112 shares
issued and outstanding at March 31, 2006
)
    
    
    12,996
    
    
    
    12,764Additional paid-in capital
    
    
    11,904,000
    
    
    
    11,624,234Accumulated deficit
    
    
    (11,147,600
    )
    
    
    (9,651,551
    )Common stock subscribed, not issued
    
    
    
    
    
    
    200Accumulated other comprehensive income (loss)
(foreign currency translation adjustment)
    
    
    (33,303
    )
    
    
    (28,274
    )Total stockholders equity (deficit)
    
    
    736,093
    
    
    
    1,957,373TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
(DEFICIT)
    
    $
    4,377,966
    
    
    $
    5,062,944COMMITMENTS (Note 20)SUBSEQUENT EVENT (Note 21)
  F-3




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##### Table of Contents



REMEDENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 For the years endedMarch 31,2007
    
    
    2006Net sales
    
    $
    6,676,365
    
    
    $
    7,393,948Cost of sales
    
    
    3,342,716
    
    
    
    3,812,463Gross profit
    
    
    3,333,649
    
    
    
    3,581,485Operating ExpensesResearch and development
    
    
    341,764
    
    
    
    1,153,897Sales and marketing
    
    
    888,810
    
    
    
    1,202,145General and administrative
    
    
    3,288,723
    
    
    
    4,235,292Non cash restructuring expense
    
    
    
    
    
    
    764,151Depreciation and amortization
    
    
    209,340
    
    
    
    107,222TOTAL OPERATING EXPENSES
    
    
    4,728,637
    
    
    
    7,462,707INCOME (LOSS) FROM OPERATIONS
    
    
    (1,394,988
    )
    
    
    (3,881,222
    )OTHER INCOME (EXPENSES)Interest expense
    
    
    (176,344
    )
    
    
    (24,195
    )Non cash interest expense
    
    
    
    
    
    
    (100,000
    )Other income
    
    
    75,283
    
    
    
    49,427TOTAL OTHER INCOME (EXPENSES)
    
    
    (101,061
    )
    
    
    (74,768
    )INCOME (LOSS) BEFORE INCOME TAXES
    
    
    (1,496,049
    )
    
    
    (3,955,990
    )Income tax (expense) benefit
    
    
    
    
    
    
    68,688NET LOSS
    
    $
    (1,496,049
    )
    
    $
    (3,887,302
    )LOSS PER SHAREBasic and fully diluted
    
    $
    (0.12
    )
    
    $
    (0.35
    )WEIGHTED AVERAGE SHARES OUTSTANDINGBasic and fully diluted
    
    
    12,971,795
    
    
    
    11,122,754
  F-4




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##### Table of Contents



REMEDENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
FOR THE YEARS ENDED MARCH 31, 2007 AND 2006
 Additional
    
    
    
    
    
    CommonPaid in
    
    Accumulated
    
    Stock
    
    TreasuryShares
    
    Amount
    
    Capital
    
    Deficit
    
    Subscribed
    
    Stock
    
    Other
    
    Total$
    
    $
    
    $
    
    $
    
    $
    
    $
    
    $Balance, March 31, 2005
    
    
    2,176,225
    
    
    
    2,176
    
    
    
    5,427,289
    
    
    
    (5,764,249
    )
    
    
    
    
    
    
    
    
    
    
    60,874
    
    
    
    (273,910
    )Common stock issued for 78% equity interest in Remedent NV
    
    
    7,715,703
    
    
    
    7,716
    
    
    
    1,170,876
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,178,592Common Stock issued to MDB Capital for conversion of
$100,000 note payable including $10,000 accrued interest
and $100,000 non cash interest as a result of stock
valuation
    
    
    197,839
    
    
    
    198
    
    
    
    209,802
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    210,000Common Stock issued to MDB Capital for consulting fees
    
    
    247,298
    
    
    
    247
    
    
    
    395,430
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    395,677Warrants issued to MDB Capital for consulting fees
    
    
    
    
    
    
    
    
    
    
    368,474
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    368,474Common stock issued by private placement
    
    
    2,520,661
    
    
    
    2,521
    
    
    
    3,197,560
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,200,081Common stock to be issued for development services
    
    
    
    
    
    
    
    
    
    
    519,800
    
    
    
    
    
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    520,000Stock options issued for development services
    
    
    
    
    
    
    
    
    
    
    361,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    361,500Value of stock options issued to employees
    
    
    
    
    
    
    
    
    
    
    113,709
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113,709Treasury stock received as repayment of related party loan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (140,300
    )
    
    
    
    
    
    
    (140,300
    )Treasury stock retired and cancelled
    
    
    (93,533
    )
    
    
    (94
    )
    
    
    (140,206
    )
    
    
    
    
    
    
    
    
    
    
    140,300
    
    
    
    
    
    
    
    Common stock fractional shares cancelled in reverse split
    
    
    (81
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (89,148
    )
    
    
    (89,148
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,887,302
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,887,302
    )Balance, March 31, 2006
    
    
    12,764,112
    
    
    
    12,764
    
    
    
    11,624,234
    
    
    
    (9,651,551
    )
    
    
    200
    
    
    
    
    
    
    
    (28,274
    )
    
    
    1,957,373
  F-5




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##### Table of Contents



REMEDENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
FOR THE YEARS ENDED MARCH 31, 2007 AND 2006
 AdditionalPaid in
    
    Accumulated
    
    Common Stock
    
    TreasuryShares
    
    Amount
    
    Capital
    
    Deficit
    
    Subscribed
    
    Stock
    
    Other
    
    Total$
    
    $
    
    $
    
    $
    
    $
    
    $
    
    $Balance, March 31, 2006, carried forward
    
    
    12,764,112
    
    
    
    12,764
    
    
    
    11,624,234
    
    
    
    (9,651,551
    )
    
    
    200
    
    
    
    
    
    
    
    (28,274
    )
    
    
    1,957,373Common stock issued for development services
    
    
    200,000
    
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    (200
    )
    
    
    Common stock issued on conversion of
convertible debentures
    
    
    32,133
    
    
    
    32
    
    
    
    57,807
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,839Value of stock options issued to employees
    
    
    
    
    
    
    
    
    
    
    221,959
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    221,959Cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,029
    )
    
    
    (5,029
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,496,049
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,496,049
    )Balance, March 31, 2007
    
    
    12,996,245
    
    
    
    12,996
    
    
    
    11,904,000
    
    
    
    (11,147,600
    )
    
    
    
    
    
    
    
    
    
    
    (33,303
    )
    
    
    736,094
  F-6




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##### Table of Contents



REMEDENT, INC. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the year ended March 31,2007
    
    2006CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (1,496,049
    )
    
    $
    (3,887,302
    )Adjustments to reconcile net income (loss) to net cash used by operating activitiesDepreciation and amortization
    
    
    209,340
    
    
    
    105,807Inventory reserve
    
    
    
    
    
    
    (23,997
    )Allowance for doubtful accounts
    
    
    (1,813
    )
    
    
    (729
    )Common Stock issued to MDB Capital for non-cash 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
    
    
    
    
    
    
    368,474Stock issued upon conversion of convertible debentures
    
    
    25,706
    
    
    
    Common stock to be issued for development services
    
    
    
    
    
    
    520,000Stock options issued for development services
    
    
    
    
    
    
    361,500Value of issued stock options to employees
    
    
    221,959
    
    
    
    113,709Changes in operating assets and liabilities:Accounts receivable
    
    
    870,014
    
    
    
    (972,084
    )Due from related party
    
    
    
    
    
    
    4,159Inventories
    
    
    476,814
    
    
    
    (917,006
    )Prepaid expenses
    
    
    (297,844
    )
    
    
    (155,188
    )Accounts payable
    
    
    (336,606
    )
    
    
    791,888Accrued liabilities
    
    
    (220,360
    )
    
    
    261,969Deferred revenue
    
    
    
    
    
    
    (17,457
    )Income taxes payable
    
    
    (110,468
    )
    
    
    (62,875
    )Net cash used by operating activities
    
    
    (659,307
    )
    
    
    (3,013,455
    )CASH FLOWS FROM INVESTING ACTIVITIESDecrease (increase) in restricted cash
    
    
    70,762
    
    
    
    (70,762
    )Decrease (increase) in other current assets
    
    
    
    
    
    
    119,983Purchase of patent rights
    
    
    
    
    
    
    (117,871
    )Purchases of equipment
    
    
    (385,866
    )
    
    
    (276,324
    )Net cash used by investing activities
    
    
    (315,104
    )
    
    
    (344,974
    )CASH FLOWS FROM FINANCING ACTIVITIESNet proceeds from private placement
    
    
    
    
    
    
    3,200,081Proceeds from capital lease note payable
    
    
    151,402
    
    
    
    Principal payments on capital lease note payable
    
    
    (40,171
    )
    
    
    Note payments  related parties
    
    
    (8,422
    )
    
    
    Note payments-unrelated parties
    
    
    
    
    
    
    (150,883
    )Proceeds from (repayments of) line of credit
    
    
    837,180
    
    
    
    599,913Net cash provided by financing activities
    
    
    939,988
    
    
    
    3,649,111NET (DECREASE) INCREASE IN CASH
    
    
    (34,423
    )
    
    
    290,682Effect of exchange rate changes
on cash and cash equivalents
    
    
    (170,756
    )
    
    
    1,021CASH AND CASH EQUIVALENTS, BEGINNING
    
    
    332,145
    
    
    
    40,442CASH AND CASH EQUIVALENTS, ENDING
    
    $
    126,966
    
    
    $
    332,145Supplemental Information:Interest paid
    
    $
    111,493
    
    
    $
    23,527Income taxes paid
    
    $
    0
    
    
    $
    
  F-7




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##### Table of Contents



SUPPLEMENTAL NON-CASH INVESTING
AND FINANCING ACTIVITIES:
    
  F-8




---



##### Table of Contents



REMEDENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
 For the year endedMarch 31,2007
    
    
    2006Net Loss
    
    $
    (1,496,049
    )
    
    $
    (3,887,302
    )OTHER COMPREHENSIVE LOSS:Foreign currency translation adjustment
    
    
    (5,029
    )
    
    
    (89,148
    )Comprehensive loss
    
    $
    (1,501,078
    )
    
    $
    (3,976,450
    )
  F-9




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##### Table of Contents



REMEDENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. BACKGROUND AND ORGANIZATION
    Consolidated Financial
Statements
   F-10




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##### Table of Contents



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
            F-11




---



##### Table of Contents



Tooling
    
    3 YearsFurniture and fixtures
    
    4 YearsMachinery and Equipment
    
    4 Years
     F-12




---



##### Table of Contents



Accounting for Income Taxes
     Disclosure About Segments of
an Enterprise and Related Information
     F-13




---



##### Table of Contents



Reporting Comprehensive Income
   Share-Based
Payment
  Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133
and 140
 Accounting
for Servicing of Financial Assets, an amendment of FASB Statement No. 140
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB No. 109
 Fair Value Measures
 F-14




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##### Table of Contents



Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements
 3. CORPORATE RESTRUCTURING  2006
    F-15




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##### Table of Contents



Consolidated Financial Statements
  Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratios
   F-16




---



##### Table of Contents



4. PRIVATE PLACEMENT
     5. CONCENTRATION OF RISK
     F-17




---



##### Table of Contents



6. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
  March 31, 2007
    
    March 31, 2006Accounts receivable, gross
    
    $
    1,804,117
    
    
    $
    2,444,979Less: allowance for doubtful accounts
    
    
    (79,996
    )
    
    
    (74,133
    )Accounts receivable, net
    
    $
    1,724,121
    
    
    $
    2,370,846
 7. INVENTORIES
  March 31, 2007
    
    March 31, 2006Raw materials
    
    $
    30,579
    
    
    $
    30,538Components
    
    
    786,728
    
    
    
    1,102,231Finished goods
    
    
    329,000
    
    
    
    349,8881,146,307
    
    
    
    1,482,657Less: reserve for obsolescence
    
    
    (13,366
    )
    
    
    (12,104
    )Net inventory
    
    $
    1,132,941
    
    
    $
    1,470,553
 8. PREPAID EXPENSES
  March 31, 2007
    
    March 31, 2006Prepaid materials and components
    
    
    $
    394,598
    
    
    $
    72,106Prepaid Belgium income taxes
    
    
    
    66,830
    
    
    
    60,520Prepaid consulting
    
    
    
    66,830
    
    
    
    VAT payments in excess of VAT receipts
    
    
    
    47,260
    
    
    
    92,181Royalties
    
    
    
    33,415
    
    
    
    30,260Prepaid trade show expenses
    
    
    
    6,523
    
    
    
    25,325Legal
    
    
    
    
    
    
    
    16,159Prepaid rent
    
    
    
    7,054
    
    
    
    20,712Other
    
    
    
    45,911
    
    
    
    17,848$
    668,421
    
    
    $
    335,111
 F-18




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##### Table of Contents



9. PROPERTY AND EQUIPMENT
  March 31, 2007
    
    March 31, 2006Furniture and Fixtures
    
    $
    137,560
    
    
    $
    94,368Machinery and Equipment
    
    
    559,422
    
    
    
    167,764Tooling
    
    
    188,450
    
    
    
    175,950885,432
    
    
    
    438,082Accumulated depreciation
    
    
    (295,809
    )
    
    
    (120,721
    )Property & equipment, net
    
    $
    589,623
    
    
    $
    317,361
 10. LICENSED PATENTS
 Teeth Whitening Patents
  Universal Applicator Patent
  
    
 F-19




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##### Table of Contents



   
 11. LINE OF CREDIT
      
 12. NOTES PAYABLE
 March 31, 2007
    
    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 date (1)Unpaid principal balance
    
    $
    
    
    
    $
    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
    
    $
    11,282
    
    
    $
    31,282
 
 (1)
    
    The remaining outstanding debentures of $20,000 plus $12,133 in
accrued interest were converted to 32,133 shares of common stock as of
July 2006. The Company valued the common stock at the market price of
$1.80 per share on the date of conversion and charged interest expense
for $25,706 for the difference between the amount of the debt
converted and the market value of the common stock issued upon
conversion. F-20




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##### Table of Contents



13. LONG TERM DEBT
      
 14. DUE TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS
  March 31, 2007
    
    March 31, 2006Demand loan from a former officer
and major stockholder
    
    $
    50,536
    
    
    $
    58,958$
    50,536
    
    
    $
    58,958
        F-21




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##### Table of Contents



15. ACCRUED LIABILITIES
  March 31, 2007
    
    March 31, 2006Accrued employee benefit taxes
    
    $
    260,676
    
    
    $
    227,369Royalties
    
    
    
    
    
    
    100,000Commissions
    
    
    2,834
    
    
    
    80,366Accrued audit and tax preparation fees
    
    
    27,282
    
    
    
    23,500Reserve for warranty costs
    
    
    20,049
    
    
    
    18,156Accrued interest
    
    
    6,180
    
    
    
    15,584Accrued consulting fees
    
    
    2,528
    
    
    
    9,021Other accrued expenses
    
    
    92,886
    
    
    
    127,046$
    412,435
    
    
    $
    601,042
 16. INCOME TAXES
 Accounting for Income Taxes
   March 31, 2007
    
    March 31, 2006Domestic
    
    $
    (1,627,604
    )
    
    $
    (3,190,901
    )Foreign
    
    
    131,555
    
    
    
    (765,089
    )$
    (1,496,049
    )
    
    $
    (3,955,990
    )
  March 31, 2007
    
    March 31, 2006Domestic  Net operating loss carryforward
    
    $
    3,025,488
    
    
    $
    2,533,512Foreign  Net operating loss carryforward
    
    
    202,731
    
    
    
    244,828Total
    
    
    3,228,219
    
    
    
    2,778,341Valuation allowance
    
    
    (3,228,219
    )
    
    
    (2,778,341
    )Net deferred tax assets
    
    $
    
    
    
    $
    
 F-22




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##### Table of Contents



March 31, 2007
    
    March 31, 2006DomesticPre tax income
    
    $
    (1,627,604
    )
    
    $
    (3,190,901
    )Statutory tax rate
    
    
    35
    %
    
    
    35
    %Tax benefit based upon statutory rate
    
    
    (569,661
    )
    
    
    (1,116,815
    )Increase in valuation allowance
    
    
    569,661
    
    
    
    1,116,815Net domestic income tax (benefit)
    
    
    
    
    
    
    ForeignPre tax income (loss)
    
    
    135,101
    
    
    
    (765,089
    )Statutory tax rate
    
    
    32
    %
    
    
    32
    %Tax expense (benefit) based upon statutory rate
    
    
    43,232
    
    
    
    (244,828
    )Permanent differences
    
    
    (43,232
    )
    
    
    176,140Net operating loss
    
    
    
    
    
    
    Net foreign income tax (benefit)
    
    
    
    
    
    
    (68,688
    )Total Income tax (benefit )
    
    $
    
    
    
    $
    (68,688
    )
 17. EQUITY COMPENSATION PLANS
     F-23




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##### Table of Contents



2001 Plan
    
    
    2004 PlanWeighted
    
    
    
    
    
    
    WeightedOutstanding
    
    
    Average
    
    
    Outstanding
    
    
    AverageOptions
    
    
    Exercise Price
    
    
    Options
    
    
    Exercise PriceOptions outstanding , March 31, 2005
    
    
    222,500
    
    
    1.29
    
    
    
    
    
    
    Granted
    
    
    
    
    
    
    
    
    
    475,000
    
    
    3.76Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    Cancelled or expired
    
    
    
    
    
    
    
    
    
    
    
    
    Options outstanding , March 31, 2006
    
    
    222,500
    
    $
    1.29
    
    
    
    475,000
    
    $
    3.76Granted
    
    
    
    
    
    
    
    
    
    25,000
    
    
    1.80Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    Cancelled or expired
    
    
    
    
    
    
    
    
    
    (289,334
    )
    
    4.00Options outstanding, March 31, 2007
    
    
    222,500
    
    $
    1.29
    
    
    
    210,666
    
    $
    3.19Options exercisable March 31, 2007
    
    
    222,500
    
    $
    1.29
    
    
    
    210,666
    
    $
    3.19Exercise price range
    
    $1.00 to $4.00
    
    
    
    
    
    $2.46 to $4.00Weighted average remaining life
    
    
    5.0
    years
    
    
    
    
    2.3
    yearsShares available for future issuance
    
    
    27,500
    
    
    
    
    
    
    589,334
  Number of
    
    
    
    
    
    
    Number of securitiessecurities to be
    
    
    
    
    
    
    remaining available forissued upon
    
    
    
    
    
    
    future issuance underexercise of
    
    
    Weighted-average
    
    
    equity compensationof outstanding
    
    
    exercise price of
    
    
    plans (excludingoptions, warrants
    
    
    outstanding options
    
    
    securities reflectedPlan Category
    
    and right
    
    
    warrants and rights
    
    
    in column (a))EqEquity Compensation Plans approved by security
holders
    
    
    433,166
    
    
    $
    2.22
    
    
    
    616,834EqEquity Compensation Plans not approved by security
holders
    
    
    297,298
    
    
    $
    1.50
    
    
    NA730,464
    
    
    $
    1.93
    
    
    
    616,834
  F-24




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##### Table of Contents



March 31, 2006Net income (loss):As reported
    
    $
    (3,887,302
    )Pro forma
    
    $
    (4,067,302
    )Earnings per share:Basic and fully dilutedAs reported
    
    $
    (0.35
    )Pro forma
    
    $
    (0.37
    )
 18. COMMON STOCK WARRANTS AND OTHER OPTIONS
    F-25




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##### Table of Contents



WeightedOutstanding
    
    
    Average ExerciseWarrants
    
    
    PriceWarrants and options outstanding , March 31, 2005
    
    
    201,565
    
    
    
    6.16Granted for services
    
    
    397,298
    
    
    
    1.73Issued to investors in private placement
    
    
    2,520,661
    
    
    
    1.75Issued to placement agent for private placement
    
    
    252,067
    
    
    
    1.75Exercised
    
    
    
    
    
    
    Cancelled or expired
    
    
    
    
    
    
    Warrants and options outstanding , March 31, 2006
    
    
    3,371,591
    
    
    $
    2.01Granted
    
    
    
    
    
    
    Cancelled or expired
    
    
    (265,940
    )
    
    
    Warrants exercisable March 31, 2007
    
    
    3,105,651
    
    
    $
    1.72Exercise price range
    
    $1.20 to $10.00Weighted average remaining life
    
    
    4.74
    

    Years
 19. SEGMENT INFORMATION
    March 31, 2007
    
    March 31, 2006U.S. sales
    
    $
    561,055
    
    
    $
    437,132Foreign sales
    
    
    6,115,310
    
    
    
    6,956,816$
    6,676,365
    
    
    $
    7,393,948
 20. COMMITMENTS AND CONTINGENCIES
    
  F-26




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##### Table of Contents




  March 31, 2008
    
    $
    230,376March 31, 2009
    
    $
    200,603March 31, 2010
    
    $
    140,929March 31, 2011
    
    $
    35,623
 21. SEVERANCE AGREEMENT
   22. SUBSEQUENT EVENTS
     F-27