3. LONG-TERM INVESTMENTS

GLAMSMILE ASIA LTD.

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842). The FASB issued this update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The updated guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of the standard is permitted. We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements however, we do not expect the adoption will have a material increase in the assets and liabilities of our consolidated balance sheet.

Acquisition

Effective January 1, 2010 the Company acquired 50.98% of the issued and outstanding shares of Glamsmile Asia Ltd. (“Glamsmile Asia” or “Glamsmile”), a private Hong Kong company, with subsidiaries in Hong Kong and Mainland China, in exchange for the following consideration:

325,000 Euro (US$466,725). As of March 31, 2011 the full amount was paid.

250,000 shares of common stock to be issued during the fiscal year ended March 31, 2011 ($97,500 was recorded as an obligation to issue shares as at March 31, 2010). The parties have agreed that the shares will be issued during fiscal year ended March 31, 2015.

100,000 options on closing (issued);

100,000 options per opened store at closing (issued);

100,000 options for each additional store opened before the end of 2011 at the price of the opening date of the store;

Assumption of Glamsmile’s January 1, 2010 deficit of $73,302; and

Repayment of the founding shareholder’s original advances in the amount of $196,599. The balance of $196,599, recorded as due to related parties at March 31, 2010, is unsecured, non-interest bearing and has no specific terms of repayment other than it will be paid out of revenues from Glamsmile, as working capital allows. During the year ended March 31, 2011 a total of $101,245 was paid to the founding shareholder, leaving a balance due of $95,354 on June 27, 2011. As at March 31, 2012 the full amount was paid.

All options reside under the Company’s option plan and are five year options.

Also pursuant to the agreement, the Company granted irrevocable right to Glamsmile Asia to use the Glamsmile trademark in Greater China.

The Company acquired a 50.98% interest in GlamSmile Asia Ltd. (“GlamSmile Asia”) in order to obtain a platform in the Chinese Market to expand and introduce our GlamSmile Asia concept into the Chinese Market. In order to sell into the Chinese Market, an approval by Chinese Authorities is required, in the form of licenses. As GlamSmile Asia was already the owner of such licenses prior to the acquisition, this was an important advantage. We obtained control of GlamSmile Asia through the acquisition of the 50.98% interest and the appointment of our CEO as a Board member of GlamSmile Asia.

On January 30, 2014, the Company has sold a total of 2,500,000 ordinary shares of its investment in GlamSmile Dental Technology Ltd for $3,000,000 and recognized a gain on the sale in the amount of $1,582,597. As of March 31, 2014 the Company has received $1,850,000 and has recorded the balance of $1,150,000 as an amount receivable.

Effective March 31, 2014 the Company has retained a 21.51% ownership in GlamSmile Asia Ltd.

Deconsolidation

On January 28, 2012, the Company entered into a Preference A Shares and Preference A‑1 Shares Purchase Agreement (“Share Purchase Agreement”) with Glamsmile Dental Technology Ltd., a Cayman Islands company and a subsidiary of the Company (“Glamsmile Dental”), Glamsmile (Asia) Limited, a company organized and existing under the laws of Hong Kong and a substantially owned subsidiary of Glamsmile Dental, Beijing Glamsmile Technology Development Ltd., Beijing Glamsmile Trading Co., Ltd., Beijing Glamsmile Dental Clinic Co., Ltd., and Shanghai Glamsmile Dental Clinic Co., Ltd., Gallant Network Limited, a shareholder of Glamsmile Dental (“Gallant”), and IDG-Accel China Growth Fund III L.P. (“IDG Growth”), IDG-Accel China III Investors L.P.(“IDG Investors”) and Crown Link Group Limited (“Crown”)(“IDG Growth, IDG Investors and Crown collectively referred to as the “Investors”), pursuant to which the Investors agreed to (i) purchase from the Company an aggregate of 2,857,143 shares of Preference A-1 Shares of Glamsmile Dental, which represents all of the issued and outstanding Preference A-1 Shares of Glamsmile Dental, for an aggregate purchase price of $2,000,000, and (ii) purchase from Glamsmile Dental an aggregate of 5,000,000 shares of Preference A Shares for an aggregate purchase price of $5,000,000.

Under the terms of the Share Purchase Agreement, the Company agreed (a) to indemnify the Investors and their respective affiliates for losses arising out of a breach, or inaccuracy or misrepresentation in any representation or warranty made by the Company or a breach or violation of a covenant or agreement made by the Company for up to $1,500,000, and (b) to transfer 500,000 shares of Glamsmile Dental owned by the Company to the Investors in the event of breach of certain covenants by the Company. In connection with the Share Purchase Agreement, the Company also agreed to enter into an Investor’s Rights Agreement, Right of First Refusal and Co-Sale Agreement, and Voting Agreement with the parties.

In addition, in connection with the contemplated transactions in the Share Purchase Agreement on January 20, 2012, the Company entered into a Distribution, License and Manufacturing Agreement with Glamsmile Dental pursuant to which the Company appointed Glamsmile Dental as the exclusive distributor and licensee of Glamsmile Veneer Products bearing the “Glamsmile” name and mark in the B2C Market in the People’s Republic of China (including Hong Kong and Macau) and Republic of China (Taiwan) and granted related manufacturing rights and licenses in exchange for the original issuance of 2,857,143 shares of Preference A-1 Shares of Glamsmile Dental and $250,000 (the receipt of which was acknowledged as an offset to payment of certain invoices of Glamsmile (Asia) Limited).

On February 10, 2012, the sale of the Preference A-1 Shares and the Preference A Shares was completed. As a result of the closing, the equity ownership of Glamsmile Dental, on an as converted basis, is as follows: 31.4% by the Investors, 39.2 % by Gallant, and 29.4% by the Company. Mr. De Vreese, our chairman, will remain as a director of Glamsmile Dental along with Mr. David Lok, who is the Chief Executive Officer and director of Glamsmile Dental and principal of Gallant. The Investors have a right to appoint one director of Glamsmile Dental, and accordingly the Board of Directors of Glamsmile Dental will consist of Mr. De Vreese, Mr. Lok and a director appointed by the Investors.

In conjunction with the transaction and resulting deconsolidation of Glamsmile Dental, the Company recorded a gain of $1,470,776, calculated as follows:


Consideration received	$	2,000,000
Fair value of 29.4% interest		2,055,884
Carrying value of non-controlling interest		1,117,938
Less: carrying value of former subsidiary’s net assets		(2,002,329)
Goodwill		(699,635)
Investment China & Hong Kong		(1,082)
Rescission agreement Excelsior (Note 11)		(1,000,000)
	$	1,470,776

For the nine month periods ended December 31, 2019 and December 31, 2018 the Company recorded equity (loss) / income of ($28,667) and $58,427 respectively as “Other income” for its portion of the net income recorded by GlamSmile Dental Technology Ltd.

The following tables represent the summary financial information of GlamSmile Asia as derived from its financial statements and prepared under US GAAP:


	Nine months ended		Nine months ended
Operating data:	December 31, 2019		December 31, 2018
Revenues	$	3,607,967	$	3,531,823
Gross profit		2,376,689		3,012,123
Income (loss) from operations		(42,360)		355,576
Net income	$	(133,272)	$	271,626

CONDOR TECHNOLOGIES NV (formerly Medical Franchises & Investments (“MFI”)

Effective March 31, 2013, the Company acquired 6.12 % of the issued and outstanding shares of Medical Franchises & Investments N.V., a Belgium corporation (“MFI NV”) in exchange for a cash prepayment of $314,778 that was made during the fiscal year ended March 31, 2012. The Company’s investment in 70,334 shares of MFI NV has been recorded at the fair value of $787,339 which is the quoted market price of approximately USD $11.19 (€8.70) per share. As a result of our adoption of ASU 2016-01, the investment is being recognized as a financial instrument with a readily determinable fair value and an unrecognized loss of ($42,973) has been recorded in income due to the fair value per share at March 31, 2019, being $18.99 (€16,90) per share. The fair value per share at December 31, 2019 was $16,71 (€15,00) per share, resulting in a loss of ($160,504) which was recorded in income. Further, as a result of our adoption of ASU 2016-01, we have recorded a transition date adjustment as at April 1, 2018 to reclassify the unrecognized profit of $178,361 recorded in 2018 from other comprehensive income to deficit.

MFI NV has been founded to market an advance in dental technology which has the potential to replace the process of making mechanical impressions of teeth and bite structures with a digital/optical scan. During November 2016, the name of the Company MFI NV was changed to Condor Technologies NV.

SMILEWISE CORPORATE B.V.B.A.

Effective April 16, 2018, the Company acquired 60% of the issued and outstanding shares of SmileWise Corporate B.V.B.A., a Belgium corporation (“SmileWise’) in exchange for a cash payment of $2,592 (€2,226) that was made during April 2018. As of March 29, 2019 100% of SmileWise was merged into MIB. This merger/integration was completed because SmileWise needed a new ‘practice-building’ clinical concept and MIB needed a team to fill the clinics with patients. SmileWise is a dental marketing agency and software developer catering to dentists.

METRICS IN BALANCE N.V.

Effective November 22, 2018, the Company acquired 63,112 shares or 3.08% of the issued and outstanding shares of Metrics in Balance N.V., a Belgium Corporation (“MIB”). As of March 29, 2019, our 60% ownership of SmileWise was merged into MIB, and we converted cash payments to MIB of $123,912 (€ 110,271) to MIB shares; resulting in an increase in our shareholding of MIB by 1,082,190 shares to a total of 1,145,302 or 26.09%. MIB listed on the Euronext, Paris, France in March 2018 and trading has been minimal to date. Consequently, the quoted market price has not been disclosed because it may not be representative of the fair value of our investment. MIB has been founded to allow healthcare and dental professionals to determine the relationship between malocclusion and posture problems thereby enabling therapy to improve quality of life.

As a result of the increase in share ownership the Company has determined that significant control exists and consequently the investment is being recorded as an equity investment and all gains or losses are recorded in income.

During the year ended March 31, 2019 we recorded $2,832,822 in equity income comprised of a gain on merger of SmileWise in the amount of $3,007,301 resulting from the re-measurement of the value of SmileWise, offset by an equity loss of $174,479. SmileWise was fair valued using an average of discounted cash flow and comparable exit methods employing the following inputs: discounted cash flows using a weighted average cost of capital (“WAAC”) of 23%; software as a service (“SaaS”) multiples, dental industry multiples and mergers and acquisition (“M&A”) multiples of between 5.1 and 18.5. As at March 31, 2019 unrealized net gains on our investment in MIB were $2,832,822. As at December 31, 2019, we recorded a net loss for the three and nine months ending December 31, 2019 of $(8,934) and $(12,580) respectively, reflecting Remedent’s 26.09%.

The following table represents the summary financial information of MIB as derived from its financial statements and prepared under US GAAP:


Operating data:	December 31, 2019
Revenues	$	26,948
Gross profit		26,458
Income (loss) from operations		(64,452)
Net income (loss)	$	(48,217)